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An Interview with a Wal-Mart Supplier

As Wal-Mart continues to push suppliers to the brink of death, more and more suppliers are opening up about their relationships with Wal-Mart.  The stories all contain one common denominator:  “It’s always hard to make money from Wal-Mart orders.” And while big brands like Proctor and Gamble can supply Wal-Mart at cost, smaller suppliers do so and “wait to die”.  In an article from Sinotoys.net, “Bo Lin” (an alias), a toy supplier for Wal-Mart, describes the woes of working with the giant.  Aside from Wal-Mart’s low cost bargaining tactics, Bo Lin also describes being bribed by Wal-Mart factory inspection officials to pass inspection, regardless of the circumstances in his factories.

“We’re a small enterprise.  Life and death can happen in a split second,” Bo Lin said great anguish.

Last month, a business owned by a friend of Bo Lin’s closed down.  That was a stationery processing plant with sales that surpassed 400 million [RMB].  Almost all the goods were supplied to Wal-Mart.  Bo Lin’s factory is also a Wal-Mart supplier.  “We all used to do business with Wal-Mart for the glory,” Bo Lin said describing the initial excitement of becoming a Wal-Mart supplier.

During our interview, Bo Lin repeated that sentence 5 times. 

But after 4 years of struggle within Wal-Mart’s supply chain, Bo Lin is determined to withdraw. “Four years is the cycle of death and rebirth”.  This is “established law” for all of Wal-Mart’s suppliers.  The difference is only whether to die or withdraw.

In 2003, Bo Lin started his own toy trading company – largely working with a few small toy factories.  In the beginning, Bo Lin, recollects, doing “business” with Wal-Mart was exciting for everyone – it was something that would “make your son proud.” Moreover, to start, Wal-Mart’s “prices were reasonable.”… But no matter whether its Bo Lin’s own factory, or his “surrogate” factories, when confronted with Wal-Mart, they all have absolutely no bargaining power.

Gradually, Bo Lin has discovered that even with the daily appreciation of the Chinese yuan and rising manufacturing costs, Wal-Mart could never think to give Bo Lin a price increase.  Wal-Mart pays factories in U.S. dollars, but since Bo Lin’s factory opened in 2005, the Renminbi has been appreciating.  In 2005 the appreciation was 2.49%, but by the end of 2007, the Renminbi had appreciated against the U.S. dollar by 17%.  “With the influence of the currency exchange, small enterprises were basically at a loss for hedging…” Bo Lin said.  The rising costs have a great strength to kill and injure.

“My factory produced art supplies.  The raw materials were directly related to the appreciation of oil.  In the past four or five years, plastics, paints, and candles have risen 80%-200%.” But even those producing wooden goods have seen the costs of wood increase… 50%-120%.  When production costs are rising and “the price stays the same, it equals a price reduction,” Bo Lin summed up Wal-Mart’s pricing system.


The hidden rule of cost does not include just these “visible” factories, Bo Lin expressed.

In response to criticisms of sweatshops by the outside world, Wal-Mart and many other international corporations have put into effect FCCA (factory output and capability evaluations) plans… Regarding Wal-Mart’s factory inspections and ratings system, Bo Lin states that at the time of inspection, “examination” staff openly demand commissions for “what color rating” [the factory will receive] – the whole thing has a marked price.

Asked why they would demand bribes, Bo Lin says “when they examine the factories they ask that the factory not work overtime.  You ask, is this possible for a small factory?  It’s not possible, so you [pay them] money”

When Wal-Mart announced it would cut its inspection department and use third party inspectors, suppliers were all very happy.  Bo Lin stated that Wal-Mart staff demanding commissions is the most vicious thing.  Bo Lin’s factory paid out a 10%-15% commission – a small factory’s interest rates are about 15% which would wipe away all profit.

Posted by Michael Mignano on Thursday, November 13, 2008

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COMMENTS

Yes It is true. The number of factories closed down and number of unemployment created due to falling prices offered by Wal-Mart(this is to offer Americans cheap goods) outweighs the benefits, both social and economical, derived by the society as a whole.

The true story is that Wal_mart pause danger to livelihood of many workers whose future depending on the factories producing goods for Wal_mart. Partly, Americans too should be blamed for buying the cheaper goods produced by millions of needy workers who should be paid a decent wage.
In order to do this, Wal_mart should offer factories a decent price.

