Dean Barber

Walmart’s Path To Redemption

In Site Selection on March 23, 2014 at 7:22 am

For reasons that I do not fully understand, my wife will not step foot inside a Walmart. I think its bigness, not just store size but the size of the company, is a primary reason.

And let me tell you, this is one big company with 11,302 stores in 27 countries. With fiscal year 2014 sales of over $473 billion, Walmart employs more than 2 million people worldwide. Each week, more than 245 million people go to a Walmart store. Last week, I was one of them, part of the pack.

I wanted to buy a corded phone. (Yes, they still make them.) I originally went to an office supply store, where an $80 phone caught my eye, but I held off from the making the purchase, thinking Walmart might could do better.

The next day, I went to a nearby Walmart, where I found a corded speakerphone made by or for AT&T for $25. It was exactly what I wanted and for a cheap price, too.

Nowhere on the phone or the box that it came in could I find the country of origin where the product was manufactured. The instruction manual, however, revealed that it was printed in China, so I figure that is most likely where phone was made, too.

Then I started thinking, which can be a dangerous thing. Maybe, just maybe, Walmart didn’t want me to know where this phone was made. I say this, which is pure speculation on my part, because the company has been on a big “Buy America” kick of late. (Nevermind that I probably still would have bought the phone even if “Made in China” were on the box.)

But I do prefer, whenever possible and practical, to buy American. Now I have this Martin guitar, which is an incredible instrument. It’s a Custom Shop model, and I sometimes shudder when I play it because it sounds that good.

A Company with an American Soul

C.F. Martin & Co. has been making guitars in this country for a very long time. The current chairman and CEO, C.F. “Chris” Martin IV, is the great-great-great-grandson of the founder, C.F. Martin, who arrived in New York City from Austria in 1833.

In 1838, Martin moved his manufacturing operations to Nazareth, Pa., where it remains to this day, making what I believe are the finest production guitars in the world.

Now, I also have a Chinese-made guitar. I like to think of it as my beater, spill-beer-on-it-and-I-won’t-flinch guitar. It cost me about one-sixth of what my Martin cost. The Chinese guitar will never sound as good as my Martin, nor will it ever have the collector’s value or the “American soul” of my Martin.

But I have to tell you that the Chinese guitar still sounds pretty good, and from my standpoint, it was an excellent purchase for what I wanted it for — playing music in rough and rowdy Texas road houses where The Lone Star String Band might encounter stumbling drunks and showers of beer. (No place for my beloved Martin or the faint of heart.)

Like that AT&T phone, I got a lot of bang for my buck with my purchase of that Chinese-made guitar. As a consumer, I hope that I will always have that luxury of choice, knowing full well that finding American-made products on store shelves is not always so easy.

It Just Goes to Reason

But whenever it is practical to do so (and not too painful to my wallet), I am willing to pay a little more to buy American. If we did more of that, I would have to believe that could make positive difference for manufacturing in this country, although I have seen no convincing numbers to substantiate that. It just goes to reason.

Now let’s go back to Walmart, so that you might have an earthly clue why I am writing this blog. By all outward appearances, it would seem that Walmart, cognizant of the fact that many people do not like it, want more of us to like it.

So they have embarked on this campaign to boost U.S. manufacturing by committing to purchase an additional $50 billion in American products over a 10-year span.

A Significant Pledge

The company estimates that its $50 billion pledge, by the 10th year, will result in it buying an additional $250 billion cumulatively over that period. And Walmart wants you to know that the Boston Consulting Group estimates this commitment will create 1 million jobs.

Now I’m not so convinced of the Boston Consulting Group’s numbers, but I am convinced that Walmart is attempting to rehabilitate itself to some degree in the eyes of consumers. The company tells us that it has 40 different departments in discussions with suppliers to have them manufacture in the U.S.

And Walmart  reports that 72 percent of its suppliers have now seen the light and believe that  they can make manufacturing here in the U.S. work in a cost effective manner within four years or less.

Earlier this month, Walmart U.S. President and CEO Bill Simon spoke of the importance of U.S. manufacturing at the company’s Year Beginning Meeting in Orlando. He named three Walmart suppliers who he said have recently committed to manufacturing in this country.

