How Walmart Plans to Bring Back ‘Made in America’

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FREDERIC J. BROWN / AFP / Getty Images

Walmart doesn’t make anything. But the giant retailer could play a part in the manufacturing rebound that is taking place in the U.S. with its promise to buy $50 billion more U.S. made goods over the next decade for its Walmart and Sam’s Club stores. It’s a bit ironic, given Walmart’s vast global sourcing organization. But the same forces that are making the U.S. a more hospitable place for manufacturing —higher shipping costs and wage rates overseas among them—have prompted the company to reevaluate its sourcing on a variety of products. “This is a commitment around manufacturing and more economic renewal.  We see it as a critical issue for us in the American economy,” says Duncan Mac Naughton chief merchandising and marketing officer for Walmart U.S.

What Walmart sees is a way to lower costs while smoothing its supply cycle by looking more broadly at its distribution system. Although the company may be able to buy an item cheaper from China, the price it pays per piece doesn’t always reflect what it spends to get the product to the shelves.  “When we buy from overseas, we may buy more than we need to fill the container,” says Mac Naughton. “We’re looking at carrying costs through the system in addition to landed costs.” (Walmart has recently been criticized for being out of stock on items, due to a lack of store employees, but the company says its in-stock position is at record levels and that it hasn’t cut employee hours.)

(COVER STORYMade in the USA)

Walmart is also hitting some unexpected supply snags as local demand increases in the developing countries where it buys goods. Recently, it found itself short of memory foam for mattress toppers and had to add a U.S. supplier, Sleep Studio, to augment its foreign source. That need to increase capacity can only increase as the middle class grows in India, China and elsewhere. The company will still likely rely on foreign suppliers for those products, such as cut-and-sew garments, that have a very high labor input. But given the more robust regulatory environment in the U.S., domestic suppliers are far less likely to run shoddy plants that endanger workers, as some of Walmart’s overseas subcontracters have been accused of doing.

Which suppliers stand to benefit from Walmart’s strategy? The company says that products with a “high cube”  (supply-chain speak for big and/or bulky, such as furniture) are candidates. So are products that have more highly-automated production, meaning lower direct labor, or products that have a less predictable sales curves and might have to be produced quickly to meet a sharp rise in demand. The company says items such as sporting goods, storage products, games and paper products are likely categories.

One of the first companies to benefit is 1888 Mills in Griffin, Georgia, which makes better-quality towels. Walmart’s version will be labeled “Made Here.”  1888 Mills had some spare manufacturing capacity, but since the size of Walmart’s orders can distort any vendor’s production, 1888 Mills needed a longer-term deal to be able to make the investment required to produce the needed quantities. “We made a commitment that was longer term than we would normally do. There’s transparency on the part of both parties: we worked with collaboratively with them,” says Michelle Gloeckler, Walmart’s senior vice president of home.

(MORE: How ‘Made in the USA’ is Making a Comeback)

Camping and outdoor goods company Coleman is another participant. The firm, owned by Jarden Corp. is manufacturing its hard-sided coolers and personal flotation devices in the U.S., adding 160 jobs according to Walmart.  Jarden, whose brands range from Quickie mops to K2 skis, has been ahead of Walmart on domestic manufacturing. Jarden has been on a reshoring kick for about two years.

Some of Walmart’s vendors will get a chuckle out of the idea that Walmart is willing to become more transparent. Walmart has a reputation for getting vendors into its buying rooms and beating the hell out of them on price, essentially leaving them with little margin. But Mac Naughton says that Walmart has to start thinking longer term, rather than season-to-season and that this kind of collaboration will reduce costs for both parties over time, paving the way for lower prices for consumers. For instance, a U.S. manufacturer can bypass Walmart’s distribution centers and deliver directly to stores, so-called “no touch” distribution.

Although $50 billion is a lot of goods, it’s about 10% of what Walmart will sell this year at retail. The company says the $50 billion is just a starting point, and that if other retailers joined the party the figure could be much, much higher, perhaps $500 billion. Walmart’s U.S. president, Bill Simon, suggested in a speech to fellow retailers that the power of their order books can help reshore U.S. production in textiles, furniture, pet supplies, some outdoor categories, and higher end appliances.

This isn’t Walmart’s first crack at a Made in America program. An earlier one fizzled, amid some bad publicity, because Walmart couldn’t get enough low-priced merchandise to sell. Americans may love their country, but they will buy Chinese if the price differential is too high. This time Walmart says consumers won’t have to pay up to buy domestic. “I hope the American consumer values this and we’ll make it easy for them,” says Mac Naughton. If not, consumers won’t make it easy for Walmart.

