It’s been 18 months since Walmart made its much-publicized pledge to source an additional $250 billion worth of American-made goods over the next decade. Is the retailer keeping its promise?
Today, Reuters is out with a detailed progress report today looking at the steps the company has made since January 2013, finding the retail giant is running into a number of practical problems— many of which it caused — when it comes to sourcing American-made products. As reporter James B. Kelleher writes:
[S]uppliers trying to reshore production as part of the initiative by the world’s largest retailer are running into practical problems as they try to restart long-idled corners of U.S. manufacturing.
Companies that make the leap have to grapple with a host of challenges, including a shallow pool of component suppliers, an inexperienced workforce, and other shortcomings that developed during the country’s long industrial decline.
‘A lot of the tribal knowledge and skill sets are gone because the humans who used to do that work have either retired or died,’ says H. Kim Kelley, the CEO of Hampton Products International, a privately held maker of locks, lighting and other household hardware. The Foothill Ranch, California-based company began selling products made in Asia to Walmart in the 1990s and is now supplying it with some U.S.-made products.
Of course, Walmart is directly to blame for many of the roadblocks it is now encountering. As the Reuters story notes, Walmart’s insistence over the past several decades that suppliers cut their costs forced many manufacturers to shut down U.S. plants and move production overseas.
And the numbers don’t lie when it comes to the impact this had. As Alliance for American Manufacturing (AAM) President Scott Paul wrote just after Walmart’s big announcement was made, the company increases its global procurement costs by $21 billion annually.
Many of the high ticket items Walmart sells, such as appliances and apparel, come from overseas — Chinese exports to Walmart alone accounted for 11 percent of the U.S. trade deficit with the country between 2001 and 2006. As of 2013, 80 percent of Walmart’s suppliers come from China.
Another hurdle facing the company is that manufacturers who do operate in the United States are having a tough time locating U.S.-made component parts for their products. For example, the team at Hampton Products found it difficult to find a “U.S. maker of lightweight but strong polyester yarn.”
Still, the company does appear to be taking steps to find solutions:
The issue is so widespread that Walmart is making it the focus of a two-day summit it is hosting in August in Denver. At a similar summit held in Orlando last year, Walmart focused on connecting suppliers with economic development officers from states hoping to lure the new factories.
The retailer says it is especially interested in having factory owners with excess capacity attend the August event — even those that aren’t interested in supplying Walmart directly. The hope is that they can become contract manufacturers to Walmart suppliers looking to produce in the United States.
Walmart declined to share how many new U.S.-made products have been introduced in its stores since January 2013, so exactly how much progress has actually been made toward its pledge remains unclear. What is clear is that if Walmart is dedicated to keeping its pledge, the company will have to lead the way in making it easier for all retailers to source American-made goods.
Photo by Flickr user Patrick Hoesly, used following Creative Commons guidelines.