A twinkle of hope

An edict out of Bentonville, Ark., has more of a chance to shore up (pun intended) America’s ailing manufacturing sector than anything our elected officials may promulgate from Washington, D.C., or Little Rock.

Governors and state and local economic development leaders will attend later this week an event organized by Wal-Mart Stores that has the potential to create hundreds of thousands of manufacturing jobs in the U.S.

Gov. Mike Beebe is one of several state CEOs set to attend the “U.S. Manufacturing Summit” scheduled to be held Aug. 22 in Orlando, Fla. The event is part of the retailer’s “onshoring” effort to buy at least $50 billion in U.S. made products during the next 10 years. Although two-thirds of products purchased by Wal-Mart come from the U.S., much of that is for food.

The $50 billion boost by Wal-Mart is expected to come in two forms, according to company officials. First, they seek to buy more U.S.-produced goods in categories like sporting goods, apparel, storage products, games and paper products. The other, and likely more challenging area, is to return U.S. production “in high potential areas like textiles, furniture and higher-end appliances.”

Textiles, furniture and higher-end appliances are three categories that once employed tens of thousands of Arkansans – if not more. Arkansas has been harder hit than its neighbors in terms of manufacturing jobs lost. Between June 2010 and June 2013, Arkansas lost 7,700 manufacturing jobs, a decline of 4.75%. Among Arkansas’ neighboring states, only Mississippi also saw a decline in manufacturing jobs in the same period, but that was just a 500 job loss, or a decline of 0.36%.

But is $50 billion a big number with respect to what Wal-Mart purchases? It’s not pocket change.

Using a back-of-the-envelope calculation that incorporates the company’s reported (10K for the most recent fiscal year) total sales, margin, amount of international sales and level of grocery sales compared to hardlines, the $50 billion boost could come close to representing almost half of all non-consumable products purchased by the global retailer. If in place during the most recent fiscal year, the $50 billion boost would have represented around a 20%-25% increase in U.S.-made products (including consumables).

Critics may argue that the “Everyday Low Price” business model practiced with unwavering diligence by Wal-Mart – and, subsequently, other mass retailers – pushed some U.S. manufacturing jobs to Mexico, China, Taiwan, Vietnam and other low-cost labor markets. Others may argue that federal and state tax and regulatory policies have made it difficult for U.S. manufacturing operations to compete with offshore operators.

This essay does not seek to address the validity of the various factors resulting in a U.S. manufacturing sector that has shed more than 7 million jobs since peak employment in 1979; or an Arkansas manufacturing sector that has lost almost 38% of its jobs since a peak in 1995.

This is merely to note what may be possible when Wal-Mart executives directly encourage hundreds of their vendors to meet with state, regional and city leaders around the U.S. for the purpose of establishing relationships that result in jobs. To say the meeting in Orlando is akin to speed dating runs the risk of sounding silly about a serious summit. However, the gathering is an attempt to make introductions, share interests and begin relationships. We certainly hope for positive chemistry, the sharing of phone numbers and promises to “talk soon.”

It is the promise of those relationships that draws to Orlando representatives from the Fort Smith Regional Chamber of Commerce and the Northwest Arkansas Council. Economic development is certainly a dog-eat-dog game, but being within a few miles and minutes of Bentonville may provide that ever-so-slight advantage needed in the competition for jobs.

The promise of potential also is not lost on Grant Tennille, executive director of the Arkansas Economic Development Commission.

“We’re very focused on trying to take advantage of that (Wal-Mart onshoring program), … and recruiting like crazy in those areas,” Tennille said.

What happens later this week in Orlando is one of the important early steps in a 10-year program to which we hope Wal-Mart officials remain committed. That commitment could be magnified, because success by Wal-Mart in this effort could boost sales of U.S. produced goods by $500 billion over the 10-year period if other large retailers decide to participate.

Ideally, state and federal officials would step back from dizzying cycles of sophomoric political posturing long enough to consider and enact policies that would aid Wal-Mart’s onshoring effort.

The City Wire appreciates the onshoring push by Wal-Mart, and we plan to monitor the interaction between the company, private development groups, and state and federal officials.

Why do we care? Because this is a twinkle of hope for families struggling with unemployment and underemployment all around this great state who have for too long lived near a large empty building that once hummed with the sound of production and paychecks.