Wal-Mart's Manufacturing Pledge Met With Hope, Skepticism

by Mark Friedman  on Monday, Feb. 24, 2014 12:00 am  

Burt Hanna, CEO of Hanna’s Candle, said Wal-Mart’s orders increased from $4 million in 2012 to $30 million in 2013. By 2017, Wal-Mart is expected to buy $45 million worth of merchandise from his company that manufactures scented candles in Fayetteville. (Photo by Brooke McNeely Galligan)

Mel Redman, the toy vehicle maker, said that by not building in China, his company would save primarily on shipping costs, but he declined to say exactly what those costs were.

“The No. 1 line expense item that we have is logistics cost, and a huge portion of that is ocean freight and container costs,” Redman said. “So that’s a great incentive to take that down as much as you can and put that back into the investment end of the manufacturing.”

Burt Hanna, CEO of Hanna’s Candle Co., said labor costs to make a candle are lower overseas. Competitors in India pay an employee $3 a day, while in China it’s $10, Hanna said. He pays between $100 and $120 per employee.

But he could trump the international competition on other fronts. “The way to beat them is to make sure you’re not doing the same … products as them,” Hanna said. “You’ve got to have innovation and you’ve got to be quicker to market to change.”

The multiyear commitment from Wal-Mart has meant that Hanna has added 60 jobs that pay between $8 and $18 an hour.

“It’s been great for our business and great for our employees because consistent, everyday work is really what we needed,” Hanna said.

Fishman, the author, said the items made in the United States will have to sell for a price that’s competitive, and not just with other retailers, but also with what’s already on Wal-Mart’s shelves.

“It’s hard to see how the economics of U.S. manufacturing catch fire,” he said.

One selling point might be quality and durability, Fishman said. If Wal-Mart can say the U.S.-made blender will cost $2 more but will last 10 years longer than a foreign-made blender, “Americans will pay more for that,” he said.

The Innovation Pledge

Last month, Wal-Mart and its Walmart Foundation pledged $10 million to foster innovation in American manufacturing.

The five-year program will start in March and award grants to innovators in the manufacturing sector “and seeks to create new processes, ideas, and jobs that support America’s growing manufacturing footprint,” Wal-Mart’s Simon said in a news release.

 

 

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