July 31, 2014    Volume 21, No. 12

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Walmart Is Giving Priority To U.S. Manufacturers Who Hire American Workers; CEO Bill Simon Says Reviving Industry Is Essential For Walmart's Success


By Richard A. McCormack
richard@manufacturingnews.com

Walmart is accelerating its program to purchase billions of dollars of more products from U.S.-based manufacturers. On July 8. Walmart held its first-ever Made in USA 'Open Call' Event" at its Arkansas headquarters. Five-hundred manufacturers pitched their products to Walmart buyers. The only requirement was that their products be manufactured or assembled in the United States. It was the first time in Walmart's history that the company made its buyers available in an open call.

"Anybody who wanted an appointment got an appointment, the only caveat is it had to be made or assembled here in the U.S. to create American jobs," said Walmart CEO Bill Simon.

Walmart is not backing off its goal of buying $250 billion in additional items from American producers over the next decade. "We are ahead of where we thought we would be after one year," said Walmart spokesman Kory Lundberg. "We are very excited about how it is going."

On Aug. 14 - 15 in Denver, Walmart will be holding its second "Manufacturing Summit" focused on identifying U.S. manufacturers that make component parts (such as small motors) that go into products made and assembled by larger U.S.-based Walmart suppliers. Walmart realizes that it can act as a catalyst in rejuvenating withered U.S. supply chains. "There are opportunities for us to create manufacturing hubs in this country again like we did many years ago," says CEO Simon.

At the July 8 open-call event, Simon told an assembled crowd of 800 manufacturing company representatives that buying a lot more U.S.- made goods was essential for putting the United States back on stable economic footing. He encouraged other retailers to take up the charge, quickly, in order to improve the economic outlook for the U.S. retail sector.

Walmart has a lot at stake. Without customers, Walmart cannot grow. And without manufacturing, Walmart does not have enough customers. The service economy is not generating enough wealth, say Walmart executives. Movie theaters and restaurants cannot sustain a local economy when everyone has a job working at movie theaters and restaurants and can't afford to see movies or eat at restaurants.

When Walmart buys products made by American manufacturing workers, "we see growth in [local consumer] markets that we haven't seen growth in in many, many years," said Simon. "After six years of moving sideways and waiting for something to happen, it is time for American businesses to lead the renewal and growth cycle that will restore the manufacturing base and help grow our economy. We have to do it. We have to do it. We can't wait for [government] programs and policies that will come and go and will be favorable and unfavorable. We can't wait any more."

Walmart is seeing economic rejuvenation in the communities in which production for Walmart stores is being reestablished. Winnsboro, S.C., is experiencing a revival thanks to a new Element Electronics factory that assembles televisions for Walmart that were previously made in China. In Clarendon, S.C., Kent Bicycles is ramping up production to assemble half a million recreational bicycles for Walmart, the first time in a generation that a volume bicycle production facility has been operational in the United States. "They are in discussions with suppliers of component parts for those bicycles to grow around their facility in South Carolina," says Simon. "That is jobs for communities that need those jobs."

In addressing the U.S. manufacturing reps at Walmart headquarter, Simon said that he told the company's buyers to be flexible -- to work with companies to help them become Walmart suppliers. "We will have a bias toward 'yes,' " he said. "We want to get to 'yes.' Don't make your decision on what is, but what could be and we will work with you on the 'what could be' part," he told the American manufacturers.

Duncan Mac Naughton, Walmart's Chief Merchandising and Marketing Officer, told the manufacturing reps that Walmart buyers do not want to hear them say, "We can't do it." He offered this advice to the manufacturing companies: "Don't say no. Say, collaboratively, how can we find a path to win together."

Walmart's executives are getting inspiration from founder Sam Walton. "His vision is still what we aspire to deliver," said Simon. "He was bold, he took risks and he moved fast. Let's get some deals done and start to change America."

Michelle Gloeckler, Walmart Executive Vice President of Consumables and U.S. Manufacturing, told the assembled American manufacturers that Walmart will work with any manufacturer on ramping up U.S. production of competitive products. "We talked to our buyers and told them to understand your production output," she said. Smaller manufacturing companies that win supply contracts can phase up production. "We can look at launching them at two distribution centers or launching them on Walmart.com."

Chief Merchandising and Marketing Officer Mac Naughton was more specific: "We are looking at our business one store at a time."

