(Dec. 13, EDITOR'S COLUMN) NOGALES, Ariz. — Raise your hand if you’re a Wal-Mart watcher.

In this business and practically every other, when Wal-Mart Stores Inc. moves, you watch closely. You see if minute changes in the Wal-Mart supply model will throw you off your game. You ponder whether you’re an efficient enough supplier to deal with the behemoth, yet still uphold your sanity and line of credit.

Wal-Mart’s produce honcho, you would think, must have it easy, what with everyone bending over to please.

But Ron McCormick, vice president and divisional merchandise manager for produce and floral, explains that executing the Wal-Mart model in a perishables setting is akin to walking a tightrope. Go as fast as you can toward the safety of the other side, but continually adjust to stay balanced.

“We always have to look for unintentional consequences that might cause us to make an adjustment to stay in balance,” McCormick on Nov. 29 told a group of about 100 members of the Fresh Produce Association of the Americas at their annual meeting in Nogales.

Those adjustments are often interpreted as great sea changes, he added. Analysts are too quick to see the “leans of adjustment” as bigger than they really are, he said.

For instance, when Wal-Mart adopted reusable plastic containers, there was not a big overnight shift as part of a grand design, but a gradual, pragmatic adoption.

“Grand designs only last until someone figures out they don’t work,” he said.

In the same manner as Wal-Mart weaved RPCs into the supply chain, it is testing RFID, and eventually that might stick too, McCormick indicated in a later interview. “It is our assumption that at some point in time all our facilities will be enabled,” he said Dec. 6.

So, too, is the company tweaking its distribution and logistics, and the philosophies by which it will abide.

This latest “adjustment” certainly has the attention of Nogales-area operators.

Wal-Mart recently opened a warehouse facility in Nogales, to prime the pump for its import business. Wal-Mart is committed to the idea of direct import, a model that is at odds with the lifeblood of the typical U.S./Mexico border shipper and consolidator.

Wal-Mart will continue to work with certain top-class border importers, McCormick said, but more and more volume will be shifted in-house. Direct-import means more long-term relationships and contracts directly with Mexican growers, a tradition, coincidently, in which Nogales businessmen excel.

Just goes to show your customer today can be your competitor tomorrow.

But that’s not all that Wal-Mart has in store.

The company is extending shelf life of product because of its third-party West Coast consolidation facility in Riverside, Calif. — now a major conduit for product going to the nation’s 40 Wal-Mart distribution centers.

“Our California suppliers ship full truckloads of a commodity to the building in quantities that would already be allotted to destination DCs,” he said Dec. 6. “The center then takes the portion of that truckload and divides it accordingly, and combines it with other items until the outbound truck is full and then dispatches it to the Wal-Mart DC. One of the things we are most pleased with is that it adds refrigerator life for our customers.”

There might be a chance to extend this platform to the border.

“The West Coast consolidation facility shows that we might be able to have something along the U.S./Mexico border, both for shipments coming here and for U.S. product going to Mexico,” he said at the Nogales meeting.

Such a two-way business would possibly mean more U.S. produce going to Wal-Mart de Mexico stores.

Among other logistics changes at Wal-Mart, an agreement recently was signed with e-commerce provider Itradenetwork. Wal-Mart vendors will become even more reliant on electronic commerce.


Sustainability is the latest buzzword to follow organics and local.

McCormick is Wal-Mart’s co-captain of sustainability efforts, so you can expect some of his ideas to filter down through the produce industry.

The company is putting an emphasis on food miles through its Heritage Agriculture program, using the DCs to do more local purchasing, he said. “We might find we can get product cheaper from Mexico, but if it’s available locally we are weighing that option.”

“With freight costing so much, we may be able to come out ahead by paying more for local but less in transportation overall,” he added.

The only problem is that many areas of the U.S. that formerly had local produce deals just don’t make commercial volumes anymore, as production has moved to places where land and labor were cheaper.

McCormick suggested that Wal-Mart might work with land grant universities and other institutions to attempt to reintroduce some local crops that can be viable. “Some areas used to grow peaches, but they’re all gone now. Put in the trees and in five years you’re back in business.”

Certainly, McCormick is taking a long-term view when it comes to Wal-Mart’s fruit and vegetable business. He predicted that well-run local produce programs would mean the DCs don’t have to warehouse as much product at once, which would lead to fresher product on the shelves and less shrink overall.

The trend toward local, organic and sustainable, in some ways, flies in the face of Wal-Mart’s more corporate approach to organics. At Wal-Mart, organics are sold in packages to maintain organic status. That way an uninformed clerk doesn’t unwittingly commingle the product.

But McCormick acknowledged that many consumers of organics are turned off by packaging. They want no-frills, but the assurance of organic certification. To deal with this, in certain markets Wal-Mart is considering whether entire produce departments should be certified as organic.

That’s an interesting thought, but my perception would be that the hard-core organic devotee is by nature not a fan of corporate giants like Wal-Mart. They’ll gladly pay more at Whole Foods for the same thing.


These are just a few of the latest adjustments Wal-Mart is making as it balances on the tightrope towards the new frontier in produce. The changes to come are many.

Those Wal-Mart watchers along for the ride are advised not to look down, but straight ahead.