Mervyn in
Friday, November 14 at 02:25 AM

Mervyn,

I think ALL of you anti Wal-Marters, should go out today and buy a Brand New U.S. made car, SUV or truck and mke sure you pay the sticker price and don’t take any of the ‘discounts’ or ‘incentives’!!  That way, you could ALL help out those auto workers, buy American, and keep the U.S. auto companies from asking for a ‘bailout’!!

Will you do that?  Bet not!!  You guys like to tell others what THEY should do, but, don’t practice what you preach!!

“falling prices offered by Wal-Mart”

Last I heard, companies set the price, not the customer!!  If a company doesn’t like what a buyer ‘offers’ to pay, they are free to refuse to sell their products to that customer!!  Remember, Wal-Mart is NOT the only retailer!!

“smaller suppliers do so and “wait to die”.”

How stupid is that?  Any business that ‘waits to die’, isn’t worth being in business and deserves to DIE, because that means they aren’t trying to find a ‘better’ way to do things!!

RDS in
Friday, November 14 at 11:31 AM

‘Kakocracy’: ‘Governance’ by the worst elements of society exclusively in their own interests and to the permanent detriment of all other classes and members of society except their cronies.

ddrb in
Friday, November 14 at 01:01 PM

Dear RDS,

I feel you have not understood the interview properly.  It shows Wal-mart is killing one to make another alive.  By selling cheap stuff in their stores by killing workers producing the stuff in the developing counties, they are able to stay alive in USA by beating the competitors (other large departmental stores in USA) who don’t cry a slogan like “Always Cheap”. Why is that?

It is not all about anti Wal-mart or take it or leave it argument. It is all about millions and millions of poor and needy workers like me who produce goods for Wal-mart who are not paid decent wages by the factories producing orders for wal-Mart.
In their web site, they are talking prominently about Corporate Social Responsibility, but they don’t do what they preach.  Wal-Mart is failing in their social responsibility by not paying attention to the dyeing workers whose life can be uplifted only if Wal-Mart could reasonably pay the factories.
Wal-Mart openly reject goods produced by sweatshops, but fail to appreciate the fact that it is worse than sweatshops when the workers producing goods are not paid wages enough to make their normal living.

Wal-Mart can do better only if they are little more sympathetic and not being hypocrites.

Ali Manzor in Bangladesh
Saturday, November 15 at 05:26 AM

Ali Manzor,

“It shows Wal-mart is killing one to make another alive.”

Wal-Mart is killing no one to make another alive as you say!!  Tell me, how Wal-Mart ‘forces’ people to work in those sweatshops?  Seems to me, people will die faster with NO wages, long before people with ‘low wages’ would!!

“It is all about millions and millions of poor and needy workers like me who produce goods for Wal-mart who are not paid decent wages by the factories producing orders for wal-Mart.”

And, just what would people like you, be doing to make a decent wage, if Wal-Mart was not purchasing things from those factories?  In other words, could you be working somewhere else at a ‘higher, decent wage’?  Are these people actually making LESS, working in those factories then they would if Wal-Mart was NOT buying product from them?

“if Wal-Mart could reasonably pay the factories.”

It is my understanding, that Wal-Mart buys product from those factories and pays for those products, at what the factories agree to sell the products for, so they do not pay the factories, the pay for product!!  Does Wal-Mart hire employees at those factories?  Does Wal-Mart set the pay rates for those employees?  Do those employees know what they are going to be paid, keep coming back to work each day, and accept their paychecks on payday?

At the end of the day, are those employees ‘better off’ with or without the jobs that were created by Wal-Mart buying from those factories?

Sounds to me, that if anyone NEEDS a union, it is your people!!

RDS in
Saturday, November 15 at 08:49 PM

The “Great Mind” of RDS is Revealed Again!

“Seems to me, people will die faster with NO wages, long before people with ‘low wages’ would!!”

So you’d rather see people die slowly with low wages, is that it, RDS?

ScrewedbyWalmart in Anytown, America
Monday, November 17 at 05:15 PM

Screwedby,

“So you’d rather see people die slowly with low wages, is that it, RDS?”

Yep!!  As everyone dies eventually, I would rather it take about 9 decades, than to see people die in months from starvation!!

RDS in
Monday, November 17 at 09:14 PM

Is RDS a human being to say a think like that?

Ali in
Tuesday, November 18 at 09:35 AM

Ali,

“Is RDS a human being to say a think like that?”

So, you think it is being MORE human, to have people just die quickly from starvation, than to live for 90 years being ‘poor’, right?  Please don’t try to decide how long you will allow me to live!!

