Multinational retail titan Walmart is widely known for its ambitious sustainability efforts. Employing 2.1 million people across more than 4,600 US locations, the powerhouse corporation delivers on its “everyday low price” promise by closely managing costs, all the way down to the raw materials its suppliers need to develop their products. To help a key supplier in its automotive business make data-driven, sustainable sourcing decisions, Walmart turned to Circular.
The Challenge
Walmart has presented its suppliers with a tough problem: find sustainable alternatives to virgin materials while minimizing or eliminating cost increases of the finished good. Rather than squeezing suppliers to solve this challenge on their own, Walmart decided to get on the same side of the table to see if retailers and suppliers could crack the code on finding economically viable, sustainable materials.
Walmart asked Circular to collaborate with Highline Warren, a long-time supplier for Walmart’s white-labeled automotive products. The team targeted recycled high-density polyethylene (rHDPE) for automotive oil and windshield wiper fluid bottles produced in North America with five project objectives:
- Identify cost savings
- Find efficiencies in the sourcing process, reducing time to decision
- Diversify the supply chain
- Inform decision making using market data on pricing, material availability, etc.
- Gauge supplier engagement and openness to use AI tools to support sourcing decisions
Highline Warren was already sourcing some rHDPE. But with significant growth plans, as well as the challenges in the fragmented, opaque post-consumer recycled (PCR) market, the company knew it wanted to build a more robust PCR supply chain.
The Results
In just three weeks, Circular uncovered savings opportunities of up to 20% and provided market insights that helped the team evaluate each supplier quote on price vs. benchmark. For Highline Warren, these results fast-tracked decision-making on which materials to move to testing and contracting. For Walmart, the project established the business case to use AI sourcing tools to drive transparency, cost savings, and efficiency across business units.
In addition to capturing immediate savings, Highline Warren was able to diversify its supply chain with 38 new rHDPE suppliers in the US. Armed with market data and a much deeper understanding of the performance of recycled plastic, Highline Warren is now considering sourcing opportunities globally to mitigate supply chain risk in the current uncertain economic environment.
Perhaps most importantly, Walmart and Highline Warren proved that a retailer and supplier can create a win-win when they work together to source sustainable materials. In a new way of doing business based on transparency and joint problem solving, both parties benefit from the cost savings, efficiency, and surety of supply driven by diversification.
The Approach
The first step of this process was to align the material spec with the intended application. For example, Circular’s pricing data helped Walmart identify an opportunity to swap a light grey colored material for the far more expensive natural material Highline Warren currently sourced. Since rHDPE would be used for the motor oil bottle liner, color was less important. Straight away, this switch opened up a 3x cost savings opportunity.
The material switch opened up cost savings, but it wasn’t the only one. Highline Warren had been working with a broker, which added a layer of fees to the sourcing process. Using Circular’s data and software, the company uncovered sourcing options they hadn’t previously identified—eliminating the need for a broker.
In addition to cost savings, working with Circular drove efficiency for Walmart and Highline Warren, offering significant time savings. The RFQ process for sourcing recycled materials could last years with the incumbent analog processes. Circular’s operations team augmented the procurement teams. The additional capacity resulted in more robust and complete RFQ results with higher supplier response rates in just three weeks.
Circular’s AI solution helps sourcing teams identify relevant results and further vet during the RFQ process. Buyers are then able to advance qualified suppliers with a high likelihood of success in testing. For Walmart and Highline Warren, this process yielded custom quotes to spec and volume adjusted pricing that created greater efficiency in sourcing decision-making. The Walmart procurement team can use these great results as a proof point to support the continued use of AI in sourcing efforts.
The Circular Approach
Interested in achieving the same for your business? We may be able to help.
The Questions to Ask Yourself
- Can we include PCR in our packaging without exceeding our current budget?
- Who sells the materials we need — and how much should we pay for them?
- Are our processes manual and inefficient? Can we use AI to find savings and efficiency gains?