Thursday, June 5, 2014

Made in USA—it's harder than it looks

The most significant life experience I ever had was being a part of a start-up that tried to turn an idea into a commercial product.  The effort was not successful.  The overwhelming majority of such efforts are not.  The few that do succeed are so rare they should be treasured like the precious jewels they are.  Which is why the foremost evil of neoliberalism was the notion that financial bandits had the right to acquire those successes and break them up for the parts.  I remember sitting next to some smug little twerp on an airline in the 1980s who casually informed me that breaking up companies was a great way to release the latent value that was hidden by corrupt and incompetent management.  I almost slugged him.  Here was a guy who couldn't organize the production of birdhouses suggesting that the folks who could organize the production of the complex and difficult were somehow morally corrupt because they thought (correctly) that an ongoing concern was far more valuable than a collection of parts.

Little did I understand at the time that the twerp was part of a larger cultural phenomenon.  He was, in fact, merely spouting some version of the convention wisdom.  So conventional that Oliver Stone put it front and center is his 1987 movie Wall Street.  Bud Fox has attached himself to a raider named Gekko by giving him inside information about Blue Star Airlines (a company his own father helped build.)  One day Fox stumbles into Gekko's chop shop where Blue Star was being dismantled for its parts.  Fox thought he had an agreement that while Gekko was going to acquire Blue Star, he wasn't going to dismantle it.  Fox charges into Gekko's presence totally enraged by the betrayal which leads to the following exchange:
Bud Fox: Why do you need to wreck this company? (Blue Star Airlines)
Gordon Gekko: Because it's WRECKABLE, all right? I took another look at it and I changed my mind!
The insane arguments of the neoliberal "free trade" crowd are beginning to prove themselves political losers.  Yesterday, Der Spiegel published an interview with Marie Le Pen who gave several excellent examples of why her political party just destroyed the ruling Socialists in the recent  EU election.  One telling quote "The problem is the total opening of borders and allowing the law of the jungle to prevail: The further a company goes today to find slaves, which it then treats like animals and pays a pittance, without regard for environmental laws, the more it earns."

It's no wonder the political classes of Europe, steeped as they are in the conventions of neoliberalism, so loathe someone like Le Pen.  Turns out it doesn't take a whole lot to expose the utter insanities of their economic positions.

This picture from another collection of scenes from the rust belt where the physical damage caused by the crackpot theories of neoliberalism is so apparent.  And now we are seeing that Wal-Mart! is discovering that it was a whole lot easier to wreck the industrial economy of USA than it will be to try to recreate a small part of it.  As the old Pops used to say, "Any jackass can kick down a barn but it takes skills to build one!"

Walmart Is Having A Hard Time Sticking To Its 'Made In America' Promise

Reuters 06/04/2014  By James B. Kelleher

June 4 (Reuters) - When Walmart pledged last year to buy an extra $250 billion in U.S.-made goods over the next decade, it appeared to be just what was needed to help move America's putative manufacturing renaissance from rhetoric to reality.

But suppliers trying to reshore production as part of the initiative by the world's largest retailer are running into practical problems as they try to restart long-idled corners of U.S. manufacturing.

Companies that make the leap have to grapple with a host of challenges, including a shallow pool of component suppliers, an inexperienced workforce, and other shortcomings that developed during the country's long industrial decline.

"A lot of the tribal knowledge and skill sets are gone because the humans who used to do that work have either retired or died," says H. Kim Kelley, the CEO of Hampton Products International, a privately held maker of locks, lighting and other household hardware. The Foothill Ranch, California-based company began selling products made in Asia to Walmart in the 1990s and is now supplying it with some U.S.-made products.

Trying to rebuild that manufacturing capability, while making products that meet Walmart's standards, can require companies to "start from scratch," Kelley says.

Cindi Marsiglio, the Walmart vice president overseeing the U.S. sourcing push, says the retailer and its existing suppliers have 150 active reshoring projects in various stages of development. For all too many, she says, finding U.S.-made component parts has emerged as a vexing problem.

