A wide range of companies, including Apple, General Electric and Brooks Brothers, are experimenting with making more products in the United States. The moves make good public relations, but they also take advantage of cheaper energy costs and transportation benefits in this country.
On Tuesday, Wal-Mart, the largest US retailer, gave suppliers an added incentive, announcing that it would increase sourcing of American-made products by $50 billion over the next 10 years. Wal-Mart said it would buy more goods already produced in the US, like games and paper, as well as help vendors in areas like furniture and textiles return production that had moved overseas.
The company did not disclose the value of the American-made products it already sourced. In its most recent fiscal year, Wal-Mart spent $335 billion buying and transporting merchandise globally. (It does not break out figures for the US and Sam’s Club, which represent about 70% of over all sales.) The $50 billion commitment — $5 billion a year — represents about 1.5% of that annual total.
With rising labour and energy costs overseas, “a few manufacturers have even told Wal-Mart privately that they have defined the ‘tipping points’ at which manufacturing abroad will no longer make sense for them”, William S Simon, the Wal-Mart US chief executive, said in making the announcement at the National Retail Federation conference in New York.
Wal-Mart has been under pressure concerning its overseas sourcing because of a deadly fire in November in Bangladesh that killed more than 100 people at a factory used by Wal-Mart suppliers. Wal-Mart has said it did not know the suppliers were using the factory, and a Wal-Mart spokesman, David Tovar, said on Tuesday that the company had been working on the new initiative to buy more American goods for more than a year.
James Cerruti, a senior partner for strategy and research at the consulting firm Brandlogic, said that while Wal-Mart no doubt wanted to get away from recent negative news like the factory fire, gun sales and a Mexico bribery inquiry, “these are real commitments”.
One beneficiary of the new effort, 1888 Mills, said an advantage was Wal-Mart’s committing to contracts longer than the standard six months to a year. Jonathan R Simon, the 1888 chief executive, said Wal-Mart had given the company a multiyear contract outlining how and when it would buy the American-made towels.
That “allows us to make investments with confidence”, he said. “We’ve been staying with US manufacturing and quite honestly, we’re one of the very last producers of terry towels left in the US. It had been quite a challenge, keeping the operation going, but we stuck with it hoping that eventually there would be more opportunity.”
Simon said 1888 Mills made about 10% of its products in the US, including towels in Griffin, Georgia. While 1888 Mills had been supplying Wal-Mart with foreign-made products, the retailer recently agreed to carry an American-made towel at 600 of its stores starting this spring.
Executives at Wal-Mart told Simon that “especially in some of the towns where we manufacture that have been hit hard by the economic downturn, that these are Wal-Mart customers and it makes perfect sense to try to support jobs here in the US for people who end up shopping in their stores,” he said.
In the last decade or so, American manufacturers have moved operations to China, Bangladesh, Vietnam and other lower-cost countries as they try to meet retailers’ strict cost requirements. However, recent consumer interest in American-made goods, rising labour and energy costs overseas, and pressure to get merchandise from the design phase into stores within weeks rather than months have renewed interest in manufacturing in this country.
For instance, the US turned out almost 100 million pairs of shoes in 2000, but that fell to about 26 million by 2009, according to the American Apparel and Footwear Association. In 2011, though, there was a rebound to 30 million pairs.