Aug 13 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.
ZIPPERS AND SNAPS
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
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
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
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)