Hampton, which also makes tow straps, tie-downs and bungee cords for the automotive market, had a hard time locating a U.S. maker of lightweight but strong polyester yarn. Marsiglio says other suppliers complain of difficulty finding small motors, as well as plastic injection molding equipment and computerized cut-and-sew tools.

The issue is so widespread that Walmart is making it the focus of a two-day summit it is hosting in August in Denver. At a similar summit held in Orlando last year, Walmart focused on connecting suppliers with economic development officers from states hoping to lure the new factories.

The retailer says it is especially interested in having factory owners with excess capacity attend the August event - even those that aren't interested in supplying Walmart directly. The hope is that they can become contract manufacturers to Walmart suppliers looking to produce in the United States.

On July 8, it is also inviting hundreds of potential vendors to an "open call" to pitch U.S.-made products to the retailer in Bentonville, Arkansas, where it is based.


Walmart's critics say the company bears some responsibility for the diminished capability of U.S. manufacturers. For years, its relentless insistence that suppliers cut costs prompted companies to shut domestic plants and shift production to low-wage countries.

Now, the retailer is asking companies to come back home - though they need little prompting. The forces pulling production back to the United States are powerful and real and include lower domestic energy prices, increasingly competitive wage rates, the benefits of greater automation, and a renewed appreciation for the value of being able to respond quickly to shifting U.S. customer demands.

Still, starting up a manufacturing operation is a complex undertaking, especially for vendors like Hampton and Redman & Associates, an Arkansas-based toymaker.

Last year, Redman sold 1.1 million battery-powered ride-on toys, such as large toy cars, in the United States - every one of them made in Chinese contract plants. By 2016, the privately held company plans to be producing about 600,000 of those toys each year out of a brand-new company-owned and run plant in the U.S.

Mel Redman, the company's CEO and chairman, says the transition has required the company to reverse engineer everything its Chinese contractors were doing - an exercise that wasn't easy given his executive team's background in retail.

"We didn't know much about manufacturing - we didn't know anything about it really," he says.


Walmart declines to say how many products it has introduced as a result of the 18-month-old Made in USA initiative. But the company says consumers can now buy everything from U.S.-made flat-screen TVs, light bulbs and towels and curtains in its stores and on its website.

The flat-screen TVs, made in Winnsboro, South Carolina by Element Electronics, may be the campaign's biggest surprise to date.

Founded in 2007, Element had until this year made all its TVs in Asia - but it was unable to get them on Walmart's shelves because there was nothing that differentiated them from rivals' products, says CEO Mike O'Shaughnessy. "So we began to think about what we could do differently. Well, one of the things we could do differently is to make our TVs at home," he says.

Element built a small test plant in Michigan that began producing flat-screen TVs shortly before Walmart announced the Made in USA push in January 2013. The announcement prompted the company to fast-track its expansion. Today, Element's 315,000-square-foot plant in South Carolina has six assembly lines making 32- and 40-inch TVs that are now available in all of Walmart's more than 4,000 U.S. stores.

The switch has led to significant savings in ocean freight charges and customs duties on finished goods - though like so many companies involved in the initiative Element has had difficulty finding domestic suppliers. "We import the vast majority of our parts," says O'Shaughnessy. "Longer term, the more success we have procuring our parts domestically, the better off we expect to be."

Although Walmart has given itself 10 years to meet its $250 billion goal, Marsiglio says the retailer hopes to meet the target ahead of schedule. She says the point of the "open call" next month is to simplify a product pitching process that can challenge even long-time suppliers.

But while the door is open, the bar is high and Walmart will require any applicants to open their financial books as part of the screening process.

Given Walmart's reputation as a tough negotiator with suppliers, the disclosure of sensitive financial information to the retailer requires a leap of faith. But Element's O'Shaughnessy said his company had no misgivings about opening its books. Walmart needs to know it can rely on its vendors, he said.

"What does it cost to produce product? What does it cost to move product? Every one of the variables that make up the cost of the product we (shared) with Walmart," he says. (Editing by David Greising and Martin Howell) more

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