An ambitious plan to bring manufacturing back home

Between 1997 and 2012, more than 5 million American manufacturing workers lost their jobs, as companies looked to move production overseas in search of lower costs.

"Chinese manufacturing was on a major tear," says Hal Sirkin of the Boston Consulting Group, a global business consulting firm. "Factories in the U.S. closed. Some were dismantled and shipped [abroad]."

For several years, prospects for the American factory worker seemed grim, a reality underscored by steeply rising unemployment across the Rust Belt and southern states. But as China's middle class expanded and manufacturing costs rose overseas, the tide gradually began to turn. Productivity gains and logistics efficiency brought the cost of U.S. production near parity.

The stage was set to reverse decades of outsourcing.

When Walmart pledged in 2013 that it would spend an additional $250 billion over 10 years on products that support reshoring and the creation of American jobs, the race for U.S.-made merchandise was on.

The "Investing in American Jobs" initiative came as both exciting and challenging news to manufacturers who supply the retail giant.

"It's like detective work, finding the manufacturers and people capable of doing the work we need," noted Randall Davidson, vice president of supply chain at Gibson Overseas, makers of Pioneer Woman cooking and dining ware — a Walmart exclusive. "For example, we're using a tube supplier to make high-quality drinking straws for Walmart."

Davidson painstakingly sourced drinking jars in Pennsylvania, lids in West Virginia, straws in Missouri and printing and packing in Ohio. But as the items rolled out to stores, he began to see that the effort was worth the return — customers loved that they were able to support American jobs through their purchase.

"Through social media, we heard from fans that it was important to produce in the U.S.," Davidson says. "That's exactly the kind of feedback you want to get when you go through a process like this."

"According to data from our suppliers, items that are made, assembled, sourced, or grown here account for about two-thirds of what we spend to buy products at Walmart U.S.," says Cindi Marsiglio, vice president of U.S. Sourcing and Manufacturing at Walmart. "It's really rewarding to walk through a Walmart and see new products made in the U.S., made closer to our customers, and knowing jobs have been created as a result," she says.

Walmart's research shows that for 85 percent of customers, where something is made rates second only to price when it comes to influencing purchase intent.

Because finding all the necessary resources to reshore manufacturing can prove challenging, Walmart holds an annual U.S. Manufacturing Summit, which works "like business speed dates" says Marsiglio. Walmart acts as a matchmaker between suppliers, manufacturers and government agencies.

"We have very robust expert teams," says Marsiglio. "We put that expertise to work assisting current and potential suppliers as they navigate the complexities of local and state regulations."

The appeal of reshoring, bolstered by Walmart's commitment to purchasing American-made goods, has allowed sports and outdoor equipment manufacturer Lifetime Products to open a new facility north of Knoxville, Tennessee. The expansion has led to the creation of 50 new jobs and the company expects to increase its local workforce to 500 over the next five years.

Lifetime executives are regular attendees at Walmart's U.S. Manufacturing Summit. "We have benefitted from the meetings by being able to produce a picnic table and expand our lineup of kayaks and stand-up paddleboards (stateside)," says Clint Morris, SVP of Marketing at Lifetime, a Walmart supplier since the mid-1980s.

To further jump-start U.S. manufacturing, in 2014 Walmart established the U.S. Manufacturing Innovation Fund. Its goal is to provide a total of $10 million in grants over five years, with a focus on innovation in the production or assembly of U.S. consumer products. The grants have helped fund research to create energy efficiency in the manufacture of polyester fabrics, improve the industrial implementation of 3-D-printed metals and establish a process that can reduce the need for water in dyeing fabrics.

Through these efforts, Walmart and suppliers like Gibson and Lifetime are learning that manufacturing closer to home isn't just beneficial to the communities where products are made — it creates efficiencies in the supply chain that ultimately save customers money.

At the turn of the millennium, "China's cost per labor hour was 72 cents while in South Carolina, for example, [the cost was] $15," says Sirkin, whose firm worked with Walmart to assess the economic impact of the company's $250 billion commitment. "But today, with the right product, you can actually make things cheaper domestically."

Rising overseas wages, higher shipping costs and the appeal of a simplified distribution system have led to something of a renaissance in U.S. manufacturing.

The Boston Consulting Group estimates that 1 million new U.S. jobs will be created through Walmart's domestic manufacturing initiative, including direct manufacturing job growth of approximately 250,000 and indirect job growth of approximately 750,000 in the support and service sectors.

"We're excited for U.S. manufacturing; it's the backbone of this economy," says Morris. "By making things in the U.S., we're celebrating the American worker, helping people find a job. It's patriotic."