When Walmart contracted with 1888 Mills to make towels in the United States, the company did not have the production capacity to supply 4,000 stores. The manufacturer started by supplying 200 stores, added another 200 and then another 200 as it ramped up production. "As they build their capacity we will continue to make shelf space available to them in more stores," says Walmart spokesman Lundberg.

Sales of towels made by 1888 Mills have increased by 24 percent compared to the towels they replaced that were made in China. Producing those towels in the United States has reduced Walmart's inventory and has allowed it to order on demand.

1888 Mills is not yet up to 4,000 stores. "They are working on it and they have purchased a new factory in Georgia that they are retrofitting and bringing back to life so they will be able to produce more," says Lundberg.

Other companies have started out in 50 Walmart stores. "We want to figure out what works for you and what works for us and start the process," says Lundberg.

In order to provide companies the ability to ramp up or reshore production, Walmart is providing them with multi-year agreements "with a lot of transparency with the supplier to give people the certainty the need to invest capital in the U.S. to create jobs," said Gloeckler.

Walmart hopes that other retailers start similar "Buy American" programs. "If other retailers get involved and join us, it increases what we are able to do," says Lundberg. "We think we can source $250 billion additional by ourselves, but if the retail industry comes along, just think of what that means?"

Walmart CEO Simon feels the company's Buy American initiative is a transformative event in American history. When he met with all of the company's buyers about the open call, "I said, 'Each and every day our buyers make decisions that impact the lives of our customers; and each and every day, they make decisions that impact their careers and our company.' " But when buyers meet companies interested in producing products in the United States, it "will impact not only our mutual customers and our companies but our country," said Simon. "I believe that today, we are on the edge of a truly great breakthrough and nothing less than the future of the country is at stake. We can do it. I know we can. If we do this right, people will look back and say we really did what our customers needed us to do; that we really, really did what was right for our companies and that we really helped grow the economy of the United States of America."

Of the 500 manufacturers that made a pitch to Walmart on July 8, 56 percent of them were companies that had never sold anything to Walmart. Other Walmart current suppliers pitched new products that could be manufactured in the United States.

"One of the reasons for the open call event was to see what's out there that we don't know about that we should be carrying," says Lundberg. "We saw a lot of great items and made a lot of deals on the spot and we are working with others that are under consideration. It was an amazing event for the suppliers that were here and we will have new products on Walmart.com and in Walmart stores as a result of that." American-made products are being promoted separately on Walmart's consumer web site.

Walmart has found that there are five categories of products that lend themselves to being made in the United States:

  • Products for which raw materials are available at competitive prices, such as cotton, plastics and metals;
  • Products that are made on highly automated production lines that require little manual labor;
  • Products that are slow and inefficient to ship -- that are bulky, light and take up a lot of space and where freight is a big portion of the price getting the product to the United States;
  • Products where energy is a big part of the production process since energy costs are much lower and power is more reliable in the United States; and
  • Products for which there is growing demand; seasonal products or trendy products that need to be quickly restocked.

"Changes in energy and transportation costs and all the variables that make up manufacturing components are swinging in the direction of the United States for the first time in a generation or more and it makes sense to make products closer to our customers -- it is more efficient to do that," said Simon.

The Walmart executives describing the Buy American initiative were consistent in describing the number-one attribute Walmart is looking for in a U.S. producer: competitive pricing. "Let's be clear about what our customers expects. It about the right price," said Charles Redfield, Chief Merchandising Officer of Walmart's Sam's Club division. Mac Naughton was more specific: "We have to win and we will win on price." He said Walmart buyers are "respectfully real" with U.S. manufacturers: "If your offer is not competitive, we will tell you. We will coach you. We will work together to make it more competitive."

The company has created a web site (http://corporate.walmart.com/suppliers/us-manufacturing-for-suppliers) that allows U.S. manufacturers to contact Walmart buyers to pitch U.S.-made products that Walmart can carry. Companies can find out what it takes to set up an appointment with a Walmart buyer. It has also issued a broad request for proposals seeking U.S. manufacturers of patio furniture. There is also information on the 2014 U.S. Manufacturing Summit, to which it invites Walmart suppliers, mass, discount and specialty retailers, raw materials and component suppliers, representatives from state and federal government and financial institutions and investors -- http://news.walmart.com/events/ 2014-us-manufacturing-summit.


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