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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: russwinter who wrote (13934)	10/25/2004 12:51:23 AM
From: mishedlo	Read Replies (1) of 116555

From caddman on the FOOL Thanks to WMT... I work in a shared office suite. Great place to meet and talk to a wide variety of professionals from different industries. Two doors down is an owner of a platics/ploymers manufacturing and design firm. Great guy, really concerned about the road the economy is going down. Like usual there is some manufacturing here, but a lot overseas. They are now building in China to supply the market in China. One of their clients is a firm that makes power tools. Many of the tools are sold at WMT. WMT has a new supplier system going on-line soon. The new system also brings new order/invoicing/payment protocols. Soon when a tool is sold at the register, a simultaneous order is placed for restocking to the supplier. Sounds cool, but here is the catch. Payment for the supplied product will only be released for items SOLD. WMT will never have any skin in the inventory/supply game. No dollar risk to them for poor purchasing decisions, poor product performance, etc. The power tool manufacturer in turn is telling its suppliers they will mimic this payment protocol. My office neighbor is now squeezed. No one will pay him for parts until an item is sold. But he cannot in turn demand the same arrangement from Alcoa, GE Plastics, etc. WMT will work as long as the consumer buys from them. Poor Christmas season, who cares. WMT is not on the hook for the inventory. I asked my neighbor, the founder of the company, where he draws the line. Will he throw in the towel? He is starting already. No more low-cost low margin parts. Only high end part design/development/specialty plastics. caddman

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