July/August 2015 Issue
Bentonville-based Made in USA Works!
is helping companies re-shore production to meet Wal-Mart’s American-made initiatives and create more business opportunities in Arkansas.
Photography by Beth Hall
Top photo: Chris Neeley, the Made in USA Works! executive vice president is helping companies worldwide see the benefits of bringing production to the United States.
I t has been a big year for Chris Neeley, and it all started with being in the right place at the right time.
Neeley was working in public affairs at Wal-Mart for the home-state region — Arkansas, Oklahoma and Missouri — in 2013 when Bill Simon, the company’s U.S. president and CEO at the time, announced its Made in the USA initiative, committing to increase Wal-Mart’s purchase of American-made goods over the next 10 years.
While working with Wal-Mart’s USA-made program, Neeley saw that many small- and medium-sized manufacturers needed help navigating the steps to get their products on the shelves of America’s largest retailer. So, last year, he decided to embark on his own path and help fill that need.
On June 16, 2014, Neeley left his job at Wal-Mart. The following day, he, along with Little Rock attorney Mike Roberts, launched a consulting firm, called Made in USA Works!.
Neeley’s goal has always been promoting American manufacturing, creating opportunities for homegrown producers and serving as an ambassador for Arkansas economic development. Made in USA Works! helps producers with the process of “re-shoring” manufacturing and/or packaging and, ultimately, selling their products in major American retailers.
Over the past year, Made in USA Works! has grown exponentially, Neeley said. First it outgrew Neeley’s living room, where it started, and then expanded beyond its first office space. The company’s headquarters is now housed across the street from Wal-Mart headquarters in Bentonville.
“We’ve never looked back,” he said. “It’s not the same company when we started. It’s more diverse. It’s bigger. And, I don’t think we’ll be the same company 12 months from now because the demands and the needs are there.”
Heading for Re-Shore
Re-shoring seems to be an anecdotal trend, said Alan Ellstrand, professor of management and chair of the Department of Management at the University of Arkansas Sam M. Walton College of Business. He’s heard about companies expressing frustrations with overseas manufacturing, but hasn’t seen data to show how many are coming to America, or back to America.
Low labor costs and relaxed environmental regulations are factors that once attracted American and other foreign companies to overseas manufacturing, Ellstrand said. Depending on what companies produce, he said many are now finding that several issues exist overseas that can disrupt the supply chain — infrastructure problems, lack of a reliable energy source, poor roads and a low-skill workforce. These factors, then, attract some manufacturers to the United States.
“Sometimes the labor is not skilled enough to be able to give you the quality,” Ellstrand said. “Companies find that once they set up operations [overseas], overall it’s not working for them. The low-labor costs are more than offset with quality issues. The conclusion is that some are better off moving production or parts of production to the U.S.”
The American workforce is more skilled, though often automated, he said, but labor costs end up being lower once companies factor in the disadvantages of overseas production. So, the investment in re-shoring and setting up automation often pays for itself.
The flux of manufacturing is nothing new, said Asa Hutchinson III, Made in USA Works! vice president of global business development.
“For centuries, countries have experienced gains and losses when it comes to commerce and trade,” Hutchinson said. “For more than 30 years, America experienced severe losses in manufacturing due to cheap labor costs in China. Well, the flow is heading back this way.”
Hutchinson, the son of Arkansas Governor Asa Hutchinson, said overseas labor costs are increasing by about 15 to 20 percent per year, and the growth of online sales has forced many companies to re-examine the “time-to-market costs” of overseas production. American consumers are also becoming less tolerant of waiting for products to be made overseas, he said.
“You can make that same product in Arkansas and ship it out across the entire U.S. in two to three days,” Hutchinson said. “This helps suppliers and retailers better manage inventory and replenishment. It saves the consumer money and gets it into their hands much quicker. Foreign and domestic companies alike are beginning to realize this and adjust their strategies accordingly.”
Consultations In Innovation
So, what does it take for a company to re-shore production to the United States?
It depends, Ellstrand said, and is based on several factors, including the type of operation. He said contracting production is the simplest approach, because it requires little investment and allows the companies to “test drive” the setup.
While Ellstrand recognizes the re-shoring trend, he said offshoring still exists in manufacturing.
Neeley said re-shoring takes time, and just getting a Wal-Mart purchase order can take six months to a year.
“It’s not going to happen overnight,” he said. “You have to do it incrementally. The first step may be packaging, then assembly, then manufacturing.”
Made in USA Works! assists a diverse group of companies that produce general merchandise, commercial-grade products and food items.
Neeley said his team has met with more than 200 companies in 28 countries over the past year. They currently assist about 20 companies, both American and foreign, all with different needs. The goal for most is to secure purchase orders for major retailers.
The Made in USA Works! team helps companies become more innovative and efficient, focusing on bottom-line costs, as well as branding and marketing. They provide connections with resources to help with re-shoring and in setting up meetings with retailers. The company is paid a consultant fee, which Neeley said varies depending on the client.
“It’s helping them understand that in America, you can reduce a lot of labor costs because you can use technology to your advantage,” he said. “It costs money, but the more hands you take out of a product in the manufacturing of it and the more you can mechanize it with technology, the faster you can produce it and the better chance you have for selling it to a company like Wal-Mart who buys on a greater scale.”
The ability to scale production to Wal-Mart’s level is an important factor that Made in USA Works! considers when taking on new business. While Neeley doesn’t expect a company to initially stock the shelves of Wal-Mart’s approximately 5,000 stores, it should be able to source regionally.
