Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.
It’s that time of year when consumers reach for holiday wrapping paper without a second thought of where it’s made. Would you believe it may very well be from Memphis?
Impact Innovations, Wal-Mart’s largest holiday wrapping paper supplier, recently delivered 10 million rolls of holiday wrap that were made in Memphis.
“It’s the first time Wal-Mart has offered holiday paper made in the U.S.” said Cindi Marsiglio, vice president of Walmart Manufacturing. “Impact Innovations agreed to onshore their wrapping business after first meeting with us nearly three years ago and in June the new presses in Memphis began to run.”
Trisha White, senior director of marketing at Impact Innovations, told Talk Business & Politics that 35% of its holiday paper production was onshored this year from Asia. Next year the company plans to have 50% of its holiday wrap production based in Memphis, and increasing incrementally over the next couple of years.
“We will likely keep some of the more labor intensive manufacturing in Asia, but the bulk of rolled paper will come onshore,” she said. “About 95% of the wrapping paper we make is for the holidays, be we are hoping to expand that business into everyday and occasional wrapping paper for our retail customers.”
THE PROCESS, JOBS
White said Impact Innovations’ top management first met with Wal-Mart about onshoring some production more than two years ago. About a year ago they figured out a way to onshore the paper production and began to set the wheels in motion. She said the new press arrived in Memphis in May and it took the company about six weeks to get it running.
“We hired all new pressmen who helped install the machinery creating about 20 new full time jobs in this plant, which was formerly used for cutting the giant rolls into smaller rolls and packaging them for our retail clients,” White said. “This is a one-of-a-kind press so there was a lot for the pressman to learn.”
Another 100 seasonal jobs (March to November) were also added this year with more expected in year two as production runs ramp up.
“We are very pleased with our first run here in the U.S. There was a big learning curve and it was not without a few headaches, but our operations team put in lots of hours and we got the orders done on time.” White said.
Impact Innovations supplies Target, K-Mart, Kroger, Big Lots and Michaels with holiday wrapping paper products in addition to the Wal-Mart business.
It’s been three years since Wal-Mart pledged to buy an additional $250 billion of products made in the U.S. by 2023. Marsiglio said the retailer sets quarterly and annual goals for this initiative and through October the company had already fulfilled its spending goal for 2015. The self-assessment is private and not open for public analysis.
“We are tracking ahead of schedule with our spending goals and we are seeing momentum continue to increase through 2015, which is still early in the 10-year commitment,” Marsiglio said in an interview with Talk Business & Politics.
Wal-Mart reports that 1,300 categories have been analyzed for economic attractiveness for onshoring production. More than 150 unique projects have been approved and projects range in individual value from $1 million to $370 million across 42 departments. The retailer has focused on three ways to fulfill its 10-year commitment, through increased purchases of U.S. made goods already sourced here; source new U.S. made goods, and reshore the manufacturing of goods made elsewhere.
As more categories are now being made in the U.S., from NUK baby pacifiers made in Wisconsin, to biking helmets rolling off the line in Illinois and socks and hosiery production ramping up in several states including Arkansas, the onshoring effort is gaining momentum, she added. Marsiglio admits that onshoring production doesn’t happen overnight and it’s not without hurdles.
“Suppliers often look at how readily available the raw materials are to their existing U.S. production facility, and the more automated systems are the easiest to bring onshore,” she said.
Many of the onshoring efforts by suppliers to Wal-Mart have been the lower hanging fruit given cost and time restraints of ramping up manufacturing from scratch. Marsiglio said holiday wrapping paper is a seasonal product that’s not labor intensive and is a good fit for onshoring. She said buyer teams at Wal-Mart have are proactive in discussing onshoring with their suppliers in categories that make sense.
The Wal-Mart onshoring commitment that included a longer-term contract was key in Impact Innovation’s decision to onshore the holiday wrapping paper production.
“Because of increasing labor and shipping costs associated with overseas production, we’ll realize savings over time. But with a big investment like this – basically transforming our Memphis facility – we needed an extended commitment to make it happen, and Walmart came through. This isn’t just about the money. It’s about doing the right thing. By growing U.S. manufacturing, we’re creating local jobs, and local industry support jobs. Those jobs help elevate families, businesses, our communities, and our entire country,” said John Dammermann, CEO of Impact Innovations.
SUPPLIER INSIGHT, IMPACT
Marsiglio said one thing that has been most surprising to her in the past two years of this decade-long commitment has been the insightfulness and creativity on the part of suppliers. She said the suppliers have embraced this initiative 100% and often look at where they may have factories and what else they can make there.
In the case with Impact Innovations, they already had the cutting and assembly facility in Memphis so it made sense to move some production to that same facility. Jarden, another large supplier for Wal-Mart, recently looked at where they had excess manufacturing capacity and moved more production there.
“Jarden has a factory in the U.S. where they make playing cards, but they also found a way to move their Walmart private label cutlery manufacturing from abroad into this same plant. Now these two very different products are made in the same U.S. plant,” Marsiglio said.
Marsiglio said 10 years is a long time to follow a story, but said the small pockets of renewed manufacturing cropping up around the country are significant. The Boston Consulting Group made an early prediction that the $250 billion investment would create one million jobs, including the jobs in manufacturing and related services. But it’s too early in the decade-long initiative to evaluate that prediction. Wal-Mart did recently provide a report on some of the announcements made so far.
Harry Moser, founder and president of the Reshoring Initiative, estimates that Wal-Mart’s increased purchases will add 300,000 U.S. manufacturing jobs.
“About 60% of companies ignore the 15% to 30% of the cost of offshoring, and these costs are rising rapidly.” Moser said.