Walmart Suppliers Grapple With ‘Made in USA’ Labels


Walmart suppliers grapple with challenge of 'Made in USA' labels

Jack Sloan waits to pitch plastic travel mugs to a Walmart buyer at the retailer’s Bentonville, Arkansas headquarters July 7, 2015. Photo Credit: REUTERS/Nick Carey

Detroit Quality Brushes is a company that does just what its name suggests: It makes high quality brushes in Detroit.

Years ago, the company had 18 competitors in the United States. Today, there are only three left, says John Avgoustis, head of marketing and sales.

“Walmart and others were a fundamental force in getting many companies to go the way of the dodo,” he said.

Avgoustis was among some 2,000 executives from U.S. manufacturing companies who journeyed to Wal-Mart Stores Inc.  headquarters here on July 7 to huddle in tiny conference rooms with Walmart buyers and present products made in the U.S.

Walmart’s 2015 U.S. Manufacturing Summit was advertised as a chance for goods producers to pitch American-made products to the retail giant. They would also get advice from Walmart executives on how to take advantage of the company’s recent efforts to support more U.S. manufacturing jobs and reverse the trends its purchasing strategies and demand for low prices have driven.

But the event also highlighted the challenges facing companies trying to bring manufacturing jobs back to the United States. Cheaper energy and rising labor costs inChina have helped stabilize manufacturing employment in the U.S., but there are still roughly 5 million fewer Americans working in factories today than in 1990.

Would-be Walmart vendors attending the summit had to establish that their so-called “Made in America” products are not just assembled domestically, but also made from component parts manufactured in the U.S. But some companies attending the summit said they have to rely on imported parts or materials because their one-time U.S.-based suppliers have been put out of business by foreign rivals.

Walmart’s “Made in the USA” efforts go back to 2013, when the company came under increasing pressure from unions and other critics who said its drive for low cost goods was undermining American jobs. Walmart says it wants to spend $250 billion on American-made products by 2023, and says buying from U.S. producers is good business.

PENDULUM SWINGS AMERICA’S WAY

Harold Sirkin, a managing director at Boston Consulting Group, says Walmart’s drive to buy American, and similar moves by big importers such as sportswear maker Nike Inc., are, in part, a response to Chinese labor costs that have hit 61 percent of U.S. levels, compared to 17 percent of U.S. levels 15 years ago. When supply chain and transport costs are figured in, American manufacturers can now compete, he said.

“The pendulum has swung back in favor of the U.S.,” Sirkin said. “But it can also swing back the other way.”

That is what worries Jack Sloan, vice president of sales at SFH Company LLC. Sloan came to Bentonville hoping to sell customizable plastic travel mugs made by SFH’s Chicago-based Magenta unit from American-sourced plastic, with a recommended retail price of $6.99, about $1.50 cheaper than mugs he’d seen on Walmart’s shelves.

His pitch went well, and the buyer asked him to come up with suggestions for Valentine’s Day, Mother’s Day and Back to School promotions in a test run at Walmart stores.

But Sloan nevertheless had concerns. “I really love what Walmart is doing, but we’ll see how committed they are in the long run,” Sloan said. “If this is just a cyclical thing will they send it back overseas 10 years from now?”

CAMISOLES FOR $1.68?

Jeff Kjar and Shellie Slade of Utah-based Elk Management had a tougher time pitching their American-made clothing line to five Walmart executives gathered in a 10 foot by 12 foot windowless room. Kjar said Elk was willing to build a new factory to handle Walmart business, but they could not compete with a $1.68 camisole the retailer currently sells.

The executives, who included Walmart category director for ladies apparel Kellie Mullins and David Adams, a divisional merchandise manager, responded that Walmart customers expect $1.68 camisoles, but will also pay higher prices for better-quality clothing.

They advised Kjar and Slade to aim for that higher-end, but they also offered a caution: The company should double check that the spandex it uses is American-made.

The clothing manufacturers have since discovered that their spandex was imported, and they have found a domestic source instead. But many would-be Walmart suppliers say producing goods entirely made from American materials presents a major challenge.

K’Nex Brands, a Walmart supplier, manufactures Lincoln Logs, an iconic wooden American toy that has been made in China for 60 years. Chief executive Michael Araten says the company set out four years ago to move production back to America and did test runs with furniture makers. But the U.S. makers had trouble producing the small wooden logs to scale.

The company finally tapped golf tee maker PrideSports, which found moving up in scale feasible, and K’Nex recently launched production in Maine at a competitive cost.

Satisfying Walmart’s criteria for Made in the USA products remains an issue for Detroit Quality Brushes, a family owned company founded in 1887.

