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Thursday, July 24, 2014

Walmart’s Buy American Plan Could Be More than “Shot in the Arm” to Reshoring

Early this year — January to be precise — retail giant Walmart announced plans to spend an additional $50 billion over 10 years on U.S.-made products, adding juice to the reshoring movement. The reason, said the company, is to give a shot in the arm to American production of appliances, furniture, textiles, and other goods.

Walmart repeated its pledge at a manufacturing summit that it hosted in August in Orlando. The story recently got its legs again among business media, with commentators analyzing the impact Walmart will have on U.S. manufacturing.

A shot in the arm is about as far as the plan goes in terms of a meaningful investment in U.S. manufacturing, some observers maintain. This is because Walmart’s proposed spend averages $5 billion per year for the proposed 10-year period, which is only about 1.07 percent of the company’s consolidated net sales of $466.1 billion in its most recent fiscal year (Feb. 1, 2012-Jan. 31, 2013).

At the summit, company officials said the Buy American commitment would generate $70 million of factory growth and create more than 1,000 U.S. jobs. Nice figures, but not overwhelming.

Walmart President and CEO Bill Simon added in remarks to summit attendees at the Orange County Convention Center “that [j]ump-starting the [U.S.] manufacturing industry and rebuilding the middle class requires a national effort by countries, industry leaders, lawmakers, and others.” He thus does not see the retailer single-handedly rejuvenating American manufacturing as much as laying the groundwork for itself (and others) in dropping offshore suppliers in favor of U.S. manufacturers.

Nevertheless, the timing is propitious. Reshoring is a growing trend as manufacturers of many goods find that the total landed cost of products made in China, for one, is actually on a par with or higher than the cost of similar goods made in America. Also, U.S. manufacturers have more control over quality and other key issues when products are made domestically. Walmart may thus still spur U.S. manufacturing while continuing to stock its shelves with the low-priced goods its customers want.

Walmart’s Made in America commitment appears to be yielding gains, as examples indicate. GE, which will supply energy-efficient lightbulbs to the retailer, invested $30 million in U.S. production and added 150 jobs. Element Electronics Corp., which bills itself as the only American-owned company producing televisions domestically (in Detroit), is slated to open a flat-screen TV factory in South Carolina next month to supply Walmart, creating up to 500 jobs. Hampton Products International invested $5 million in a Wisconsin facility to make screen-door and storm-door hardware and plans to make additional investments next year; it expects to add 150 jobs there in the future.

Walmart’s decision will give a boost to U.S. manufacturing at an opportune time for goods producers. Offshoring is still popular for most commodity goods and will remain so, but U.S. manufacturers are becoming more price-competitive with their Asian counterparts. From the retailer’s clout alone, Wal-Mart’s procurement policy may trigger a swell of domestic purchasing and supply.

MORE FROM THOMASNET NEWS: Reshoring’s Impact on U.S. Manufacturing Job Creation 

 

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Comments

  1. Walmart’s efforts are good for the economy and U.S. Manufacturing.

    Our founder/president Harry Moser of The Reshoring Initiative attended the Walmart Manufacturing Summit. Here’s Harry’s takeaway:

    “I came away convinced that Walmart is doing everything it can to dramatically increase its purchases of U.S. manufactured products. I met dozens of companies that are doing their best to provide a U.S. made product at a price and quality that U.S. consumers will find acceptable and choose vs. imported products.

    To put Walmart’s goal into perspective: $5 billion of extra purchases per year will mean about 30,000 reshored manufacturing jobs. That will be a one-time doubling of the number of jobs reshored, currently about 30,000 per year.”

    The not-for-profit Reshoring Initiative’s free Total Cost of Ownership http://www.reshorenow.org/TCO_Estimator.cfm software helps corporations calculate the real P&L impact of reshoring or offshoring. In many cases companies find that, although the production cost is lower offshore, the total cost is higher.

    The Reshoring Initiative http://www.reshorenow.org tracks all reported and some private cases of reshoring and concludes that about 80,000 manufacturing jobs have been reshored since Jan. 1, 2010.

    Any company, including Walmart suppliers, trying to evaluate the feasibility of reshoring is encouraged to use our free software or call us for free advice.
    You can reach Harry Moser, founder/president of The Reshoring Initiative, at harry.moser@reshorenow.org | http://www.reshorenow.org

    Also, I recommend reading “ReMaking America” the AAM’s new book on how manufacturing may see a new dawn in America along with wealth and growth opportunities. http://americanmanufacturing.org/remake-america/ Harry Moser, founder/president of the Reshoring Initiative wrote an excellent chapter on Reshoring.

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