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From The Frying Pan Into The Fire —
Wal-Mart Finds Another Way To
Alienate Suppliers

Ace PACA lawyer Larry Meuers reports in his newsletter what some of his clients are telling him about Wal-Mart:

Wal-Mart Stores, Inc. (Bentonville, Arkansas): We have received calls from clients that an outside auditing firm has been auditing Wal-Mart produce files to determine whether the prices charged and paid by Wal-Mart comport with the contractual price between the supplier and Wal-Mart. The auditing firm has been demanding that the supplier refund any discrepancies found. If Wal-Mart is your customer and you have any questions or information regarding this issue, please contact Larry Meuers by email at or by telephone at (239) 513-9191.

This is what doing business with Wal-Mart has come to — suppliers who have worked with Wal-Mart every day for years and thought they had a “partnership” relationship with Wal-Mart, do not get a phone call from their produce department contact, they don’t even get a letter from the produce department giving a heads up that an audit process is under way and they may be contacted.

Instead, a total stranger, from an outside company, sends an e-mail with what is basically a bill demanding payment. In other words, the produce contact has been OK all these years, signing off on payments and orders, etc. — but, all the sudden, none of that matters.

Now, when the produce suppliers do what is normal, call their “partner” at Wal-Mart in produce and ask what this is about, they are then told that “corporate” has hired an outside auditing firm. Because so many produce decisions have been made “on the fly” over the years — based on an e-mail or a phone call or a fax — to respond to rapidly changing markets, avoid out-of-stocks and take advantage of opportunities, the vendors are told that a lot of things are showing up as “unjustified payments” and that is why they got the letter/invoice.

The vendors are told that they should go through the process, pull up their paperwork and records and any adjustments will be minimal in the end. They are told not to worry.

Here is a shocker: The vendors are still worried.

These vendors aren’t Wal-Mart. Few have the same big company record retention systems. Did they save their notes on the phone conversation with their contact with Wal-Mart — especially on transactions for which they were already paid years ago? Probably not.

Besides, even if in the end these audit notices all go away and everyone gets a “no change” case, that doesn’t mean that no harm was done.

When a supplier gets a demand to turn over a truckload of money to Wal-Mart, prudent executives don’t just ignore it. They call attorneys such as Larry Meuers and retain them. They contract with certified public accounting firms. They pull their own controllers off other tasks to focus on this task.

Hopefully it all works out and the outside auditor agrees that nothing is owed. If that agreement comes after months of meetings, painstaking review of records, explanatory letters written, that “no change” case can easily cost tens of thousands of dollars in professional fees and maybe more.

Yet as much as the money is an issue — and it is a big issue with vendors who get blindsided by this — there is something about the way this is being handled that is profoundly disrespectful of a collaborative relationship.

It makes sense for Wal-Mart to check its payments — but if there is a suspicion of a problem, the first step should be to go to the Wal-Mart employee involved. Can he explain the discrepancy? Does he think there is a problem?

If so, one would think that the produce employee at Wal-Mart would call up his “partner” in the vending community and discuss the matter.

One assumes that most of the time the situation will be amicably resolved as the selling and supplying partners discuss the matter, remind each other of what transpired and come to a resolution.

In a few cases, there may be a dispute that can’t be resolved and it may go to accounting and legal. That is business. But no partner who values his partner just has an outside auditor send him a bill. That is not partnership, that is not collaboration, that is not mutual respect.

The truth is this seems unlikely to have been a produce department initiative. It smacks of the way department stores treat suppliers. One suspects a general policy instituted at very high levels.

Produce, though, is not the same thing as general merchandise, and there will be consequences to this hostile attitude that non-produce executives at Wal-Mart simply have no clue about.

Watch as out-of-stock numbers creep up, especially for highly valued product in very short supply.

When allocations need to be made, the biggest buyer is not necessarily the favored buyer.

Perhaps in isolation, produce sellers would forget about such a corporate initiative, but following on the changes in Wal-Mart’s produce procurement practices that we have been chronicling, most recently here, they will, legitimately, perceive these audits as one more sign that things have really changed at Wal-Mart.

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