Walmart’s ‘Made in USA’ Push Entices, Challenges Manufacturers

When Walmart pledged last year to buy an extra $250 billion in U.S.-made goods over the next decade, it seemed to be just what the country needed to help move its manufacturing renaissance from rhetoric to reality, according to news agency reuters.com. But suppliers trying to reshore production as part of the initiative have run into practical problems.

Companies have to grapple with such challenges as 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 knowledge and skill sets are gone because the humans who used to do that work have either retired or died,” said H. Kim Kelley, the CEO of Hampton Products International, a privately held maker of locks, lighting and other household hardware. The California-based company began selling products made in Asia to Walmart in the 1990s and now supplies it with some U.S.-made products. Trying to rebuild that manufacturing capability, while making products that meet Walmart’s standards, can require companies to “start from scratch,” Kelley said.

Walmart and its existing suppliers have 150 active reshoring projects in various stages of development. For many, finding U.S.-made component parts is a problem so widespread that the retailer will host a two-day summit in August to connect suppliers with economic development officers from states hoping to lure new factories.

Walmart also invited hundreds of potential vendors to an “open call” on July 8 in Bentonville, Arkansas, to pitch U.S.-made products.

The retail behemoth’s critics say it bears some responsibility for the diminished capability of U.S. manufacturers. For years, its relentless insistence that suppliers cut costs prompted companies to shut domestic plants and shift production to low-wage countries. Now, it asks companies to come back home, and its efforts are aided by lower domestic energy prices, increasingly competitive wage rates, improved automation, and a renewed appreciation for the ability to respond quickly to shifting U.S. customer demands.

One electronics company that had made its TVs in Asia built a small local test plant that began producing flat-screen TVs shortly before Walmart announced the Made-in-USA push in January 2013. Today, the company’s 315,000-square-foot plant in South Carolina makes TVs that are sold in all of Walmart’s 4,000+ U.S. stores. The switch has led to significant savings in ocean freight charges and customs duties on finished goods, though the manufacturer has had difficulty finding domestic suppliers.

Walmart gave itself 10 years to meet its $250 billion goal but hopes to meet the target ahead of schedule. In the meantime, the company will require suppliers to open their financial books as part of the screening process in order to verify that it can rely on them to supply product as promised.