Wal-Mart to cut produce supplier base

As part of an ambitious initiative to transform its supply chain and to reduce its supply chain costs, Wal-Mart Stores Inc. plans to begin narrowing its supplier base for produce bound for its stores in North America.

The world's largest retailer will begin sourcing fruits and vegetables from select key producers, many of whom are based outside of the continent, according to Wal-Mart executives. The Bentonville, Ark.-based company is expected to follow a similar centralized procurement strategy across other lines of its business, including other perishable foodstuffs. Such a move is likely to have an enormous impact on how Wal-Mart manages one of the world's largest and most complex supply chains.

Wal-Mart executives disclosed the strategy at a meeting last October with analysts and investors. Pam Kohn, Wal-Mart's senior vice president and manager for perishables and general merchandise, said the retailer plans to strengthen and develop key partnerships with growers and suppliers of fruits and vegetables. By working with a few key growers, Wal-Mart believes it can improve product quality, shorten time to market for the goods, and reduce costs through increased efficiencies, Kohn told the group.

As part of this strategy, Wal-Mart conducted a pilot program in 2009 with apple growers in Washington state. Wal-Mart said the program resulted in savings of more than 10 percent.