And the Suppliers Respond

They were Element Electronics, which opened a plant in Winnsboro, S.C., which will assemble and package flat screen TVs and which is expected to  employ 500 people.

Simon also named 1888 Mills, which will expand its production facility in Griffin, Ga., by 500,000 square feet because of increased demand for its products in Walmart stores. No mention of job creation. Simon also cited American Home Manufacturing, which will create 200 new jobs with a new plant in South Carolina that will make comforters.

Walmart, along with the Walmart Foundation and the U.S. Conference of Mayors, also announced earlier this month the launch of a $10 million fund designed to help support and spur innovation in U.S. manufacturing. 

The fund will provide grants of $100,000 or more to universities and think tanks with innovative ideas for the production of textiles and “common manufacturing processes that apply to a broad range of consumer goods, including small motor manufacturing and tooling for injection molding.” Applications for the grants are due April 22, 2014.

“If we want to grow manufacturing and help rebuild America’s middle class, we need the brightest minds in our universities, in our think tanks, and in our towns to tackle obstacles to U.S. manufacturing,” Simon said in a statement. 

Now I know what you are thinking and I thought the same thing — that $10 million is mere chump change for a company with $466 billion dollars in sales worldwide and operating income of over $30 billion. And you would be correct, but also understand that it is a start and good things may happen, probably will happen, as a result.

Repairing a Tarnished Image

Clearly Walmart, which has had image problems in recent years primarily centered on perceptions of how it treats its employees, wants us to reconsider the company. By reinventing itself, it hopes to show that it is something other an uncaring goliath, especially in comparison to its employee-loving competitor, Costco. In short, Walmart wants to be loved by you, if that is possible, and pushing American manufacturing is seen as a path to redemption.

The company is even showing its green side by partnering with the Environmental Defense Fund to cut its emissions. And now it’s banking on boosting U.S. manufacturing, which seems to be striking a chord even among the cynical like me.

Naturally, some are not buying it. Mike Rowe, host of Discovery Channel’s “Dirty Jobs” said he received death threats over his involvement in a Walmart commercial that ran during the Winter Olympics.

“Three days of press, five hours of sleep, four bottles of wine, a speech, a job offer, 5,000 form letters, and a couple of good-natured death threats,” Rowe wrote in a Facebook post. “All because of a commercial that I narrated about American manufacturing paid for by Walmart. Press tours are fun!”

You will probably never be able to buy a Martin guitar in a Walmart, which is probably a good thing. Martin stands for a quality that frankly goes well beyond what Walmart is all about.

And the truth is that Martin, known and sought after by guitar players worldwide for its quality, never needed any convincing to continue to make most of its signature products here in U.S. And that’s a good thing, too, because American soul is American manufacturing. Never forget that.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

 

 

 

 

 

 

 

 

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  1. Dean: If redemption can be bought by increasing domestic purchasing over 10 years by 1.716567277%, I’d like to get in that game. That is the percentage that $50 billion of increased domestic purchases over 10 years when compared to Walmart’s total inventory purchases over the previous 10 years ($2.9 trillion, yes, that’s trillion). Let’s be generous and discount that by 52& (which is the percentage of Walmart’s units that are international), and it translates to a whopping 3.65227080302%. And, that comparison is going backwards. Walmart will continue to grow over the next decade! And let’s not forget that Sam Walton’s Buy American campaign was less than met the eye and disappeared after Sam’s passing. Anyway, I always love your columns. So thanks. Mark

  2. Dean,
    I rather align with Mark’s comments above. They are a tremendously well organized and efficient company, but so far truly lack an ethical soul. I absolutely refuse to shop there. I was in the manufacturing area of several 3M divisions over the years when they would take 3Ms goods, take the 2% net 10 terms and pay in 90 days minus the 2%. We could afford it, a small supplier could easily go broke from the lack of cash flow.
    I applaud their current efforts and hope those efforts (green and re-shoring) succeed wildly. I have maintained over the past 30 years that it is possible to manufacture in the US at a very competitive cost using lean principles such as design for manufacture etc. It is slowly happening.
    Great article,
    John E.

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