March 15, 2013
Walmart Supplier News
Walmart SVP Michelle Gloeckler was interviewed by Walmart Supplier News. This article appeared in the Spring 2013 issue.
MOMENTUM BUILDS FOR DOMESTIC SOURCING INITIATIVE
Michelle Gloeckler is senior vice president of the home category at Walmart U.S.
Walmart U.S. president and CEO Bill Simon laid out a grand vision for reviving the national economy earlier this year when he delivered a keynote speech at the National Retail Federation annual meeting. Simon’s plan involved increasing hiring by Walmart and the retail industry, providing jobs to 100,000 veterans, and boosting job creation and consumer spending through the sourcing of an additional $50 billion in domestically manufactured goods over the next 10 years. Leading the domestic sourcing initiative is Michelle Gloeckler, SVP home, and former Walmart.com executive Greg Hall, who was named to the newly created position of VP U.S. sourcing and manufacturing. Walmart Supplier News spoke with Gloeckler about what’s next on the sourcing front and what suppliers can expect in 2013 and beyond.
WSN: FIFTY BILLION IS A BIG NUMBER. HOW DID WALMART ARRIVE AT THAT FIGURE AS A DOMESTIC SOURCING GOAL?
MG: The $50 billion we’ve committed over 10 years is additional growth on top of the two-thirds we’re already spending to buy products that are made, sourced or grown in the United States. That growth will include dollars that we aren’t currently spending on products that we’re not offering today, as well as growth in existing products and shifting existing items to U.S. production. As an industry, with other retailers’ participation we could set our sights higher to drive $500 billion in new purchases over the next 10 years. That’s what an American renewal looks like.
WSN: WHAT VOLUME OF GOODS DOES WALMART CURRENTLY SOURCE DOMESTICALLY?
MG: According to data from our suppliers, items that are made here, sourced here or grown here account for about two-thirds of what we spend to buy products at Walmart U.S.
WSN: TALK ABOUT THE BUSINESS CASE FOR WHY INCREASED DOMESTIC SOURCING MAKES SENSE AT THIS TIME?
MG: Growing the economy and creating jobs are at the heart of our national political conversation today. It will take all of us doing our part — business, government, labor, nonprofits and private citizens. The retail industry must help lead, and we need to start now.
This could create jobs in such areas as manufacturing and industrial engineering, shipping and transportation, management, accounting, large equipment maintenance and service providers like medical, retail, restaurants and food service. 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.
WSN: ARE THERE CERTAIN CATEGORIES WHERE IT MAKES MORE SENSE THAN OTHERS TO ONSHORE PRODUCTION?
MG: Walmart and Sam’s Club will grow U.S. manufacturing on two fronts. By increasing what we already buy here — in categories like sporting goods, apparel basics, storage products, games and paper products. And, by helping create U.S. production in key areas like textiles, furniture, pet supplies, some outdoor categories and higher-end appliances. These are just a few examples. We are looking at many more.
Some categories have high cube, meaning they are not very efficient to ship long distances. Other categories where the raw materials are available in the United States make sense to manufacture here. There are many categories worth evaluating.
WSN: THE $50 BILLION IS A 10-YEAR GOAL, SO HOW DO YOU SEE THE OPPORTUNITIES UNFOLDING ACROSS CATEGORIES IN THE SHORT TERM VERSUS THE LONG TERM?
MG: This 10-year timeframe reflects the longer lead times for bringing facilities online. We’re having discussions with suppliers about their challenges, and offering our guidance and facilitation to move this initiative forward. At the same time, we’ve already seen some successes.
WSN: FOR EXAMPLE?
MG: We’ve worked with 1888 Mills for many years. Today, most towels are made overseas. But 1888 Mills had an underutilized factory in Griffin, Ga. We could see that with a couple commitments from us and a couple innovations and a little capital from them, we could actually change the equation and the numbers would work. So we made a long-term commitment to get this program going. Today, the factory is hiring again, and the community is thrilled. The towels will be in 600 of our stores this spring and another 600 stores this fall.
WSN: ARE THERE OTHER EXAMPLES?
