While a large portion of the products Walmart sells are sourced in China, the global retailer says more can be done to boost manufacturing here at home.
Walmart released a report earlier this summer which it said can serve as a roadmap to help expand American manufacturing. The retailer worked with Boston Consulting Group and claims that decreasing policy barriers could offer an opportunity to create more than 1.5 million American jobs and recapture more than $300 billion in consumer goods that are currently imported.
In 2013, Walmart embarked on a goal of sourcing an additional $250 billion over 10 years in goods that support American jobs. Since then, Walmart said it has learned a number of things about how the U.S. can tilt the global supply chain in its favor.
The report points to 10 policy “levers” to address barriers to growth. It includes building more vocational training programs and re-branding the image of the U.S. manufacturing industry to attract new workers. Walmart also called for promoting manufacturing clusters with public-private cooperation and encouraging growth of component production to help close supply chains. On the regulatory end, the report called for eliminating federal overlap in regulations and streamlining compliance. Finally, it said the U.S. needs to create a globally competitive tax environment, modernize trade agreements and support state and local tax deductions that foster manufacturing investments.
“Walmart called for promoting manufacturing clusters with public-private cooperation and encouraging growth of component production to help close supply chains.”
“It’s important to note that there is no silver bullet that will solve the problem on its own. The barriers to domestic manufacturing are just too broad and too complex,” said Dustin Burke, partner in BCG’s manufacturing practice.
The report pointed at federal overlap of regulations as a common problem and called for streamlining compliance requirements. The manufacturing industry’s concerns about regulations aren’t new. Manhattan Institute released a report earlier this year which said “decades of expanding regulations” are negatively impacting growth in the industry. Manhattan Institute senior fellow Mark Mills said that for small manufacturers, the cost of regulatory compliance was the equivalent of $35,000 per year per employee.
There also has been a growing need for talent in the sector. Walmart’s report calls for building vocational training programs linked to local industry and to identify skill gaps and partner with academic institutions. The report also called for reducing financial burdens on private industry to train and upskill workers. This includes expanding and protecting manufacturing extension partnerships (MEPs), local workforce investment boards (LWIBs) and to incentivize manufacturers to create and expand in-house apprenticeships.
Cindi Marsiglio, Walmart’s vice president of U.S. manufacturing, told Retail Dive that changing perception about the industry would also help attract younger workers. Despite the fact that more low-value tasks are being automated, she said there is a growing demand for skilled workers.
“We have a generation of young, newly and soon-to-be employed individuals who aren’t thinking about manufacturing as a path to success, and it’s quite the opposite…Our suppliers tell us they need a ready workforce, they want skills developed for a wide variety,” Marsiglio said.
Steve Goldstein, D.C. bureau chief of Market Watch wrote that the company itself could arguably be a contributor to the demise of the U.S. manufacturing sector with its “rapacious sourcing of consumer goods from China.” He also notes a 2015 Economic Policy Institute estimate which said the company’s trade deficit with China had displaced more than 400,000 American jobs.
It’s worth noting though that the retailer has a vested interest in sourcing closer to home because it reduces transportation costs, and can enable them to get products to market faster. Goldstein said while Walmart’s ideas may be based in self interest, they’re also valid in boosting the U.S. manufacturing sector. “The ideas are, to some degree, self-serving— for instance lowering tax rates and adopting a territorial system of taxation—but go beyond that,” Goldstein said.