HONG KONG: Li & Fung inks new sourcing deal with Wal-Mart
A sourcing deal inked more than two years ago between Li & Fung and Wal-Mart Stores has been replaced by a new agreement that allows the global supply chain manager to offer a range of new services to the retail giant.
The original deal, announced in January 2010, involved Li & Fung setting up a new sourcing unit for Wal-Mart called Direct Sourcing Group Pte Ltd. Reports at the time said it had the potential to buy goods worth about $2bn in its first year of operation.
Under the new arrangement, Wal-Mart no longer has the option to purchase all of the shares of Direct Sourcing - although the unit will continue as the main direct resource for the retailer's Sam's Club warehouse format in the US.
The unit will also provide buying agency services to Walmart in the US and some international markets on a "category-specific basis," Li & Fung said, without giving details. The new agency agreement will run for five years with an option to extend for another two years.
In addition, another of Li & Fung's subsidiaries "will trade with Walmart International markets on a principal to principal basis."
"The move to a supplier relationship will allow the group to provide Walmart International markets with design, replenishment and other services that could not be provided as a buying agent," the sourcing group said in a statement today (20 September).
The previous deal saw Wal-Mart shift from using the Hong Kong firm's wholesale operations in the US in a bid to drive savings across a supply chain. The new arrangement cements Wal-Mart's position as now one of Li & Fung's largest customers.
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