In January 2013, Wal-Mart announced a commitment to purchase an additional $50 billion in American-made goods over 10 years, said Cindi Marsiglio, vice president of sourcing and manufacturing at Wal-Mart U.S. This amounts to a $250 billion pledge, when compounded and based on what the company will spend on U.S.-made products, she explained.
About two and a half years into the Made in the USA initiative, she said Wal-Mart has already added many American-made products, but declined to provide specifics.
To increase its American-made vendor list, Marsiglio said her team continuously searches for new American-made products, buys more from existing suppliers and supports suppliers’ re-shoring of production.
Before the announcement, she said about two-thirds of products sold at Wal-Mart were made in the U.S. “We’re focused on the remaining one-third and closing the gap at the end of the 10 years,” she said.
Plus, she said it makes great business sense for Wal-Mart in terms of cost, time and responsiveness, because it shortens the supply chain and allows for better predictability of seasonal or trend items. In fact, Marsiglio said Wal-Mart customers have expressed that the “Made-in-the-USA” factor is second only to price when it comes to their purchasing decisions.
“I’d love to see more retailers step up with us, challenging suppliers and makers to do this,” she said.
Last year, Wal-Mart held its first-ever open call for new suppliers of American-made products, allowing companies to pitch their products and learn about doing business with the retailer. Marsiglio said there were more than 800 meetings, and the company discovered many new products that hit the shelves over the past year.
On July 7-8, Wal-Mart is hosting its 2015 U.S. Manufacturing Summit and Open Call Event in Bentonville. It will allow current and new suppliers to meet with the company’s leaders and pitch their products for sale at Wal-Mart, walmart.com and Sam’s Club.
Neeley said it’s much more difficult for suppliers to get into Wal-Mart “without the Made-in-the-USA tag,” which provides a competitive edge.
“Wal-Mart’s investment is so large,” he said. “All retailers are looking to source more products in America.”
Neeley said about half of all clients at Made in USA Works! are in some stage of the buying process with Wal-Mart.
Coast Products USA was one of the first to sign on with Made in USA Works!. Neeley said he and Coast CEO Robert Easter have had several meetings with Wal-Mart officials, and they should know this fall whether the retailer will carry Coast products.
In 2008, Easter acquired Coast, a small manufacturer of plumbing products that has been around since 1946. He said the products — toilet valves, including flappers, fills and flushes — were made in the USA until the 1990s, when manufacturing was sent overseas. When he took over, he wanted to add “Made in the USA” to the label.
The company now manufactures at its 22,000-square-foot Florida facility, but Easter said a much larger facility will be needed to take the company to the next level. That means going from 100,000 units per month to more than 1 million if they become a Wal-Mart supplier. The company has already committed to supply Lowe’s and Home Depot.
“Chris [Neeley] showed us how to connect the dots,” Easter said. “We’ve made great strides. They understand that this isn’t a one-time sign-up. It’s a relationship.”
Made in USA Works! helped Coast identify weaknesses in production, connect with banks and make contact with Wal-Mart’s Made in the USA team, he said.
While about half of the clients at Made in USA Works! are foreign, Neeley said Coast illustrates that many existing American companies want to bring production home.
Neeley’s team also works with Arkansas-based businesses, and he sees the company as an ambassador for the state. He hopes to attract more business opportunities to Arkansas.
In June, Made in USA Works! announced that one of its clients, Vietnamese company Tinnghia Inc., is opening a U.S. trade office in Bentonville.
Marsiglio said Arkansas ranks as highly competitive in attracting the opportunities that Wal-Mart’s Made in the USA initiative creates, and these opportunities will likely grow as support from state leaders continues.
According to Ellstrand, Arkansas is poised to reap the benefits of these initiatives.
“There are a lot of influential people who are undoubtedly connected with business people in Arkansas,” he said. “Having that mission — bringing more production to the U.S. — [means] that a portion of that will ultimately rest in Arkansas and directly benefit Arkansas producers.”
Attracting foreign manufacturing to Arkansas is one of Gov. Asa Hutchinson’s main objectives. When he unveiled the Arkansas booth at the Paris Air Show in June, he effectively declared the state open for business.
In May, the Arkansas 90th General Assembly held a special session and approved about $87 million in incentives for Lockheed Martin to expand its Camden plant, provided that it is awarded a U.S. Department of Defense contract. The expansion could add about 600 jobs to the area.
In June, French manufacturer Sediver announced plans to build a plant in West Memphis to produce glass insulators for the Plains and Eastern Clean Line low-cost, clean energy project. The plant should open in 2016 and will employ 70 people.
Among the many benefits Arkansas offers, Asa Hutchinson III points particularly to the general appeal of the state’s location in the central United States, as well as its abundant natural resources, low-cost energy, affordable land, a ready workforce and the presence of several Fortune 500 companies.
He said that at Made in USA Works!, “We view ourselves as just one small tool in Arkansas’ economic development toolbox. It takes a visionary team of private and public organizations to grow our economy and attract foreign investment to Arkansas. Our goal is to bring the foreign companies here and let them see firsthand through the eyes of our top-notch business and government leaders what our state has to offer. I believe it’s an easy sell.”
Spending the past year meeting with companies from all over the world and the United States, and hearing their stories and learning about their goals, has validated the mission at Made in USA Works!, Neeley said.
“Who can be against what we’re doing?” he asked.
“It’s about solving a problem, a problem that our country created by choosing to go offshore and choosing to have things made overseas. When we did that, we lost a lot of skills, the supply chain broke down and obviously we lost a lot of jobs. What our company is doing is making this a positive and helping companies like Wal-Mart, who are investing in [American-made products], by helping [producers] bring the skills back, the training, the workforce, the assembly back.”