Gee, I guess it is alright for someone elsewhere, to die, as long as you can get that ‘boat’ you’ve always wanted, right?

And, I’ll bet you think YOU are a human being!!

RDS in
Tuesday, November 18 at 12:32 PM

I hope wal-part people as well as RDS know what is meant by Good Corporate Governance. Also, they should know that a company as a group of people who, working in an environment that allows them to develop as professionals and as humans, contribute to the development of society as a whole by efficiently producing and marketing goods and services that are genuinely useful to people - and create added value. I am unable to see Wal-Mart falling into this company definition, particularly in respect of social development. RDS is advised to realize and appreciate we are now in 21st century. Cheers

David Morgan in CA
Thursday, November 20 at 02:45 AM

David Morgan,

So, you can envision these:

Professional Cart Gatherer,
Professional Shelf Stocker,
Professional Greeter,
Professional Cashier,

And, being paid based on your being HUMAN,

right? 

Your average ‘customer’ meets all of these qualifications, so why not just let the customers serve themselves?  Eliminate the employees and just have Professional Customers, bringing in their own carts, greeting themselves, taking things from boxes and checking themselves out!!  All a store would need, is a few people to Professionally unload the trucks and wheel the pallets out to the floor!!

“efficiently producing and marketing goods and services that are genuinely useful to people”

Sounds like Wal-Mart to me!!

RDS in
Thursday, November 20 at 08:15 PM

Is RDS a human being to say a thing like that?

The ultimate conclusion of RDS’s whacked out capitalist view of labor is slavery. There is no minimum value of labor.

Eat less so I can pay you less.

Capitalism tries for a delicate balance: It attempts to work things out so that everyone gets just enough stuff to keep them from getting violent and trying to take other people’s stuff. ~ George Carlin

Ken V in Texas
Friday, November 21 at 09:55 AM

Ken V,

“The ultimate conclusion of RDS’s whacked out capitalist view of labor is slavery.  There is no minimum value of labor.”

The minimum value of LABOR, is whatever amount a person is willing to do the labor for!!  If I say I will cut your lawn for $10.00, then the minimum value for my labor, is $10.00 for cutting a lawn!! If you offer me $8.00 to cut it, I can either ‘lower’ my value and accept your offer, or refuse to work for that amount!!

RDS in
Saturday, November 22 at 01:56 AM

Ken V: When RDS was attempting to form a union at the foundry plant where he worked some years ago, I thought one of the issues was increased pay and benefits. Heck,he was a union truck driver as was his dad.Seems that his view of labor was a whole lot different when he WAS laboring,as opposed to NOW that he is"retired" and considers himself a member of the “gentry. “

ddrb in
Sunday, November 23 at 01:32 PM

...he was a union truck driver...

If he never made more than $13.50 an hour during his entire life he mustn’t have been much of a truck driver.

“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” ~ Lincoln

Ken V in Texas
Sunday, November 23 at 03:00 PM

Ken V: If he never made more than $13.50 an hour during his entire life he mustn’t have been much of a truck driver.~Ken V~~~~~~~NOTE: Or much of anything else…

ddrb in
Sunday, November 23 at 06:22 PM

ddrb,

“Seems that his view of labor was a whole lot different when he WAS laboring,as opposed to NOW that he is"retired"” and considers himself a member of the “gentry.”

FYI, I ‘labored’ for 9 years at that foundry AFTER our 3rd attempt to organize it, plus, I ‘labored’ for 13 MORE years at a non-union ‘aluminum wheel manufactureer’, after that, BEFORE I ‘retired’!!

“and considers himself a member of the “gentry.”

Who said I considered myself as part of the “gentry”?  I just said I was careful in handling my money, made ‘good’ decisions, and was able to ‘retire early’!!  I’m just a ‘common man’ who made the right choices in life!!

Ken V,

“If he never made more than $13.50 an hour during his entire life he mustn’t have been much of a truck driver.”

Really, you aren’t that ignorant, are you?  As I drove truck during the 1960’s, when the minimum wage was $1.25 an hour, NO hourly truck driver made even close to $13.50 an hour back then (top pay for hourly when I quit was about $6.50 an hour)!!  And, if I wasn’t much of a truck driver, how come they kept me on for 12 years, (and I quit to move, I wasn’t fired)?

BTW:  How long did you have your restaurant?  Is the reason you don’t own it anymore, because you were NOT much of a restaurant owner?

RDS in
Monday, November 24 at 01:51 AM

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