"Since last year I've been making the rounds talking to just about anyone who'll listen about this opportunity to re-establish a manufacturing base in the U.S." - Bill Simon, former president and CEO, Walmart U.S.
If you know anything about the American economy over the last 25 years, from the exodus of American manufacturing jobs to the proliferation of Walmart stores, you might think the above quote was satire, a la The Onion. But it's not.
Early in 2013, Walmart -- the ubiquitous retailer and the nation's largest private employer -- announced its intention to stock its shelves with an additional $50 billion worth of American-made goods in the next decade. A few months later, then-CEO Bill Simon pushed the envelope further by touting the company's role in the rebirth of U.S. manufacturing during an event in Florida. To help make his case, Simon recruited a who's-who of public figures, including U.S. Commerce Secretary Penny Pritzker and General Electric CEO Jeffrey Immelt, to tout the company's virtues. In 2014, Walmart even jumped its pledge to $250 billion in additional purchases of American-made items. And this week in Denver, Walmart hosts its second annual U.S. Manufacturing Summit.
If you think Walmart is making this pledge for purely PR reasons, you'd be both right and wrong. Right, in the sense that lots of folks blame Walmart and its sourcing practices for the decline in manufacturing jobs, and thus eager to garner some positive publicity. But wrong, in the sense that -- in some cases -- the economics now favor "reshoring" of work back to the U.S., due to an emerging domestic energy cost advantage, rising wages in Asia, and wage stagnation in the U.S. (which Walmart might know something about). And don't forget to consider the challenges that come from outsourcing: supply chain disruption, quality and inventory control issues, intellectual property theft, and high shipping costs.
Which brings us back to the company's big, shiny $250 billion commitment to American-made products. Sound like a big number? It is. But just like the endless aisles at your local Supercenter, everything is big with Walmart. So instead of focusing on the optics, here are five other ways to tell if Walmart is serious about its Made In America program.
- Will Walmart's volume of imports actually decline? If existing-store sales grow and new stores open in the U.S., it's entirely possible for it to meet its $250 billion Made In America commitment -- and still dramatically expand the sale of its imports into the U.S. If Walmart is truly serious about its pledge to help American manufacturers, the corporation will slash its imports into the U.S.
- Will Walmart's commitment extend to all departments? The company is counting groceries, gardening products like mulch, and household consumables -- which are already largely produced in the U.S. -- in their pledge. I'd be more impressed if you could walk down any aisle in a Walmart and find an abundance of Made In America options for toys, electronics, clothing, and the like. Some companies, like Element Electronics, are benefiting from Walmart's commitment, but they're still the exception, not the rule.
- Will Walmart favor higher, family-supporting wages in manufacturing and retail? One hundred years ago, Henry Ford doubled his workers' pay to $5/hour so they could buy the products they helped to create. It was a smart strategy. Today, Walmart starts its cashiers at less than $9/hour. At that rate, they aren't going to be buying Made In America products or imports. The U.S. is not going to win a race to the bottom, nor would we ever want to. Walmart helped to start that race. It should also help to end it.
- Will Walmart support public policies that make it more likely for manufacturing to return to the U.S.? That means supporting legislative efforts to combat foreign currency manipulation, corporate tax reform that recognizes the global competition facing U.S. manufacturing (as opposed to our retail sector), and urging more "domestic content" rules in government procurement at all levels.
- Will Walmart be 100 percent transparent and detailed about its progress? Much of this pledge will be met if Walmart's customers continue to buy groceries and other products already Made In America (see #2, above). But 10 years from now, after the current accolades have passed, will Walmart be striving to do more to help American industry?
Sam Walton led a "Buy American" effort at Walmart in the 1980s, or so he said. Turns out the company was increasing its imports from Asia at the same time. Today, the company that Sam built has another chance to make good on its commitments. That's why these tests are so important, for Walmart and for American manufacturing.