When Wal-Mart talks, people listen, especially when it puts $250 billion behind what it says.
Michelle Gloeckler, executive vice president, consumables and U.S. manufacturing lead, Wal-Mart U.S., told the summit that since the day in January 2013 that the retail giant made the “significant announcement” that it was going to spend $250 billion on additional made in the U.S. goods, “it was the kickoff of a journey.”
This story first appeared in the October 29, 2014 issue of WWD. Subscribe Today.
“It was a journey that didn’t take us further from home, as most journeys do, but closer to the heart of America, to places like Winnsboro, S.C., Winchester, Ky., and Circleville, Ohio,” Gloeckler said. “We’ve seen jobs created, factories built, and we’ve seen communities revitalized and we’ve seen lives changed.”
She began her presentation with a commercial that Wal-Mart used at last winter’s Olympics about a rebirth of U.S. manufacturing, with a narrator speaking over scenes of closed and then operating factories, saying, “I’m still here and I believe I will rise again, and I will build things and build families and build dreams. It’s time to get back to what America does best because work is a beautiful thing.”
Gloeckler said, “It was one of our best-scoring ads with customers and I think it surprised people that it was a Wal-Mart ad, and it really does exemplify what I’m here to talk about today.”
As the company embarked on its journey of commitment to U.S. manufacturing, a multipronged strategy emerged.
“At the end of that day, we’re tackling that very large purchase order in three ways,” Gloeckler explained. “First, by growing our existing U.S.-made goods that are available at Wal-Mart and now walmart.com. What you may not realize is that two-thirds of what we receive from our supplier partners is already made or grown here in the U.S. The second way is finding goods made in the U.S. from suppliers that aren’t currently selling to Wal-Mart or walmart.com and the third way, maybe the most difficult, is working and collaborating with our suppliers to re-shore categories that make economic sense.”
Meanwhile around the world, she noted, the middle class is growing in developing countries and driving demand for consumer products.
“Wages have certainly driven some of that growth, and when you think about the rising wages coupled with the fuel costs, that makes the U.S. a top consideration when deciding where to produce goods,” Gloeckler said. “It makes sense to produce goods closest to the point of consumption. We know that energy costs in the U.S. are not only economical and inexpensive, but it’s incredibly dependable. Many of you have traveled around the world and you know how important that is. This part shows that the U.S. can indeed compete with many countries around the world.”
For Wal-Mart, with more than 11,000 stores in the world, the Made in America commitment had to be comprehensive.
“So we got to work at Wal-Mart and as an organization we had to evolve, both in the way our buyers source products and the way we work with our suppliers,” Gloeckler said. “The good news is that innovation and risk-taking are part of our DNA at Wal-Mart. When it comes to our investment in U.S. manufacturing, we know it’s not only the right thing to do, it’s good for business, it’s good for communities and it’s good for our customers. In fact, the Boston Consulting Group predicts that our investment of $250 billion over the 10 years will create one million jobs in both the manufacturing sector and the service-providing areas that surround that. That is real impact and good for America, and our customers love that. We have found that it matters to them where our products are manufactured. It matters enough to them that it influenced where they shop and where they buy. In fact, second to price, our customers — 85 percent of them — say it’s important to carry products that are assembled or produced right here in the U.S.”
Gloeckler said while Wal-Mart U.S. sells more than $470 billion worth of goods annually, “it’s important to know that we don’t actually make anything — that’s an important distinction.”
“Thus, we need to collaborate with our supplier base to reach our goal,” she said. “So our role is really to leverage our scale, to leverage our purchase capabilities and remove obstacles, but also to facilitate and accelerate the progress of our suppliers to make or assemble their goods here. Yes, at Wal-Mart we are actually offering our own resources to help our supplier community.”
She said that, for example, over the last two years the suppliers identified two main obstacles and asked for Wal-Mart’s help. The first was navigating state governments. Usually that meant assisting with the complex task of finding the right state to re-shore or expand their U.S. production.
“Because of our large store base in the U.S., as well as our distribution centers, we have a very developed government-relations team,” that is often able to accelerate the process “or put our suppliers in touch with the right folks — that makes a difference,” said Gloeckler.
