Wal-Mart makes the case for continued U.S. manufacturing, vital for retailer’s three-year growth goal

by Kim Souza ([email protected]) 234 views 

The costs to manufacture many goods in the United States remain only slightly higher than in China and when factoring in logistics and transportation costs it’s a wash, according to Hal Sirkin, senior partner and managing director for the Boston Consulting Group.

Sirkin was one of the featured speakers touting U.S. manufacturing at Wal-Mart’s annual U.S. Manufacturing Summit in Bentonville on Tuesday (June 28). He said 10 years ago that wasn’t the case as the wage differential between China and the U.S. was a $6 to $22 per hour advantage for China.

The thing to do was to order as much cheap product as you could from China and resell it in the United States, but that is no longer the case, Sirkin said. Reshoring has now become a normal course of business today for many manufacturers like Wisconsin-based Rockline Industries, that operates three manufacturing sites in Arkansas. In Springdale, the company makes Equate branded baby wipes, which is the second highest selling product in the baby category, according to Nick Santoleri, vice president of manufacturing at Rockline Industries.

Santoleri said last year the company worked with Arkansas officials and Wal-Mart to increase its local capacity in Springdale to reshore some of the operations it had abroad. The response he said has been tremendous.

“We had nice double digit growth year on year after we opened up to Wal-Mart,” he said during the conference.

Sirkin said reshoring was once considered a short-term solution, but it’s becoming a longer term trend. While U.S manufacturing is slowly ramping up, it still pales in comparison to the volume made in China which was $3 trillion last year. He said robotics and 3D printing are helping U.S. manufacturers gain efficiencies in the competitive landscape and could be game changers for U.S. manufacturing in the near to midterm future. He said robots will never totally replace humans, but the two can co-exist for maximum output in many manufacturing applications.

Wal-Mart Stores CEO Doug McMillon tells prospective suppliers and manufacturers the company needs their innovative products to keep growth going. McMillon spoke at the end-of-day reception held for the suppliers and manufacturers at the Walmart AMP in Rogers on Tuesday (June 28).
Wal-Mart Stores CEO Doug McMillon tells prospective suppliers and manufacturers the company needs their innovative products to keep growth going. McMillon spoke at the end-of-day reception held for the suppliers and manufacturers at the Walmart AMP in Rogers on Tuesday (June 28).

John Dammerman, president of Impact Solutions, said reviving wrapping paper production in the company’s Memphis facility required a $7 million investment and because the cost was so great he approached Wal-Mart about providing a multi-year contract to justify the expense.

“Wal-Mart said yes and we worked through the terms of our agreement and in May 2014 we signed a supplier agreement. The agreement was for Impact Solutions to spend $7 million in printing equipment and gradually shift production away from China to the U.S.,” he said during the Tuesday conference.

The company agreed to ship 35% of its wrapping paper to Wal-Mart from the Memphis production facility in 2015 and increase that to 50% in 2016 and incrementally each year after. The first press was installed in May 2015 and the company met the 35% U.S. quota. In January, a second press was installed and Dammerman said the company is on track to ship 58% of Wal-Mart’s wrapping paper order from the Memphis facility this year. He said last week the company completed the installation of another $3 million of equipment above the $7 million investment to continue increasing the capacity for U.S. wrapping paper production.

“I can’t thank Wal-Mart enough for our partnership and their support in restoring production,” Dammerman said.

Last year Harry Moser, founder and president of the Reshoring Initiative, estimated that Wal-Mart’s increased purchases of U.S. made products 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.

Wal-Mart Stores CEO Doug McMillon told the suppliers and manufacturers at the reception at the end of Tuesday’s events that one of the great things about shopping at Wal-Mart has already been being surprised by items you didn’t expect to see in the store. He said events like Open Call are one way Walmart can ensure that new, innovative products make it into stores. McMillon encouraged suppliers to give feedback on the day’s events.

“Your feedback is important to us as we try and achieve this $250 billion investment in U.S. made goods. We don’t manufacture things so we need your help. … We want to drive growth and be a place you can count on for growth year after year. We set an objective with Wall Street to grow our business by $45 billion to $60 billion over the next three years and we can’t do that without you,” McMillon said.

Not everyone approved of the Walmart Open Call and U.S. Manufacturing Summit. A union-backed interest group known as Making Change at Walmart released the following statement regarding Tuesday’s event.

“Walmart is not investing in America, rather, its purchasing sends hundreds of thousands of jobs to China. They also continue to falsely label products with foreign origins on its website, despite promising to quit this deceptive practice. Walmart can hold summits and announce American ‘open-calls’ all they want, but it is not solving the problem. We will continue to call out the real truth and fight for American jobs and workers,” said Jess Levin, communications director at MCAW.

Levin was referring to claims made against Wal-Mart by the group Truth In Advertising regarding misrepresenting foreign products as “Made in the USA” on their website. He said Wal-Mart remains the nation’s number one importer, according to a 2015 report from the Economic Policy Institute (EPI). The EPI report also found that Wal-Mart’s trade deficit with China alone eliminated or displaced more than 400,000 U.S. jobs between 2001 and 2013.

Wal-Mart says its investment in U.S. manufacturing is no joke. The company highlighted several of the U.S. Made products now on its shelves that were pitched at last year’s Open Call. One of those was Glucose Health’s blueberry tea mix, made in Gravette, which is now in 1,800 stores nationwide. Peggy Knight, a broker for this product said seeing it on the shelves is a major victory, noting that it was a one-year journey from pitch to shelf. Another Arkansas-made product that got into stores over the past year is workout band sets made by Alliance Rubber Co., in Hot Springs.