Friday Rant: Best of Intentions — Walmart and the Challenges of the Greater Local Sourcing Good

It amazes me the disconnect between strategists and operators at companies that make grandiose statements about one policy or another only to find that such political campaign-like promises are extremely challenging to implement in practice -- or at least to implement and sustain with a limited added cost structure. I'm guessing this will be the case with a recent pronouncement from the world's largest company, Walmart. Walmart recently announced a new effort to buy more fresh produce locally. On the surface of the non-organic soil, this sounds reasonable enough.

But in reality, we should all question the actual impact that such an effort will really have. And at what cost. Sure, it makes for great CSR marketing to say "we'll double the percentage of locally sourced produce." Heck, Walmart may even convince a few Whole Foods shoppers to park their hybrid Lexus SUVS in their parking lot for the first time with lines like that. But in reality, backing up words with action will be difficult in this situation, not to mention potentially costly to the environment.

Consider the following hypothetical situations:

  • It's June of 2012. Walmart is working with local XYZ berry grower. An expected week's worth of product for five stores gets wiped out because of flooding (e.g., mold on the berries). When Walmart goes to the open market and calls Driscoll, Sun Belle or another distributor/trading company, they must pay a significantly higher price on the spot market (and must also deal with suppliers that previously used to hate doing business with them because of charge-backs and others related reasons)
  • It's the fall season of 2013. Walmart has worked to develop a number of local suppliers of fall crops (e.g., pumpkins, squash, root vegetables, etc.). Yet their logistics supply chain, set up around national and regional distribution facilities, has not kept up with the needs of managing many smaller, local point-to-point shipments. Shipping in smaller quantities has proved costly (LTL vs. full truckload) and local suppliers continue to have greater non-compliance around palletized shipments for certain SKUs (resulting in added rework, added CO2 emissions, etc.)
  • It's February of 2014 in Wisconsin. Walmart billboards left over from the previous summer are on the road to UW Madison to tout local sourcing. But the Madison school paper does its own study and finds that <1% of the produce items in the local Walmart are local in the middle of winter, despite what the old advertisements alongside the highway claim. CNN swoons all over it -- even the BBC picks up on how Walmart lags Tesco in the same area, despite the larger budgets we have in the states for "green" growing initiatives.

The best of intentions can sometimes end up being only that. I suspect that while Walmart's local sourcing initiative is certainly bold in design and scope, in reality, the unplanned added costs (when things go wrong), potentially negative environmental impact (e.g, emergency air freight, LTL) and negative marketing exposure could end up causing more risk than they bargained for. Regardless, I doubt that local sourcing marketing will keep those hybrid high-end SUVs parked alongside old beat-up Dodge Caravans for long unless Walmart does far more than change its regional buying practices.

Jason Busch

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