Walmart is importing more goods to the United States from India and reducing its reliance upon China as it looks to cut costs and diversify its supply chain. The world’s largest retailer shipped one-quarter of its US imports from India between January and August this year, according to bill of lading figures shared with Reuters by data firm Import Yeti. That compared with just 2% in 2018. Only 60% of its shipments came from China during the same period, down from 80% in 2018, the same data shows. To be sure, China is still Walmart’s biggest country for importing goods.
Walmart Executive VP of Sourcing said “We want the best prices, That means I need resiliency in our supply chains. I can’t be reliant on any one supplier or geography for my product because we’re constantly managing things from hurricanes and earthquakes to shortages in raw materials.”
Pakistan and Bangladesh have also benefited from Walmart’s strategy, expanding as suppliers of home and apparel products.
Why not China?
- Sourcing from mainland China has become less competitive because of rising labor costs versus other manufacturing centers.
- China reported its first decline in population in six decades last year. Other developing countries like India have a rapidly growing workforce and technological advancement.
- China’s minimum wage changes from province to province with a range between 1,420 yuan per month and 2,690 yuan per month ($198.52 – $376.08). Meanwhile, average wages for unskilled and semi-skilled workers in India range from about 9,000 INR to 15,000 INR a month ($108.04 – $180.06), according to central bank estimates.
Walmart’s Three-Pronged Approach
Walmart followed a three-prong approach to optimize its sourcing strategy.
1. Focus on increasing local procurement thus reducing procurement costs.
2. It maintained a satisfactory supplier relationship during its initial years by paying suppliers within 3-7 days.
3. It established modern commodity distribution centers and computerized its management to improve efficiency and reduce cost.
The India Foray
Walmart has been accelerating growth in India since 2018 when it bought a 77% stake in Indian e-commerce firm Flipkart. Two years later, it committed to importing $10 billion of goods from India each year by 2027. It is currently importing around $3 billion worth of goods from India each year.
Walmart is importing goods ranging from toys and electronics to bicycles and pharmaceuticals as well as packaged food, dry grains, and pasta from India.
Walmart started its sourcing operations in Bangalore in 2002. Now, the company employs more than 100,000 people, including temporary workers, in the country spread across several offices under its Walmart Global Tech India unit, Flipkart Group, PhonePe and sourcing operations.
The COVID-19 pandemic exposed weaknesses in global supply chains, showing U.S. importers to be over-reliant on a small number of markets. India, whose stock market has risen to record highs this year, is viewed as the country best equipped to outperform China in low-cost, large-scale manufacturing.
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