Wal-Mart Stores is always looking for ways to cut costs and the company's head of purchasing thinks he has a solution that will work for the retailer and its suppliers.
According to a Bloomberg Businessweek article, Hernan Muntaner, who has the official title of vice-president for international purchase leverage, wants to team with large suppliers to jointly purchase raw materials at prices that neither party could get on their own.
"Around the world, we found we were buying the same raw materials" Mr. Muntaner said. "When you put the volume together of what we bought and what [suppliers] bought, and buy from just one supplier, you can reduce the cost."
Wal-Mart, according to the report, has teamed with a supplier in Chile to buy paper. The result has been a 2.5 percent decrease in its paper costs.
Mr. Muntaner sees PepsiCo as a potential partner and believes the companies could work together to buy items such as potatoes, although the owner of Frito-Lay has yet to commit.
"Sometimes it's very hard with a big company to have conversations like this," Muntaner told Bloomberg Businessweek. "That is the main reason why we don't have Pepsi yet."
Discussion Questions: Do you see Wal-Mart being successful recruiting brand manufacturers to jointly purchase raw materials? What do you see as the pros and cons of this approach?