Denver event aims to close gap in Walmart's 'Made in USA' push

Thu Aug 14, 2014 8:04am EDT

The Wal-Mart company logo is seen outside a Wal-Mart Stores Inc company distribution center in Bentonville, Arkansas June 6, 2013.  REUTERS/Rick Wilking

The Wal-Mart company logo is seen outside a Wal-Mart Stores Inc company distribution center in Bentonville, Arkansas June 6, 2013.

Credit: Reuters/Rick Wilking

(Reuters) - Wal-Mart Stores Inc, which has pledged to buy an additional $250 billion in U.S.-made goods over the next decade, is hitting a snag as it tries to meet that promise: Some vendors keen to participate in the initiative complain that after decades of offshoring it has become impossible to domestically source even commonplace components for their products.

So America's largest retailer has invited dozens of small- and midsize manufacturers that aren't necessarily interested in having a direct relationship with Walmart to come to Denver this week for a two-day matchmaking event.

The goal? To connect Walmart vendors hungry for key parts with manufacturers that have idle plants - and to put those plants back to work cranking out components, like small electric motors or polyester yarn, that have become hard to find.

“We're going to try to match up (vendors) who are looking for component parts with factories that have capacity in the hopes that we can rebuild that supply chain that doesn’t exist anymore," said Michelle Gloeckler, the Walmart senior vice president in charge of the initiative.

Critics of the retailing giant are quick to claim that Walmart, which built its empire on low prices, is partially to blame for the sorry state of U.S. manufacturing.

Mary Bottari, a former trade analyst for Public Citizen’s Global Trade Watch, says Walmart’s push for cheap goods "has fueled a global race to the bottom in wages and working conditions." And the Economic Policy Institute, a union-friendly think tank, estimates Walmart's trade with China alone has cost the United States 200,000 jobs.

Walmart disputes those claims, and spokeswoman Brooke Buchanan says Boston Consulting Group has estimated that the domestic-sourcing initiative will create 1 million jobs in manufacturing and related service jobs.


The "Made in USA" program was conceived as a way to help Walmart win back customers who have defected in recent years to even cheaper competitors such as Dollar Tree and Dollar General. So far the effort has failed to stem a five-quarter-long decline in U.S. sales.

Walmart says the 18-month-old program is a winner with customers. It hopes the Denver event, which has attracted 100 component part manufacturers as well hundreds of existing and wannabe Walmart vendors, will allow it to rapidly increase the number of U.S.-made products available in its more than 4,200 U.S. stores.

But the event is also a tacit acknowledgment that the “Made in USA" pledge is harder than it might have seemed when it was announced last year.

Not only are some raw materials and components hard to find, but many of the companies tempted to participate in the domestic-sourcing program are unprepared to do business with Walmart and its storied - but complex - inventory control and logistics system.

Walmart's suppliers say difficulties with the program do not invalidate the idea. A number of factors, including rising wages in China, plummeting productivity-adjusted wages at home and a new appreciation for short, responsive supply chains, mean they can compete with Chinese rivals.

"By eliminating the ocean freight, what we've done is lower the overall cost of goods. So I can not only beat Chinese prices, I can obliterate them," says Keith Scheffler, president of Creative Things, an Arkansas toymaker that recently shuttered its last Chinese plant.

Still, vendors say they are forced to go overseas for such commonplace items as zippers and snaps.

Element Electronics, which makes flat-screen TVs for Walmart, has moved incrementally after finding "there was no known existing domestic supply base" when it moved assembly back to the United States, says Chief Executive Officer Mike O'Shaughnessy.

The company started simple, focusing on things like packaging materials. Now it is seeking U.S.-made suppliers of plastic and metal parts. 

O'Shaughnessy figures three years may pass before domestic suppliers can supply all the parts Elements needs.

Supply-chain problems aren't the only challenge Walmart vendors face when they join the "Made in USA" push.

The retailer's "Retail Link" system presents vendors with a torrent of real-time sales, inventory and purchase information that they need to learn how to analyze so Walmart can minimize in-store inventories while keeping shelves stocked.

It's a difficult balancing act that even sophisticated suppliers like Mel Redman, a former senior Walmart executive who runs Redman and Associates, a toy manufacturer that supplies the retailer, struggle to achieve.

“Everything works backwards," he says.

"What a vendor needs to learn to do is to work from must-arrive-by date backwards through the production schedule, lead time and lag time. It’s very complicated."

(Editing by David Greising and Douglas Royalty)

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Comments (3)
gcf1965 wrote:
“claim that Walmart, which built its empire on low prices,…” – so the consumer demanding these prices in our culture of greed played no role. Stop villainizing the business, they only cater to the demands of the consumer. Want to lay blame, look in the mirror!

Aug 14, 2014 9:42am EDT  --  Report as abuse
Ramman wrote:
Not a big fan of WalMart, but it is due to things such as poor quality and a lack of choice. Most times I end up going elsewhere for things I need and want because I cannot find what I am looking for.

That being said, I understand the company, how and why they operate as they do. I know why and understand why they went to China in the first place, like so many others. Regulatory processes and punishing taxation in the USA created the need to reduce costs of production and this was found in China at the time.

Now, however, things have changed, and it is not really due so much to the buy American crowd. For the most part people will still buy the cheaper product because it is what they can afford and it matters little where it is made. Costs of producing in China have risen to the point that it is not nearly as cost effective and regulations in China for foreign companies have made things more difficult to do business there.

But reversing the trend that has become the norm after many years is not as easy as one may think. Add in that while President Obama is going around chastising companies for moving out of America, they continue to over-regulate and are adding even more levels of taxes. This means that it is still not cost effective to manufacture in the USA despite the desires of many. True, cost comparisons with China, while still not equal, are much better, but again it is due to cost increases in China and shipping as opposed to better conditions in the USA. And, at the same time the government is screaming about companies moving out of the USA and issuing threats, they are actually building up Mexico and paying manufacturers to move there!

Aug 14, 2014 10:28am EDT  --  Report as abuse
Seriously2016 wrote:
There will always be someone to criticize no matter what you do. But it’s difficult to argue against the success of Walmart. The largest retailer in the world. It’s supporters (customers) far out number it’s critics. Good on Walmart to promote “Made in USA” goods.

Aug 14, 2014 11:18am EDT  --  Report as abuse
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