Avgoustis said the company purchases wood for its brushes from Sri Lanka, and bristles from Sri Lanka or Mexico, because the American suppliers it once used have all gone out of business.

Walmart buyer William Loan suggested the company return to pitch samples of plastic brushes.

Avgoustis said he has seen other brush companies invest in U.S. production facilities only to have retailers abandon their products in favor of cheaper, foreign-made products. But Detroit Quality Brushes has extra factory capacity, and Avgoustis said that may make it possible to produce brushes with American-made plastic that could carry a “Made in USA” label without a huge expenditure. It is, he said, worth a try.

“If after two years Walmart were to say bye-bye to us, it wouldn’t hurt us,” Avgoustis said.”

(Editing by Joseph White and Sue Horton)

SOURCE: Reuters

3 Responses to Walmart Suppliers Grapple With ‘Made in USA’ Labels

  1. Wal Mart in the past has been known to force suppliers to the lowest price on their products…if they do not turn that around to a ‘made in usa’ standard eventually they will be driven out of business…they have been practicing ‘economic terrorism’ for years accepting a majority of foreign manufacturers…Sam Walton would hang every one of them!!!

  2. Negative socio-economic culture transformation….NSECT… That is the label I put on what is happening in this country. The right wing conservatives will say…”Sounds like a liberal label to me!!” Not really, an independent voter here…but lets quit wasting time and get down to work. To start with…fast track is going to play a big part in NSECT becoming a reality. Jobs that minimum educated people and new immigrants could do are being outsourced to foreign countries. The college educated people in control of the government are overlooking a very important fact of life…there are millions and will be millions of people that will not go to college for a variety of reasons. They can’t get the money, they have had to work and they don’t have the grades, they are interested in trades that really require a different kind of training or they are just are not college types and want to work at an 8 hour job and go home to their families.

    When main line companies like Apple took their manufacturing and assembly work to China they took away three important things from this countries economy…
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    1. Private investment money for manufacturing in the United States.
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    2. The hope of blue collar workers, veterans, young less educated workers, new college graduates and immigrants for gainfull work that can lead to a better future.
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    3.A chance for an expanding solid economy not based on ‘service’ type work but based on manufacturing. I really think people in this country have forgotten how this countries economy grew to be the best in the world! Conservative politicians parrot the phrase “where are the jobs?” They are outsourced and globalization is NOT friendly to this country.
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    I posted somewhere…we need to make Frisbees again in this country and toasters…and coffee pots!! Somebody replied…we don’t need to make that cheap stuff…we got Google! What?? What a load of BS! To start with…everybody in this country is not going to make $400,000 a year at a high tech company…that is a pipe dream!! It amazes me how little people in this country understand how a company is populated with workers. Lets take the Frisbee and plastic products company that was being made fun of by my clueless friend. At the first level you have the fork truck and shipping workers with a college educated supervisor or someone from the workforce that was promoted, Next level up you have the product packers, machine operators, machine set up people (tech job), and production supervisors (tech job) Then you have the maintenance people (tech job) and maintenance supervisor (tech job). Then you have a group of college educated middle management people…Production manager, production quality control, scheduling and customer service manager, sales service reps, purchasing manager, sales manager, sales personnel, CAD design person, accounting manager and accounting personnel, personnel manager, general office people like the receptionist and secretaries. At the top you have the general manager or president. WELL!! YOU SEE ANY GOOD JOBS THERE?? YOU SEE ANY JOBS FOR COLLEGE GRADS THERE?? THERE ARE JOBS FOR ALL IN COMPANIES LIKE THIS! Also…you have all the suppliers..trucking, tooling builders, plastic material suppliers, electric high tech outside maintenance supplier, plant hand tool suppliers, packaging suppliers, pallet suppliers, insurance coverage providers, building maintenance provider…etc!! Jobs were lost here too in the draw down!! Some of the higher paid jobs in this plant could be filled by people that are promoted from the bottom up! Some of these jobs are definitely for college grads!! For every manufacturing plant lost…these opportunities were lost! I started on the production floor and in 12 years and 4 job moves I was general manager of a production plant I started from scratch…and I only had one year of college. The next job I had I got a patent on a product that made it possible for the company I worked for to build a new plant to produce that product. Patent number 4,936,453. My father started sweeping floors in a machine shop, became a tool and die maker and through his working life rose to be a mechanical engineer working for a company that made jet engines…he had a grade school education then took mail order courses in drafting and higher math. At the age of 12 I worked for my dad in the machine shop he set up in our 2 car garage building metal punch dies when I was not in school! I was an apprentice tool and die maker! I learned how to read a micrometer just a few years after I learned to ride a bike! I ran all the machines…surface grinder, milling machine, lathe, tool filing machine, drill press and other things! We made metal punch dies for small companies. I worked for him part time until I was 24 even as I worked my day jobs in management.The way this country is going now..opportunities like these will not exist. As soon as a product is designed …..it is sent off to China to be produced…even small one item product lines. What will all the people who have creativity locked up in their DNA do with it? We need roads and bridges.. but we are going to tell professional managers and technical people…a CNC milling machine expert operator…go build a road…what is this..the WPA?? This country needs to do a 180 and go back down the road to where we made a wrong turn and fix this.The only way this economy will be fixed is with the return of private investment in this country in manufacturing, not government investment, and policy and law for American companies that spells out…if you sell it here…you make it here! I have no problem with foreign products manufactured by companies flying their countries flag but I would match import tariffs leveled on us by our major trading partners…no more looking the other way on this!! NSECT or negative socio-economic culture transformation means the general population will be in a constant state of losing economic wealth and cultural well being as time goes on if things are not changed. This is a disastrous situation and we might never maintain our position as the number one world power in the free world if we don’t take care of ourselves first! It is also a national security emergency…we are losing critical skills in precision manufacturing and that is important to our ability to defend ourselves. Lastly…there is the thinking out there that we will always be the best at everything and we will always have an export market…China will not stand still!! They will become experts at everything and they will sell their expertise to everyone at a lower price than we can!! You don’t believe that statement!…just look at what happened in Japan since WWll!! Thank God they are a solid ally! China is a Communist country…a trading partner…but do not bet the future on them or any country that is not a totally free country and a solid ally! ! If anything goes wrong in China all those American investments, product designs and intellectual property could be very easily nationalized! We are our own best customers and we can grow exponentially within this country if we keep all the components of our economic culture strong! In the past we did not have to count on trade agreements to bring us business…we were the best at doing almost everything…and the world came to us for what they needed in the way of high tech or precision manufactured products. The way to continue that economic position is to keep the rich environment of the blue collar job shop alive!! For Elizabeth warrens report on foreign trade go here….. http://www.warren.senate.gov/files/documents/BrokenPromises.pdf

