Wal-Mart’s pledge bolsters US manufacturing

by admin on June 17, 2016

Both are among companies enjoying increased business as a result of a public pledge by the world’s largest retailer to step up purchases of U.S.-made goods by $250 billion over 10 years.

Tailor Made added a production cell at its Elroy factory in 2014 after winning a contract to manufacture kitchen utensils — potato mashers, ladles, turners and such — that Wal-Mart Stores Inc. formerly sourced from China.

Sheboygan-based Rockline expanded its factory in Springdale, Ark., within the past year, in part to produce facial wipes for the mega-retailer.

“Wal-Mart has made this commitment, and I don’t know if a lot of the general public believe it, but it is true, it is happening, and it is improving American life by offering high-quality jobs with competitive benefits,” Jeff Wittkopp, senior vice president of product development at Tailor Made, said.

Others are less enthusiastic. This is, after all, Wal-Mart, the $478 billion firm whose relentless drive to offer its customers rock-bottom prices is widely viewed as having helped push factory jobs from the U.S. to China and other low-wage countries in the first place.

“Reminds me of when you were a kid and someone took your candy and you got it back, and they wanted credit for giving it back to you,” said Scott Paul, president of the Alliance for American Manufacturing, a lobbying and research group founded by the United Steelworkers union and domestic manufacturers.

Cindi Marsiglio, the Wal-Mart executive spearheading the initiative to buy more American-produced goods, has heard the candy-theft critique before.

“My general sentiment,” she said, “is that does not preclude me from continuing to enthusiastically bring American jobs back as a retailer. It’s kind of a so-what. So as a maker of nothing, as a manufacturer of nothing, if Wal-Mart can accelerate this resurgence and play a role in bringing any American jobs back, we’re going to do that.”

Wal-Mart announced its effort in 2013, as rising factory wages in China were helping make U.S. production of some goods more attractive, and with manufacturing employment here rising for the first time since the late 1990s.

Since 2010, the rebound has added nearly 800,000 manufacturing jobs. But 5.7 million were lost from 2000 to 2010 — 1 out of every 3 manufacturing jobs the country had at the start of the decade.

Most of that huge loss — the greatest the country had seen in at least 70 years — came before the 2007-09 recession set in, and as imports from China soared.

Wal-Mart says that according to data from its suppliers, items made, sourced or grown domestically account for about two-thirds of the retailer’s spending on products for its U.S. operations.

Wal-Mart won’t specify where it stands on progress toward its $250 billion goal, other than to say the company is on target.

“If we were behind, we would say that we’re behind,” spokesman Scott Markley said. “If we were ahead, we’d certainly say that we’re ahead on the goal. And where we are is right on schedule.”

On its website, the company lists 40 suppliers it links to the initiative. Some have made major announcements.

Giti Tire is building a $560 million plant in South Carolina that will produce tires for Wal-Mart. Giti has said it expects the factory to create 1,700 jobs over 10 years.

Wal-Mart supplier Element Electronics Corp. has begun assembling television sets in a South Carolina factory that, according to the state commerce department, is expected to create 500 jobs.

Another supplier, Impact Innovations Inc., bought a shuttered Memphis, Tenn., factory and started making gift wrap for Wal-Mart there last year.

Given that Wal-Mart already devotes two-thirds of its purchases to U.S. goods, natural growth in the company’s sales could contribute significantly toward the $250 billion goal.

Still, even for a company as huge as Wal-Mart, $250 billion in added spending over 10 years is a big number. If achieved, it could create 1 million jobs, the Boston Consulting Group has said.

The business consulting firm has been a prominent voice predicting a return of manufacturing to the U.S., saying that rising Chinese wages, higher American productivity and other factors will close the cost gap for many goods destined for North America.

“It is about the pendulum swinging,” said Harold Sirkin, a senior partner at Boston Consulting. When China entered the World Trade Organization in late 2001, “they had a massive advantage,” Sirkin said. “In a matter of 15 years, that advantage is becoming very small.”

But another management consulting firm, A.T. Kearney, says “re-shoring” of manufacturing by U.S. companies continues to lag behind the shifting of production out of the country.

Still, Kearney notes that foreign firms are increasingly investing in manufacturing capacity here, attracted by the enormous U.S. consumer market, the country’s political and economic stability, and its engineering skills.

Add it all up, Harry Moser says, and the U.S. now is roughly breaking even — domestic manufacturers still are moving jobs to other countries, but the jobs gained from re-shoring and foreign investment here roughly offset the losses.

That, said Moser, founder of the Reshoring Initiative, stands in sharp contrast to the early 2000s, when the U.S. was registering huge net losses of manufacturing jobs to foreign soil.

Moser praises Wal-Mart for its commitment. Through its efforts, he wrote in a blog post in December, the company already has spurred creation of at least twice as many U.S. manufacturing jobs as any other company the Reshoring Initiative tracks, and has the potential to do much more.

Marsiglio, the Wal-Mart executive, said she’s optimistic. While Wal-Mart will not pay suppliers more for U.S. goods, companies should re-evaluate the relative costs of production here and abroad, she said.

“What we’re asking them to do is do the current math, because if you haven’t done it in the last five to six years, you might be surprised,” Marsiglio said.

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