The Arkansas News Bureau reported last week that Wal-Mart is thinking about purchasing APL. Everyone in authority denies it, of course, but that’s par for the course. Denials almost always indicate that there’s truth to the rumor. David Sanders put an excellent report together at the News Bureau and made some telling points:
• Wal-Mart is the world’s largest retailer and gained that spot by looking toward the future.
• If it intends to retain its lofty perch it must continue to adapt to market pressures exerted by cost-conscious consumers, and by competitors in the retail marketing arena.
• Delays in the supply chain adversely affect even Wal-Mart’s ability to provide products to consumers quickly and cheaply.
• Increasing transportation costs have affected Wal-Mart’s prices to consumers.
• Cargo volumes worldwide are increasing at a more rapid rate than shipping capacity.
• Lack of sufficient and available shipping capacity results in delays and congestion.
• Marine trade, according to the U.S. Department of Transportation, is expected to double within 20 years, affecting even more drastically the availability of shipping space.
• Wal-Mart operates more than 60 distribution centers throughout the U.S., 36 transportation office terminals in 28 states, and its private fleet includes 5,600 tractor trailers in 48 states and 6,900 truck drivers.
• Because of these widespread and complex operations Wal-Mart must exert logistical control over the movement of cargo.
With increasing annual volumes of imported goods on the way, Wal-Mart must be in a position to guarantee that these products will arrive at ports early enough so that delays can be avoided, congestion can be circumvented, and goods will be provided to consumers, quickly and cheaply, by timely deliveries of these goods to distribution centers … as advertised. With the transportation infrastructure in general disarray, however, what better way to guarantee timely movement of goods than to become, or at least control, the ocean carrier?
• APL was named Wal-Mart’s International Ocean Carrier of the Year in 2002.
• According to a company press release from 2002, “APL has been working closely with Wal-Mart for three years and provides services to Wal-Mart in 37 countries, shipping everything from electronic goods, footwear and garments, to household products and furniture.”
• With more imported goods arriving, Wal-Mart must be assured of getting the goods into port and into their outlets faster and cheaper than the competition, and acquiring a carrier like APL would give the company more control over that process.
• Such an acquisition would make Wal-Mart one of the largest shipping companies in the world and direct control over the company’s supply channels would further solidify its global position.
• Lastly, it’s not likely that K-Mart’s recent acquisition of Sears, Roebuck & Co. escaped the watchful eyes of Wal-Mart officials. 2,370 U.S. stores and a network of distribution centers and suppliers has vaulted the new combine into third place, just behind Home Depot. Stay tuned.