  3. Time to stop the cut cut cut economic mentality!! let’s work for FULL employment!! Fast track trade authority takes jobs out of this country. This would make unemployment even higher in the black community…that causes more crime…why is this nation brain dead on this issue!!. American companies that take manufacturing and lower level jobs out of this country are economic terrorists!! There is probably 50+ million people who are blue collar skilled and unskilled workers who have lost their jobs due to the process of maximizing profits to OBSCENE levels by taking advantage of almost slave labor in foreign countries…while people here could be doing those jobs!! These companies screw this country 3 ways..they take away the jobs…they bring the products back here and sell them at ridiculous profits made on dirt cheap labor…then they hold the profits offshore and don’t pay taxes on them!! Example…APPLE …they sell their new phones at three times the cost of making them!! They are made in China! Maybe scenes like the Baltimore riots would not happen if this nation truly looked at this problem of unemployment harder!! The politicians do NOT understand that there are people in this country that are honest hard working people that cannot afford or do not want to go to college! They want a chance to work their way up the hard way if necessary but there has to be that opportunity to do it…that opportunity has been shipped off to China and countries like that…change that and this country will be on its way to full power again with everybody working on its health!! It seems to me that these decisions are being considered with the idea that time will ‘stand still’ and we will always have the upper hand in innovation and advanced intellectual capacity. It also seems like these decisions are being made by college graduates who have never had a long term job where they had to get their hands dirty as an adult worker!! These thoughts do NOT stand up to history! I remember Japan a number of years ago and what the general attitude in this country was on their products..many people thought they produced ‘cheap junk’!! Not any more…they produce some of the highest quality and best engineered products available! China will advance to do the same…the problem is…there are so many people in China they will always be able to under price us because of their almost unlimited human resources…the same for India!! A side note on Japan…they refused to allow importation of some products into their country in the past because they were protecting their workers…other countries are doing that now!! We have to consider some level of ‘protectionism’ for our industrial capacity top to bottom…all skills and practices…from simple assembly line work thru machine shop work to advanced engineering and computer systems..also regular workers pay taxes to support their communities and country! It is a ‘national security’ issue! Do we want to trust someone else in another country to cover us in our future ……or even worse…in an international emergency crisis!! I do not think so! We won in World War II because we OUTPRODUCED the opponents we had at the time..we were equal to but sometimes bested by Hitler controlled engineering resources..Also…I do not think we want to trust one man to make these decisions because we cannot be sure who that one man might be and what his affiliations are!! No disrespect for our sitting president intended. For Elizabeth warrens report on foreign trade go here….. http://www.warren.senate.gov/files/documents/BrokenPromises.pdf

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