As I reported yesterday, Wal-Mart Stores, Inc. (NYSE: WMT) is in the process of arranging quite a few cuts in its purchasing and procurement divisions in the Southeast Asia region. The cuts are coming from Wal-Mart China operations and look to be a realignment of procurement positions to centralize the purchasing centers for a good portion of the retailer's international operations.But, is there more to it than that? The total headcount being cut in Wal-Mart's global procurement division is close to 250 people, with many of them in the China area and surrounding vicinity (including Singapore and Shanghai). Is Wal-Mart pulling back on its potential focus of the Chinese market to more heavily concentrate on another international market with huge promise -- India?
The case could certain be made for that point of view. And, with a new "Employment Contract Law" about to go into effect in China, this may be just a way around labor issues in the future for the retailer, something I suggested yesterday.
Like any company, one of Wal-Mart's largest expenses is labor, and the shifting of strategies and operations that minimize that expense while maintaining a certain level of operational efficiency are areas any logistics manager would investigate for possible cuts.
To me, this sounds like a normal deal for Wal-Mart: shift around costs based on the cheapest possible route while staying tuned to changes in a growing country's labor practices while at the same making sure the "well-oiled machine" does not come to a grinding halt. Whatever Wal-Mart's intentions are, it's well within the company's right to shift procurement employees around (and possibly slash the payroll in the process).
Yes, Wal-Mart does not like employment law that may bind it in the future. Yes, Wal-Mart does not like employee unions of any kind. Yes, Wal-Mart likes to minimize cost at all costs to wring out every penny of profit possible while exploring new markets for growth at the same time. There's nothing wrong with any of those viewpoints, although not everyone will agree with them. How about you?











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