(MORE: Is Walmart’s Buy American/Hire Veterans Initiative Anything More Than a PR Stunt?)

39 comments
BrianCollins1
BrianCollins1

hell with walmart and what it caused...wish the walton family died years ago and their damn company!!!!!!!!!!!!!!!!!!!

JackLWalker
JackLWalker

I pray this strategy works and Wal-Mart sales increase exponentially. Other business will follow the leader if the leader is making a better percentage on profit. Our economy has been in the tank for the last 7 years and no one has made this kind of effort to improve our economy till now. MADE IN AMERICA should mean quality even if it means paying a little more up front. If it out lasts the made In China products the savings are realized in the long run. Walmart has to recognize it owes a lot of it success to its employees. Hold on to some of those million dollar bonuses given to the few at the top and start giving spot bonuses for employees that show good work dedication or service above what is required for the customers. Now we have to support their effort and buy MADE IN AMERICA whenever we can. We have to start reading the labels again and keep those jobs here. It might be one your family that get these good jobs,

samuelcuesr
samuelcuesr

disappointment all around I spent several min posting my comment, which seems all complicated these days because you have to join face book or tweeter or something or other and then its not posted a waste of time,, just let people make there comment and see the real feed back,, ive been buying food from walmart and it goes bad before I can eat it so I fill like I getting ripped off badly and the service isn't any better, just a poor shopping Experience with a bad ending


peteraltschuler
peteraltschuler

The "Walmart Effect" has done more to undermine the American economy than any other process. 

Essentially, the effect has been felt when Walmart would, year-after-year, demand that US-based suppliers further reduce their prices until -- after implementing every form of ISO 9000 efficiency to rein in the cost of manufacturing -- the only remaining option was to send the work overseas. When that happened, the laid-off workers would go to Walmart and plead for even lower prices (now that they had no job-related income), and Walmart would go to the next manufacturer demanding lower prices from them. Ultimately, that manufacturer would also offshore production, and its employees would turn to Walmart for still lower "everyday low prices." And the cycle would continue.

Unlike Costco, which believes that its floor-level employees should be able to afford to shop in its stores and build careers at the company, Walmart's employees have been underpaid, uncovered by benefits programs, and dispensable. While Walmart has grabbed headlines with its green energy program and, now, its pledge to onshore manufacturing work, the efforts are better as PR than as economic remedies. And $5 billion a year ($50 billion over ten) is 1% of total annual sales -- an amount that's unlikely to make any difference in job growth.

Give people jobs here at home, and they can afford to shop at your business and buy the goods they make. It's a notion that's as old as Henry Ford, who raised employees' pay enough that they could buy a Model T. But it's a concept that Walmart executives seem blind to.

made-in-usa
made-in-usa

Definitely a mumbo-jumbo! Its a monopolize-marketing strategy to penetrate the remaining hi-end areas in the US and so forth. Will definitely put out more small business' means no small business, no jobs! We all know how they treat their own employees. Why would you even take the chance. To them continues their motto as always "its not just a job buts its also a career."

DeweySayenoff
DeweySayenoff

Okay, I'll admit I didn't read the article, but I had to say that the first thing which went through my mind when I read the headline was "By swapping out most of the "Made in China" tags."

Trivia: The SIX surviving siblings of Sam Walton (founder of Walmart) between them control MORE wealth than 90 MILLION of the poorest Americans.  I don't really see Walmart as good for this country.

ordcitizen01
ordcitizen01

I don't think the $50 billion is as big as it sounds.  Assuming there's going to be population growth of say 1% in the US in the next 10 years, Walmart will probably be able to sell $50 billion more made in USA products by carrying the exact same products they are now (because their revenue is about $450 billion right now and 10 years from now there's going to be 10% more people).  If they are really sincere about this they should say "Right now 20% of our merchandise (just throwing a random number out there) is made in USA and we are going to increase it to 90% in the next 10 years." or something like that.