MG: As a result of Walmart’s partnership with Sleep Studio, 20% of Walmart’s memory foam mattress topper business will now be manufactured in the United States in 2013. Previously 100% of Walmart’s 1.5-in. memory foam topper was produced by two suppliers overseas. It’s worth noting that the in-country demand for these items was rising, so the previous overseas factories are still producing 1.5-in. memory foam. In addition, by partnering with retailers such as Walmart, Coleman has brought valuable manufacturing back to the United States for its hardside cooler and personal floatation device businesses. Overall these two initiatives have resulted in more than 160 incremental manufacturing jobs in the United States and will result in more than 1.8 million units of product for Walmart domestically.
WSN: WHO ARE SOME OF THE OTHER KEY PLAYERS ON THE TEAM DRIVING THIS INITIATIVE, AND HOW IS THE GROUP INTEGRATED INTO THE MERCHANDISING ORGANIZATION?
MG: Greg Hall moved over from Walmart.com to a new role as VP U.S. sourcing and manufacturing. His merchant experience and supplier background make him an ideal choice to lead this effort. At Walmart, we have experts in all areas, which presents an opportunity to work together in nontraditional ways. For example, traditionally our government relations team works with local city and state officials in areas such as store and distribution center openings. We’ve also seen the benefits this team has provided through its work with merchants and suppliers to help navigate complexities, have the right conversations with key decision-makers and better understand the opportunities for manufacturing state by state.
WSN: AS WITH SUSTAINABILITY, A LOT OF SHOPPERS WOULD LIKE TO BUY DOMESTICALLY MANUFACTURED GOODS, THEY JUST DON’T WANT TO PAY MORE. WHAT’S CHANGED REGARDING THE RANGE OF INPUT COSTS THAT GO INTO DETERMINING WHERE PRODUCTS ARE SOURCED THAT WILL MAKE DOMESTIC SOURCING A MORE VIABLE OPTION?
MG: The economics of manufacturing are changing rapidly. In previous decades, investment mainly went to Asia, where wages were low. The price of oil was low. And new factories sprung up out of the ground. Today, some of those investments are nearing the end of their useful lives. Meanwhile, labor costs are rising outside the United States. Oil and transportation costs are high and increasingly uncertain. The equation is changing. A few manufacturers have told Walmart privately that they have defined the “tipping points” at which manufacturing abroad will no longer make sense for them. Through our buying power, we can give manufacturers confidence to invest capital here. We can collaborate with manufacturers, make longer-term product commitments on basic goods and help connect them with the best resources so they can make the most informed decisions about capital investments. Instead of buying to a long-range forecast, we can buy to sales trends — maximizing sales. Our modeling suggests the United States can offer very competitive manufacturing options, especially given rising cost variables overseas. Based on historical facts and future predictions of other markets, we feel like the support of U.S. manufacturing from many constituencies is very positive — from other retailers, suppliers, the government and consumers.
WSN: TALK ABOUT THE TYPE OF COMMITMENTS WALMART IS WILLING TO MAKE TO SUPPLIERS WHO WANT TO JOIN THIS INITIATIVE AND HELP MAKE A DIFFERENCE IN THE NATIONAL ECONOMY BY ONSHORING PRODUCTION AND CREATING U.S. JOBS?
MG: Walmart is prepared to collaborate with manufacturers, give long-range demand forecasts, make longer-term product commitments on basic goods and help connect them with the best resources so they can make the most informed decisions about capital investments. Walmart has spoken with its suppliers and is ready to facilitate important government meetings to explore benefits, rebates, training and other programs available to attract U.S. manufacturing state-by-state.
WSN: WHO ARE SOME OF THE STAKEHOLDERS YOU’VE BEEN COMMUNICATING WITH?
MG: Leading up to our announcement, we spoke with the incoming chair of the National Governors Association — governor of Oklahoma, Mary Fallin — about how state government, retailers and manufacturers can drive this issue together. Additionally, Walmart U.S. president and CEO Bill Simon, Greg Hall and I invested the weekend of Feb. 23 at the National Governors Association Winter Meeting, meeting one-on-one with 14 governors, including Jerry Brown, Nikki Haley, Martin O’Malley and Pat McCrory. Our plans were well received by leaders on both sides of the aisle and discussions centered on state-specific opportunities to make the commitments a reality as soon as possible.
In addition, this summer we will convene a manufacturing summit to bring manufacturers, government officials and other retailers together. Instead of working on these issues separately, we will accelerate these changes by working together. Walmart is proud to facilitate this meeting to advance the dialogue around U.S. manufacturing.
