Whole Foods Vendors in Uproar over Changes
Whole Foods, now of course owned by Amazon, is at high tension with many of its vendors over changes to its procurement processes and new fees it will levy on them.
The grocer recently told vendors that they would be charged 3-5% of their invoices depending on product category basically to receive store "merchandising services" from a single provider. That and other changes are happening as the grocery chain moves to a centralized procurement model from a more regional one.
The centralization was already under way before Amazon acquired Whole Foods last year, but that doesn't stop many vendors from somehow seeing Amazon as the villain in the process.
Supply Chain Digest Says... |
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| Amazon has been carefully examining the delivery expenses associated with each item. Now, the people say, it's shifting more of those costs onto vendors, including Procter & Gamble. |
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Under the new program, anything store-related - from handing out free samples to checking inventory and refreshing shelf displays - now has to go through a retail-services firm called Daymon and its subsidiary, SAS Retail Services. Whole Foods used to let suppliers handle these acitvities themselves - or hire someone else to do it.
These third-party brokers of course fulfill a number of functions, but their key role is to make sure products are displayed and merchandised well. That could mean anything from making sure there are more granola bars on the shelf when those bars are on sale, keeping the freshest yogurt on the top of rack, or strategically hiding under-stocked goods.
Brokers can also use the relationships they wield to make their case for more shelf-space.
But now Whole Foods says Daymon will do all of this for them – for a fee.
"To successfully run this program, we need your financial support," Whole Foods said about this and other changes in a recent email to vendors, in an interesting way to describe the program.
Amazon also Raising Fees on Some Vendors
Amazon itself is raising transportation fees for suppliers of beverages, diapers and other heavy, bulky products that are expensive to ship, according to a report from Bloomberg.
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Amazon has been willing to absorb losses of millions of dollars a year on certain products to make sure it has the items in stock and to fight a price war with Walmart and other retailers. But those costs are becoming unsustainable as the company sells more household goods. Fulfillment expenses -- the cost of storing, packing and shipping goods -- surged 43% in 2017 to $25 billion, outpacing revenue growth of 31% that.
Amazon has been carefully examining the delivery expenses associated with each item. Now, the people say, it's shifting more of those costs onto vendors, including Procter & Gamble.
Amazon already deducts the cost of moving inventory through its distribution network from what it pays suppliers for bulk orders, in a move similar to what Walmart began doing for some vendors and items several years back. Now Amazon is seeking to significantly increase those deductions, which amount to transportation fees.
Companies Trying to Revive Made in America Apparel
As reported in the Sourcing Journal, efforts and activity to revive US apparel and textile manufacturing continue to percolate, and building on a variety of grass roots initiatives and new-age company strategies.
American Giant, for example, has launched its first new product of 2018, called the Roughneck Pant for men, and is making it in the US, despite the obstacles, which aren't necessarily around labor costs.
"We wanted to make a stretch canvas pant that was both utilitarian and looks great," CEO Bayard Winthrop said. "Producing that material and silhouette in the US is a challenge because the machinery isn't widely available. It forced us to expand our manufacturing footprint to Georgia to make the pants the way we wanted."
Focused on ecommerce, American Giant made a name for itself with its high-quality sweatshirts and T-shirts made in the US.
The Roughneck pants are made with fabric milled in Georgia. American Giant also has two company-owned cut-and-sew facilities around Raleigh, which are supported by a Carolinas-based cotton supply chain.
“It's a unique approach to product development because it always comes down to our supply chain and our deep commitment to our manufacturing partners.” Winthrop said. “We want to know the cotton farmers, the ginners, the yarn spinners and knitters, every single component - the proximity to the production process that allows us to get the product right, keep the quality high and continue to build our Us manufacturing presence.”
According to the National Council of Textile Organizations, the value of US man-made fiber and filament, textile and apparel shipments increased 4.7% in 2017 to reach $77.9 billion. That increase may sound modest, but it is 16% above 2009 levels. Investment in fiber, yarn, fabric and other non-apparel textile product manufacturing more than doubled to $2.1 billion in 2016 from $960 million in 2009.
That said, the resurgence of Made in America and reshoring of the industry has been incremental. Company strategies are usually based on quick response delivery capabilities and having more flexible production. The efforts are helped by government-industry alliances in major hubs like New York and Los Angeles. Georgia is also the source of a new initiative to promote apparel manufacturing in the state.
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