Wal-Mart Says Reshoring Not A ‘PR Stunt,’ Gov. Hutchinson Seeks ‘Share Of Attention’

Wal-Mart officials opened the second day of their manufacturing summit with a video of legendary co-founder Sam Walton saying in a speech years ago that “buying American-made products should be what all retailers are doing.”

Michelle Gloeckler, executive vice president of Walmart U.S manufacturing, followed that by telling a crowd of around 2,000 suppliers and economic delegations from 30 states that the retailer’s effort to return manufacturing jobs to the U.S. is not a marketing ploy as some skeptics have suggested.

“We are proving them wrong, the evidence speaks for itself and this is not a PR stunt,” Gloeckler said with conviction.

Wednesday (July 8) was the second and final day of the retail giant’s third annual U.S. Manufacturing Summit held in Bentonville.

Gloeckler said for every one U.S. manufacturing job that is created, three jobs are supported, according to the Boston Consulting Group. Roughly two-thirds of products on Wal-Mart shelves are now made in the U.S., but she said there is room for more innovative products that help provide solutions to customer needs. She said half of the products come from women-owned businesses.

Wal-Mart execs have said efforts to help onshore manufacturing jobs is not an easy task, but it is feasible for many product categories and will grow as the supply network – which has shrunk for three decades – for manufacturing begins to catch up.

Todd Siwack, CEO of Ferrara Candy, took the stage to share how his company that makes private label confections for Wal-Mart spent the past 18 months preparing two new facilities near Chicago after they decided to return some production from Canada and Mexico. Siwack described the process as initially daunting because the commercial candy-making production moved offshore 25 years ago. He said the first thing they had to consider was if they could piece together an ecosystem to provide the raw materials needed to support an American facility.

He said the tipping point for Ferrera was the price and long-term commitment from Wal-Mart as well as the bond of trust established that allowed it take the leap. But, then it also had to sell that trust level and commitment to its material suppliers who were also asked to invest in American production.

CASE FOR ONSHORING
Mike Zinser, of the Boston Consulting Group, spoke at the Open Call ceremony on Tuesday (July 7). He said the economics of manufacturing abroad have tipped in favor of the U.S. for many industries. He said a floor care product company found that it was 3% cheaper to manufacture in the U.S. when considering the entire supply chain and transport costs.

On average, he said the labor costs in China are about 61% of those in the U.S., but when factoring in supply chain costs, the comparison levels out. That said, Zinser said the U.S. manufacturing supply chain remains fragmented for some industries and it will take time to mend those gaps. He said it took the Japanese automakers a few years to build out the supplier network in the southern U.S., but now they turn out cars and trucks with parts sourced mostly from the U.S.

“We are still at the very early stages of this manufacturing shift. It’s more like a 10- to 20-year cycle. U.S. manufacturers and suppliers have to innovate, apply technology and robotics where they can and they will figure it out,” Zinser said.

WAL-MART, ARKANSAS CHALLENGES
Mike Harvey, chief financial officer of the Northwest Arkansas Council, told The City Wire following the summit that Wal-Mart has realized in the past two years there are significant challenges for onshoring manufacturing. He applauded the Wal-Mart effort to ramp up the help and said holding meetings like the two-day event in Bentonville provides Arkansas a front-row seat to recruiting future business.

A delegation of economic development officials from around the Natural State had three booths at the summit expo hosting prospective businesses and fielding inquiries from suppliers looking for U.S. manufacturers and component parts.

Harvey said there are real challenges in trying to recruit product manufacturers to Arkansas, namely in the areas of skilled workforce numbers and available facilities for acquisition. He said there is good work underway in high schools and junior colleges across the state to provide a career track in manufacturing for students, if they can be convinced to sign on.

He also said Northwest Arkansas’ economy is like riding a bull in terms of its growth, but it’s important to keep local leaders aware of the need for manufacturing as a middle-class option for future generations.

In terms of real estate options for attracting manufacturing, Harvey said Fort Smith has advantages over Northwest Arkansas. Also, there is a skilled workforce there displaced in recent years from the loss of Whirlpool’s refrigerator manufacturing plant and its supporting companies.

SEEKING A ‘SHARE OF ATTENTION’
Gov. Asa Hutchinson (R) did his job plugging his home state during a presentation at the summit. He said any company looking to reshore manufacturing should put Arkansas on the short list of possible homes.

“No state knows Wal-Mart better than the state of Arkansas. … It’s a competitive climate for business and we are in the center of the U.S. and middle of the commerce stream. Businesses like Big River Steel have told me part of the reason they chose Arkansas was that the agricultural background also promotes a strong work ethic in its people,” Hutchinson said.

He added that with sales tax and payroll tax rebates in place that Arkansas can be competitive on tax structure. He said the state is committed to workforce training as well as mandated technology and computer coding taught in all high schools because robotics and technology are necessary to skilled manufacturing jobs today.

“We have a long, relationship with Wal-Mart and its supply chain drivers. I know Wal-Mart operates in lots of states and it loves all its children equally, but we (Arkansas) are the oldest child and we want our share of attention,” Hutchinson said.

Danny Games, deputy director of global business for the Arkansas Economic Development Commission, told The City Wire that his delegation believes Arkansas is competitive in key areas required by manufacturing such as energy costs, logistics and labor. Games said third party evaluators typically rank Arkansas in the top quartile, if not the top 10 states for tax structure. He said many times it comes down to company specifics on the final selection.

That said, Games was energized by the amount of interest the state has received from summit participants. On Tuesday evening, the AEDC and the Northwest Arkansas Council hosted a reception for the suppliers and government officials taking part in the two-day event. Games said the reception was well-attended and there was a genuine appreciation from suppliers and manufacturers visiting in Bentonville.

“I am optimistic that we went a long way in showing our visitors what a business friendly environment we have in Arkansas,” Games said.