Suppliers Assess Wal-Mart’s ‘Made-in-USA’ Parade
October 18 2013 by ChiefExecutive.net
Suppliers may want to keep that in mind as they decide how to respond to Wal-Mart’s pledge to buy another $5 billion in U.S.-made goods annually over the next 10 years, and to window dressing such as the “manufacturing summit” that the company recently hosted in Orlando.
Chief Executive has been chronicling the resurgence of U.S. manufacturing for years, a true sea change that has been tied to factors even bigger than Wal-Mart’s supply chain, such as increasingly favorable currency differentials, rising labor costs in China, and the recognition of the on-the-shelf costs of the logistical limitations of making a $10 product halfway around the world so that it can be sold in St. Louis.
These are the main factors behind a “reshoring” movement that Wal-Mart only lately has begun acknowledging. There’s no doubt that the company – long assailed by critics, unfairly or not, over sluggishness on issues ranging from treatment of female employees to reducing its environmental footprint – could benefit from the positive PR that it is generating with its new commitment to procuring American-made goods and helping U.S.-based suppliers.
Today even small domestic producers, who have never thought it possible, have a shot at becoming a Wal-Mart supplier. According to The Wall Street Journal, the Bentonville retailer is talking to existing suppliers about where they make products and looking for new U.S.-based suppliers at trade shows. This is how Wal-Mart encountered Amy Bradley and her husband, Tyler, who run a tiny company from their home in Wyndmoor, Pa. Their company produces a plastic scoop Ms Bradley invented, called the Toydozer, that picks up Legos and other toys with tiny pieces that scatter across floors.
The Bradleys, the Journal reports, assumed it would be too expensive to make in the U.S. and initially had it made in Mexico. But, unhappy with the quality, they checked with local plastic injection-molding companies. To their surprise, the highly automated work could be done more cheaply in the U.S. than at their Mexican contractor, so they switched production to Pendell, Pa.
But Wal-Mart is coming late to the re-shoring party. Its $5-billion-a-year commitment is only a pittance of its overall annual sales that are approaching $500 billion. And it already sources about two-thirds of its goods, mostly groceries, from the United States. So suppliers investigating Wal-Mart’s new enthusiasm for American-made wares likely already will have made up their minds that it’s a good thing to produce more in their home country.
Which suppliers stand to benefit from Wal-Mart’s strategy? According to Time, providers of big and/or bulky products such as furniture, are good 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.