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 So America's largest retailer has invited dozens of small- and
midsize manufacturers that aren't necessarily interested in having a
direct relationship with Walmart to come to Denver this week for a
two-day matchmaking event.
The goal? To connect Walmart vendors hungry for key parts with
manufacturers that have idle plants - and to put those plants back
to work cranking out components, like small electric motors or
polyester yarn, that have become hard to find.
“We're going to try to match up (vendors) who are looking for
component parts with factories that have capacity in the hopes that
we can rebuild that supply chain that doesn’t exist anymore," said
Michelle Gloeckler, the Walmart senior vice president in charge of
the initiative.
Critics of the retailing giant are quick to claim that Walmart,
which built its empire on low prices, is partially to blame for the
sorry state of U.S. manufacturing.
Mary Bottari, a former trade analyst for Public Citizen’s Global
Trade Watch, says Walmart’s push for cheap goods "has fueled a
global race to the bottom in wages and working conditions." And the
Economic Policy Institute, a union-friendly think tank, estimates
Walmart's trade with China alone has cost the United States 200,000
jobs.
Walmart disputes those claims, and spokeswoman Brooke Buchanan says
Boston Consulting Group has estimated that the domestic-sourcing
initiative will create 1 million jobs in manufacturing and related
service jobs.
ZIPPERS AND SNAPS
The "Made in USA" program was conceived as a way to help Walmart win
back customers who have defected in recent years to even cheaper
competitors such as Dollar Tree and Dollar General. So far the
effort has failed to stem a five-quarter-long decline in U.S. sales.
Walmart says the 18-month-old program is a winner with customers. It
hopes the Denver event, which has attracted 100 component part
manufacturers as well hundreds of existing and wannabe Walmart
vendors, will allow it to rapidly increase the number of U.S.-made
products available in its more than 4,200 U.S. stores.
But the event is also a tacit acknowledgment that the “Made in USA"
pledge is harder than it might have seemed when it was announced
last year.
Not only are some raw materials and components hard to find, but
many of the companies tempted to participate in the
domestic-sourcing program are unprepared to do business with Walmart
and its storied - but complex - inventory control and logistics
system.
Walmart's suppliers say difficulties with the program do not
invalidate the idea. A number of factors, including rising wages in
China, plummeting productivity-adjusted wages at home and a new
appreciation for short, responsive supply chains, mean they can
compete with Chinese rivals.
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"By eliminating the ocean freight, what we've done is lower the
overall cost of goods. So I can not only beat Chinese prices, I can
obliterate them," says Keith Scheffler, president of Creative
Things, an Arkansas toymaker that recently shuttered its last
Chinese plant.
Still, vendors say they are forced to go overseas for such
commonplace items as zippers and snaps.
Element Electronics, which makes flat-screen TVs for Walmart, has
moved incrementally after finding "there was no known existing
domestic supply base" when it moved assembly back to the United
States, says Chief Executive Officer Mike O'Shaughnessy.
The company started simple, focusing on things like packaging
materials. Now it is seeking U.S.-made suppliers of plastic and
metal parts.
O'Shaughnessy figures three years may pass before domestic suppliers
can supply all the parts Elements needs.
Supply-chain problems aren't the only challenge Walmart vendors face
when they join the "Made in USA" push.
The retailer's "Retail Link" system presents vendors with a torrent
of real-time sales, inventory and purchase information that they
need to learn how to analyze so Walmart can minimize in-store
inventories while keeping shelves stocked.
It's a difficult balancing act that even sophisticated suppliers
like Mel Redman, a former senior Walmart executive who runs Redman
and Associates, a toy manufacturer that supplies the retailer,
struggle to achieve.
“Everything works backwards," he says.
"What a vendor needs to learn to do is to work from must-arrive-by
date backwards through the production schedule, lead time and lag
time. It’s very complicated."
(Editing by David Greising and Douglas Royalty)
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