dfwenigma
dfwenigma

I never really get Walmart apologists. Walmart started some 50 years ago with a concept similar to its other low price competitors. Then they started doing things that ranged from unethical to dangerous. Now they are the single largest employer in America. A retailer - the single largest employer in America. Not a manufacturing company, not a software company, not someone who creates intellectual property or food or automobiles - a consumer retailer. Does anyone else see some dangerous writing on the wall. They employe the most people but guess what? They flirt labor law. Most of their employees are part time - that means LESS than 20 hours a week of employment. They offer benefits - but only to part-time and full time employees - but they have few in either category. Their prices on some items are basically "loss leaders" - and its those items they use to drive smaller businesses in towns out of business - so-called "mom and pop" outfits. Their mostly part-time employees must use government benefits to raise their standard of living to a point where their kids can eat and they can put gas in the car and clothing on their backs and a roof over their heads. Once upon a time the largest employers were car manufacturers or some other business that created intellectual property or products. People who didn't get college degrees aspired to work "int he shop" - because they knew that if they could get "on at the shop" they could make a union wage, a living wage. That wage is gone. Walmart will never provide that wage. So what? Here's so what: those union workers were the backbone of the middle class. Those companies and those workers supplied gas tax for our roads and bridges, they provided taxes for local schools, local roads and bridges and other infrastructure (think sewage treatment, water). And those people consumed so utility companies built infrastructure knowing that they would have a large base of customers. Walmart isn't about America - it's about the shareholder - not a bad thing - if they had real competition - but they don't. Again because they're the largest they influence everything for all of us from wages and salaries to medical benefit offerings. Employers use the largest employer as a partial yardstick for their own efforts. And NO people they can't get a better job someplace else - because those businesses are gone! Free enterprise isn't free anymore. It's about the oligopoly - it's name is Walmart.

svnagappa
svnagappa

What ever one says WallMart has an eye for quality. In 1994 I bought 2 T shirts and some towels from there. Guess what I am still using the towels still with no damage or fluff and T shirts I threw out only recently due to neck worn out and I got sick of it.

rvgreenejr0684.rg
rvgreenejr0684.rg

I believe that Walmart is wanting to become a very upscale shopping experience. A high-end retail store where the clothing is expensive and the shoes are hot and pricy. Food will be expensive and gourmet. Look out! The new Walmart is coming to a town near you.   

Leftcoastrocky
Leftcoastrocky

The Walmart heirs are worth $100 billion.  I suggest they donate $10 billion to set up a manufacturing research center to help the U.S. develop new and more efficient manufacturing techniques and equipment.  (The research center could perhaps award PhDs in manufacturing engineering.)

MyFirstRodeo
MyFirstRodeo

Thank you for this article Bill. This is the whole ball game in a nutshell! The fat cat "corporations" could do so much more to lift up this economy if they wanted to. They were counting on their buddy Mitt to get into office so they could just continue to blame every thing wrong with the present economy onPresident Obama. I am so glad that the majority of the citizens of our country became hip to the games they are playing!

They may have strength in $$$'s, but WE still have strength in ###'s!

alvarez.t3
alvarez.t3

Wages , Wal mart , what about the hourly wage that probably has most employees on food stamps , besides McDonalds .???

mrbomb13
mrbomb13

I hope Walmart continues this "Made Here" program.  The company's actions will promote what's known as a virtuous cycle:  Buying from American factories will keep those American workers employed.  Those workers will continue to earn a paycheck, which will then be used to purchase goods/services from other firms.  Those firms will profit, and be able to pay their American workers (in addition to conducting other expansionary activities).

The main point of the virtuous cycle is that an employed American consumer is more beneficial to Walmart than an unemployed one.  Therefore, "buying American" benefits both company and customer alike.

tgm404
tgm404

Chinese made goods may seem cheaper, but the quality is so low you have to throw them out in a few months. Not really a bargain, at all.

firmsoil
firmsoil

Walmart serves poor neighborhoods while Apple serves rich.

Walmart pays a higher tax rate than Apple.

Apple keeps scores of billions of its profits offshore to dodge US taxes, Walmart does not.

dawgGoodie
dawgGoodie

" It’s a bit ironic, given Walmart’s vast global sourcing organization." 

Why? Would you have WalMart go broke over your unrealistic ideals?

nubwaxer
nubwaxer

$50 billion doesn't sound all that large when walmart's revenue is around $469 billion.  i went out of my way and paid more than i wanted to so i could get "made in usa".  inside the tongue it read "uppers sewn in the dominican republic".  i was informed by the manufacturer that the rubber soles were attached in the usa and that's probably an intentional legal loophole.  your representatives have even sold out the "made in usa" label for some quick bucks.

their prices are lower but so is quality.  i've been able to buy better foods, even if less, on my $200/month food budget shopping target and the other major supermarket next door even if that place charges 30% more.  their quality is much better and their usa workers are usa union.

jmccann8
jmccann8

roknsteve

Really? Where do you suggest I shop on my fixed income?

