There are few entities capable of increasing U.S. manufacturing output by $50 billion all by themselves.
That’s why the announcement by retail giant Walmart that it will significantly increase domestic sourcing of the products found in its stores provides such a shot in the arm to the growing movement by manufacturers to return production to the United States.
The world’s largest retailer announced on January 15 that Walmart and Sam’s Club will buy an additional $50 billion in U.S. products during the next 10 years. The company said it plans to grow U.S. manufacturing on two fronts: by increasing what it already buys here in categories like sporting goods, apparel basics, storage products, games, and paper products; and by helping to onshore U.S. production in high potential areas like textiles, furniture and higher-end appliances.
“At the heart of our national political conversation today is one issue: creating jobs to grow the economy,” said President and Chief Executive Officer Bill Simon. “We are meeting with our suppliers on domestic manufacturing and are making a strong commitment to move this forward.”
Two-thirds of the products that appear on Walmart store shelves in the United States are made, sourced or grown domestically, according to data from the company’s suppliers. The company says it sees room to do more and will collaborate with manufacturers by giving them long-range demand forecasts, making longer-term product commitments on basic goods and helping to connect them with the best resources so they can make informed decisions about capital investments.
Announcement of the Walmart initiative comes as companies such as General Electric, which resumed making appliances at its sprawling Appliance Park campus in Louisville, Kentucky, have begun to repatriate manufacturing operations that previously moved overseas. Research by the MIT Forum for Supply Chain Innovation found that manufacturers are reconsidering their supply chain strategies due to higher labor costs in developing countries, energy costs and political stability issues.
The trend is good news for Massachusetts, where manufacturing employment has stabilized after a sharp decline during the recession. Manufacturing output in the Bay State surged more than 20 percent from 2010 to 2011.
Brian R. Gilmore, Executive Vice President of Associated Industries of Massachusetts, said AIM looks forward to supporting the sourcing initiative by Walmart, a longtime member of the association.
“You cannot underestimate the effect of having the largest single buyer in the world make such a clear commitment to American manufacturing. We urge other retail companies to join the effort,” Gilmore said.
Walmart said buying products in the U.S. helps both its own efficiency and the overall U.S. manufacturing base.
“This could create jobs in areas such as manufacturing and industrial engineering, shipping and transportation, management, accounting, large equipment maintenance, and service providers like medical, retail, restaurants, uniforms and foodservice,” the company said in a statement.
“Products made closer to the point of purchase mean increased flexibility because of shorter transportation time, lead time and less freight costs. This offers the ability to save additional costs in warehousing and multiple touches through the supply chain.”