WAL-MART: China Again Layoffs

Part of the pfer of purchase orders to India may not be the root cause of WAL-MART's layoffs in China.

Trying to increase the proportion of direct purchase and further reduce the cost.

WAL-MART has laid off workers in China.

WAL-MART will be the 180 employee of its global sourcing center in China.

The direct reason is that WAL-MART has chosen Intertek to test the goods purchased in China, and the quality inspection department does not need so many people.

At the end of October last year, WAL-MART global procurement center also conducted a large-scale layoffs.

At that time, more than 200 employees were dismissed, of whom nearly 100 were employees in China.

Dong Yuguo, spokesman for WAL-MART China, said that the reason for the two large-scale layoffs in a year is "improving quality inspection efficiency".

He said, WAL-MART global procurement office in China only Shenzhen, Shanghai, Dongguan and Putian 4 branches, after suppliers of goods need to be examined in these 4 divisions, the quality inspection work outsourcing to Tianxiang group, the quality inspection office will increase to more than 20.

Another reason for redundancy, which Dong Yuguo denied and repeatedly mentioned by the media, is that WAL-MART's China procurement business may be partially pferred.

WAL-MART global sourcing center is a subsidiary of WAL-MART. Its mission is to search for better products and cheaper suppliers worldwide.

Although WAL-MART claims that its direct purchases in China still remain 9 billion dollars, some commodities in India and several Southeast Asian countries have more price advantages than "made in China".

In 2007, WAL-MART doubled its purchases in India to $1 billion 500 million.

At the end of 2008, WAL-MART will officially open its first store in India.

WAL-MART's procurement in China is divided into direct purchase and indirect procurement through agents.

Since 2005, WAL-MART has no longer announced the total number of purchases in China.

If China's business shrinks, it will become a viable option to reduce the number of people in order to maintain profitability.

But the problem is that outsourcing does not always reduce costs.

Headquartered in London, the Tianxiang group is the world's leading quality and safety service organization.

The Swiss SGS certification agency, which is also known as the Tianxiang group, has a fee of about $200-300 a day for its textiles inspectors.

The standard of textiles inspection for Tianxiang group is similar.

According to the calculation of commodity size purchased by WAL-MART global sourcing center every year, it is not cheap for Tianxiang group to provide final inspection service.

A person responsible for quality inspection at Metro China headquarters said he had commissioned third parties to inspect a batch of glasses imported from Czech and paid tens of thousands of dollars for thousands of cups. However, in Czech, Metro still accepted the third party certification.

Making way for third party certification is perhaps the real reason for WAL-MART's layoffs.

The most intense demand for the third party is direct procurement.

The real purpose of WAL-MART's purchasing center is to reduce costs by managing direct imports and direct purchases.

However, since its establishment in 2002, the purchasing centre has mainly served importers and importers of the brand, saving their hands but increasing their own expenses.

The amount of direct purchases that is really important is only a small increase.

This is totally out of line with WAL-MART's original intention.

When the global procurement center downsizing in 2007, management has indicated that it will readjust its business strategy and focus on serving overseas suppliers.

These suppliers, which are closely related to the procurement center but are neglected for a long time, are the basis for achieving large-scale direct procurement.

At this time, the role of Tianxiang group is very obvious. If the direct purchase business increases substantially, it means that there may be a lot of disputes about the quality of commodities. We should find a third party that we all agree to do, which will save time and save labour.

With third parties doing the tests, the abolition of hundreds of employees' positions seems logical.