American manufacturing is poised to enter a new era of explosive growth — and your business can profit from it.
That unequivocal message was delivered loud and clear at Walmart’s US Manufacturing Summit, a two-day confab in Orlando, Florida where the world’s largest retailer assembled nearly 1,500 suppliers, retailers and government leaders to drive investment in this sector. The objective of this massive industrial retooling effort: Creation of employment and
business opportunities to advance the nation’s middle class.
Bottom line: It is imperative that African American companies, large and small, fully participate in this new industrial revolution.
In opening remarks to Summit attendees, Walmart US CEO Bill Simon spelled out the overall mission: “We’re creating a network of support. Together, we can help spark a revitalization of US-based manufacturing, using new technology and new innovations to make production in the United States affordable and feasible.â€
“America can’t be a service economy; we have to make things. I can’t think of a successful example in history of an economy built solely on services. The “multiplier effect†tells us that each new manufacturing job will lead to about three more jobs around it, creating even more opportunity in our communities,†he added. (Simon, however, made clear the
company was not advocating turning “inward or move business away from other
places.â€)
Rosalind Brewer, CEO of Sam’s Club, a Walmart division, further stressed the impact of the sector’s revival on entrepreneurs nationwide. “I have the privilege of working with — and supporting — small businesses in nearly every state in the nation,” Brewer, one of BLACK ENTERPRISE‘s Most Powerful Executives in Corporate America and 2012 BE Corporate Executive of the Year, maintains. “For small businesses to grow and prosper, US manufacturing must as well.”
As part of its Made in USA initiative, Walmart re-affirmed its commitment to keep factories humming with a pledge to spend an additional $50 billion with US companies over the next decade and willingness to sign long-term purchase agreements. Simon expects to build upon this Made in America program through a series of alliances. For instance, one such partner, General Electric announced plans to invest $30 million and add more than 50 jobs as part of GE Lighting’s production of energy-efficient light bulbs. And suppliers who attended the conference made announcements to collectively invest about $70 million in factory growth and create more than 1,000 domestic jobs. Moreover, the National Retail Federation, the world’s largest trade association for that sector, served as co-host for the event.
It’s perfect timing for a renaissance in US manufacturing according to the all-star line-up of speakers appearing at the Summit kick-off via live webcast. The group included U.S. Commerce Secretary Penny Pritzker, Walmart Stores CEO Mike Duke, General Electric CEO Jeff Immelt, CNBC’s Maria Bartiromo and eight governors.
Pritziker told Summit participants that “we are entering a new era of manufacturing†as a result of the following factors: Low-cost energy; advanced technology; stronger financial and housing sectors; a more flexible, productive workforce — worker output per hour has increased by 2.2% over the past year — and China’s eroding competitive advantage due to rising production costs, labor unrest and higher wages. In fact, a 2012 Boston
Consulting Group report states that as much as 30% of our nation’s imports to
China could be produced domestically by 2020.
Walmart’s Duke says another driver is the trend of localized manufacturing — “creating products near consumers.†And with more competitive American companies in the global economy, GE’s Immelt asserts, “the days of labor arbitrage are over.†Both maintained the greater need for a highly—skilled, knowledge-based workforce.
“One area across the nation that we need to work on is STEM [science, technology, engineering and math],†says Duke. “We need those who can design new factories and processes. We need scientists and engineers to help us develop our businesses here in the United States.â€
In a session on the role of state government that was moderated by Sam’s Club’s Brewer, Governors Mike Beebe (Arkansas), Phil Bryant (Mississippi) and Susana Martinez (New Mexico) agreed that government must support business by providing, among other initiatives, tax incentives to promote growth and skills-development programs in collaboration with colleges and universities to improve the quality of the workforce.
So what does all this mean for you? In a word: Opportunity.
During the press conference call following the kick-off, I asked Bill Simon how the Made in USA initiative will include expansion and development of minority-owned manufacturing operations. His response: “As part of our agenda, we seek to have a diverse supplier program, and we are quite ready to make long-term investments in those
manufacturers…Walmart will also seek to get our partners to focus on this area
as a source of investment.â€
Made in USA connects with Walmart’s recent supplier diversity/development efforts. The mammoth retailer spent roughly $11.6 billion with women- and minority-owned firms in 2012. Boosting the procurement spend among manufacturers should mean an even greater outlay for contractors of color. In fact, expect to see this U.S. manufacturing thrust addressed at future BLACK ENTERPRISE/Walmart 20/20 Vision Forums, our series of supplier diversity/development events designed to help African American businesses land and manage large contracts with major corporations as well as expand business networks.
There’s great potential for accelerated growth of established African American manufacturers and emerging firms in the space. Take a look at the composition of our 2013 BE 100s. Manufacturing companies collectively represent the third
largest revenue-generating category, behind auto dealerships and information technology
firms. In 2012, they grossed $4.7 billion — or 18% — of total BE 100s
Automotive parts suppliers like Detroit-based Bridgewater Interiors LLC (No. 3 on the BE INDUSTRIAL/SERVICE list) and Dublin, Ohio-based Modular Assembly
Innovations LLC (No. 4 on the BE INDUSTRIAL/SERVICE list) have grown into industry leaders with $1 billion operations. As a result, these entities and others like them contract with smaller minority firms and, in some cases, place them on track to ascend to BE 100s status. So the infusion of more high-performance manufacturers among the universe of BE 100s companies can put a significant dent in African American
joblessness — the current black unemployment rate hovers around 13% — and
strengthen the African American middle class.
For maximum impact, a good number of African American firms will have to strike strategic partnerships with other minority businesses and majority companies — note that global powerhouse Johnson Controls owns a 49% stake in Bridgewater. And with the significance of advanced technology, African American manufacturers should align with Black Digerati and other African American entrepreneurs in the tech arena. Such alliances will help drive industrial innovation — and that’s beneficial to US manufacturing and
American industry as a whole.
It is vital for African entrepreneurs to take advantage of this retooled business environment. By doing so, they will have the best shot at developing companies built to last.