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Pay-delay policy irks Sears suppliers.

PAY-DELAY POLICY IRKS SEARS SUPPLIERS

The possibility of an anti-trust lawsuit against Sears, Roebuck and Co. looms after the company announced it will delay paying its vendors by an additional 30 days beyond the current 30-day standard.

Sears announced in August that it would delay paying its vendors for up to 60 days. The company says that it is "absolutely not" experiencing cash flow problems and that they are following the trend of other retailers.

Several industry leaders contacted by Wood & Wood Products said Sears' plan would cause cash flow problems for supplies and could set a disturbing trend.

This announcement has brought protest from groups as varied as store fixture manufacturers, furniture manufacturers and the apparel industry. Many of those manufacturers contacted by W&WP asked not to be quoted but used the terms "unfair" and "unethical" to describe the situation. They preferred not to be named because they did not want to risk losing business with Sears, a company with reported annual revenues of $70 billion.

A number of representatives from major companies in the industry said it is "certainly" a possibility that an anti-trust lawsuit would be filed against the giant retailer. They added the suit might be brought by a group of suppliers.

Leading the protest against the payment policy is the National Association of Store Fixture Manufacturers. The Board of Directors of NASFM voted to officially protest the move and had executive director Bernie Whalen draft a letter of protest to Sears chairman Edward Brennan.

One of the most disturbing aspects of this is the possibility of it becoming an industry standard. In the letter Whalen states, "If this new policy becomes an industry standard, vendors will have to build the additional financing costs into their pricing structures. Sears and other retailers will have to pass along these price increases to the consumer -- who will end up paying for your 30-day payment delay."

A credit manager for a furniture manufacturer said the 60 day period may really mean 75 to 80 days with turnaround time. "If a supplier ships them $2 million a month in products and it takes two months to get paid, then the supplier is out $4 million. That is enough to close some businesses," he said.

Whalen added that the 60-day delay in payment represents one sixth of the year. He said this timeframe really hurts store fixture manufacturers because of the customized nature of the work and the capital outlay for materials and labor that must be paid out in the building of the product.

"It's a way for them to dominate their suppliers," Whalen said in a telephone interview. "We are in the midst of a recession and suppliers are heavily dependent on big business. They know they have that clout and they are using it."
COPYRIGHT 1991 Vance Publishing Corp.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Trends & News; Sears, Roebuck and Co.
Author:Adams, Larry
Publication:Wood & Wood Products
Date:Oct 1, 1991
Words:467
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