WSN: HOW DO THE NEW SOURCING COMMITMENTS DIFFER FROM THE PAST?
MG: As with all Walmart commitments — sustainability, women’s economic empowerment, healthier food, etc. — we believe our leadership can raise awareness and motivate other companies to join. We see our commitment to U.S. manufacturing in the same way. It’s good for business and requires collaboration and innovation, at which our suppliers excel. We can make a difference together. This is in line with our mission of saving people money so they can live better.
WSN: IS THE GOAL TO HAVE COUNTRY OF ORIGIN OR MANUFACTURING ORIGIN BECOME AS COMMONPLACE IN CONVERSATIONS BETWEEN BUYERS AS THE SUBJECT OF SUSTAINABILITY?
MG: Our buyers have important jobs and manage through matrices of decisions. Country of origin has always been one of the decision points as we hold ourselves to the highest standard of ethics and metrics. We believe there should be sufficient volume for us to develop this U.S. sourcing initiative over the next 10 years, as well as continue to source merchandise from a variety of countries around the world, including those from which we currently source.
WSN: SUPPLY CHAINS HAVE BECOME AMAZINGLY COMPLEX IN THE GLOBAL ECONOMY, SO IT IS CONCEIVABLE THAT DOMESTICALLY SOURCED PRODUCTS COULD BE MANUFACTURED FROM RAW MATERIALS OR COMPONENTS THAT ORIGINATED ELSEWHERE. HOW WILL YOU BE WORKING THROUGH THOSE ISSUES?
MG: In order to be labeled a U.S. product, suppliers must follow government guidelines if a domestic product has components that are sourced outside the United States. We have a “made in the USA” label on our Walmart sourced products that follows strict guidelines, and we ask that our suppliers do the same. Some labels clearly state “assembled in the USA from parts sourced from ‘country.’”
WSN: IT’S BEEN A FEW MONTHS SINCE BILL’S PRESENTATION AT THE NATIONAL RETAIL FEDERATION. WHAT’S THE REACTION BEEN FROM THE SUPPLIER COMMUNITY SO FAR?
MG: Our suppliers have been very receptive. They are interested in this initiative and want to learn more about how it might work. We continued the momentum with many of our suppliers in Orlando, Fla., during our March 7 Supplier Summit, where both Bill and Duncan Mac Naughton spoke about U.S. manufacturing.
WSN: BILL ALSO MENTIONED AT NRF THAT WALMART WILL WORK WITH GOVERNORS TO HELP CONVENE A U.S. MANUFACTURING SUMMIT THIS SUMMER. WHAT IS THE VISION FOR THAT EVENT?
MG: We hope to create a better understanding of state and local incentives, opportunities, workforce capabilities, readily available raw materials and economics. Instead of working on these issues separately, we will accelerate these changes by working together.
WSN: ANY DETAILS ON WHERE AND WHEN THE EVENT WILL BE HELD, WHAT THE FORMAT WILL LOOK LIKE OR WHO SOME OF THE PARTICIPANTS WILL BE?
MG: Those details are being finalized.
WSN: WHAT DO SUPPLIERS NEED TO KNOW ABOUT PARTICIPATING IN THE EVENT?
MG: If a supplier is evaluating U.S. production or expansion of U.S. production, attending this summit would provide understanding of state and local incentives, opportunities, workforce capabilities, readily available raw materials, economics, etc., all in one place. Current suppliers may work through their Walmart buyer or log onto Corporate.Walmart.com/Suppliers/American- Manufacturing, and click on “U.S. Manufacturing Suppliers Tools.” New or potential suppliers can apply to become a suppler on the website as well.
WSN: LET’S CLOSE WITH DISCUSSION OF THE 1888 MILLS EXAMPLE BILL MENTIONED AT NRF. THE COMPANY’S TOWELS ARE ARRIVING IN STORES NOW AND BRANDED AS ‘MADE HERE.’ IS THAT A LABEL YOU SEE BEING APPLIED TO OTHER PRODUCT CATEGORIES, OR IS IT UNIQUE TO 1888 MILLS’ PRODUCTS?
MG: The brand “Made Here” is an 1888 Mills brand and features a story about workers in their Griffin, Ga., factory.