I bought an item at Walgreen's today for  $4.19 while the same Item at Walmart costs $2.35.


I might sympathize with tour position, but economically your point is moot.

roknsteve
roknsteve

Don't shop at Walmart.  They still sell poison chinese canned foods etc.  Plus the pay is so low their employees have to survive on food stamps. 

BrianCollins1
BrianCollins1

@peteraltschuler i hate big boxes....my brother is an industrial designer and he has filled me in over the years of walmarts business practices....

BrianCollins1
BrianCollins1

@dfwenigma walmart is the epicenter of why manufacturers sell the cheapest acceptable quality goods..america used to be country that had a high standard for quality goods..that it all but gone now.

MarkPinto
MarkPinto

Compare those products you bought in 94 with what is available today and you willl probaly see a dramatic difference in quality.

AlanBonser
AlanBonser

@Leftcoastrocky 

I think the Wal-Mart heirs should take some of their $$$$$ and raise all the employees wage by $5.00 per hour and pay their health insurance. That $$$$$ would circulate into local economies immediately, and it would make a difference. They could do this and the Walton family would still be loaded.

fadingaura999
fadingaura999

You're right, not a bargain.  It's not that the Chinese can't produce quality goods, it's that the corporations contracting the goods are settling for the lowest common denominator parts.  We may see a lot of crappy American made goods in the next 10 years, not because we can't make quality goods but because the corporations trying to keep costs down will lower the quality as low as they can before people stop buying their junk. 

LindsayHartwell
LindsayHartwell

I've lived on a fixed income for all of my adult life. This year I will top out at $8400. I have never shopped at Walmart. I spend a little more on certain things and go without where it's unimportant. I don't drink, smoke or do drugs (marihuana is legal here). I spend $200 a month on food and the rest goes to bills. I may have to live in subsidized housing, but my quality of life is dependent on my resourcefulness not my ability to sleep at night for supporting slavery. Shopping at Walmart supports slavery - in case you didn't catch that. So, economically YOUR point is moot. Besides, you can't survive on just loss leaders. That's crazy. You'd be replacing everything all the time which doesn't save you money at all. Try a thrift store every now and again. It'll save you a wad of money.

dawgGoodie
dawgGoodie

@jmccann8

See, this is practicality of capitalism which creates security for everyone; even those who dislike capitalism. That includes those countries who benefit from US prosperity. 

svnagappa
svnagappa

@MarkPinto  Agree but who is responsible for it? you the Americans you want everything cheap as it can be and that means cheap manufacturing cost and lower quality. Made in America used to mean something to rest of the world now made it America means who cares it is made in China. The difference in cost of manufacturing several items between America and China is 22% yet Americans are prepared to sell out their country to buy stuff that is cheap and in that process lose everything. There you go work it all out.

MarkPinto
MarkPinto

Totally agree, compare Craftsman products from 15 - 30 years ago with what is being sold today. Prices up, quality down.

firmsoil
firmsoil

@nstaley401

Poor workers rely on govt programs because they are poor not because they are Walmart employees.

Speaking on reliance on govt programs. Apple employees' mortgage tax break on their 1.2 million dollar average Cupertino homes is looting. This one budget buster tax writeoff alone costs the US nearly 80-100 billion/yr and pretty much all goes to the top 10%. Expensive green product tax writeoffs for the Apple employees, this is a very slippery slope for the rich in America.

fadingaura999
fadingaura999

@firmsoil, @nstaley401 - You're both right, pro and con.  Apple is hardly alone in hiding money legally through loopholes.  As I've gained income over the years, my tax rate has gone up and I've paid more in taxes both because of my rate rising and my rising income.  Many of these corporations are paying far lower rates than I am if they pay anything regardless of how much money they bring in. (in Walmarts case it is a lot of low paying jobs so lower taxes for jobs makes me roll my eyes). 

MarkPinto
MarkPinto

That is pretty presumptuous on your part. I don't mind paying for a quality product. I do have a problem with seeing prices go up and quality suffer while corporate profits soar. Get rid of unions and regulate Wall St and put those monies to work in producing a better product while stimulating the economy.

fadingaura999
fadingaura999

@firmsoil 

You are correct and that is the point.  As my income went up so did the amount of taxes I paid. 

firmsoil
firmsoil

@fadingaura999 

I bet you do not pay 9% tax rate and stash the majority of your profits offshore to dodge US taxes.