The second obstacle suppliers cited was navigating the supply chain that existed or didn’t exist in the U.S. for component parts. To tackle those problems, Wal-Mart held its first U.S. manufacturing summit in Orlando in August 2013 that featured more than 1,500 attendees, including representations from 34 states, nine governors and many federal leaders. Officials and suppliers conducted 300 meetings to discuss state programs, rebates and incentives.
A second summit was held this August in Denver, with 42 states represented and 400 meetings held.
“At that meeting, we tried to tackle the second obstacle, finding component parts,” Gloeckler said. “It was organized kind of like a trade show, where companies could exhibit their manufacturing capabilities and suppliers could shop for component parts. This summer, we also held a made in the U.S. open call focused on finding new suppliers and U.S.-made goods producers that Wal-Mart is not doing business with. It was the first time we had done anything like this. We had over 800 meetings that day. I saw lives being changed. About a third of the products we saw we either committed to on the spot or they are going through the process to become a Wal-Mart supplier and to have the products on our shelves or on walmart.com. It was truly a fantastic day.”
While Wal-Mart is making progress on all three fronts, Gloeckler said, “The most difficult to do is re-shoring — bringing products back to America that are already being made overseas. The good thing is that the interest in re-shoring is at the highest it’s been in years. Boston Consulting Group’s third annual survey of U.S.-based manufacturers released last week shows that the trend for manufacturers actively doing this continued to increase year over year. It’s a big shift and it’s exciting.”
She cited examples of companies that have successfully re-shored with Wal-Mart’s support — towel-maker 1888 Mills in Griffin, Ga., and legwear manufacturer Richelieu Group in Burke County, N.C. Both companies have invested significant funds in new equipment and technology updates and have hired workers and saved jobs.
She also noted that when Wal-Mart decided to reintroduce vests for all store associates, it wound up importing them from an existing supplier. But it has since found a U.S. company, Superior Uniform Group, Inc. of Seminole, Fla., that will now supply replenishment vests going forward.
“When we make a long-term commitment, it gives people the confidence to invest in equipment, machinery, updates, technology that will add efficiencies to their business,” Gloeckler said. “The collaboration, transparency and a long-term commitment can really make a difference, and that is new for us. Customers have told us that they will pay more for U.S.-made goods, we just don’t think they should have to. For the past two years that we’ve been working on this, we have found goods where the U.S. is less expensive than the imports we were currently buying.”
With that said, Gloeckler admitted that “competing on costs for textile manufacturing in the U.S. is certainly challenging.
“From spinning, weaving and dyeing to cut and sew, it will take something new,” she said. “It will take some form of innovation. To spur progress, working with the Wal-Mart Foundation, along with the U.S. Conference of Mayors, we launched a $10 million U.S. Manufacturing Innovation Fund just this past spring, with a specific goal of making it both easier and more competitive to make household goods in the U.S. We awarded the first grants to seven universities. The majority of those first grants, $4 million, were focused on textiles, tackling everything from fabric printing and dyeing to cut-and-sew automation.
In an interview before her speech, Gloeckler said there’s been a lot of initial progress in the first Made in America categories Wal-Mart worked on, such as televisions.
“What we’re really proud of is textiles,” she said. “Textiles are difficult.”
Gloeckler said Wal-Mart is always looking for innovative fabrics. “Performancewear has come so far,” she said, adding that the retailer is also interested in fabrics that travel well and wear well.
Wal-Mart invested its resources in several start-up companies to help them get set up to become Wal-Mart vendors, Gloeckler said. “We’re looking for any [product] that would make the customer’s life easier,” she said. “We’re open to anything.”
During her summit speech, the Wal-Mart executive said, “The good news is that while we tackle these difficult obstacles, we’re still inking deals and pushing toward that $250 billion goal. The commitments that we’re making today are creating jobs across the country. But we still have a long way to go, particularly in textiles. Innovation is part of who we are at Wal-Mart, innovation is part of who we are in this industry, so we’re pushing hard, we’re leaning into the categories, were investing and putting money behind it.”
Looking further down the road, “We are thinking big at Wal-Mart, such as ecosystems of expertise. We already have great hubs to move products. What if we could colocate manufacturing next to those logistics hubs? Making goods closer to the point of consumption and then moving it efficiently is a great way to do business. What if we could make component parts right next to where manufacturing takes place? Working with our suppliers, universities, government officials, working with innovators, many of which are in this room, we believe we can make a difference, for our customers, for our communities, for our business and ultimately for America.”