Factory Construction Set New Record in 2022, but will it Stick?

As SCDigest has written many times, for all the talk about “reshoring” of manufacturing activity back to US soil, it just hasn’t showed up in the numbers in terms of domestic manufacturing output. The stories have been more anecdotal than factual.

Supply Chain Digest Says...   There are about another 800,000 jobs openings that manufacturers are looking to fill, as some worry the worker shortage could derail the reshoring momentum. What do you say? Click here to send us your comments   Click here to see reader feedback

But that may at last be changing by looking at a different set of numbers: the amount of new US factory construction.

According to an article over the weekend in the Wall Steet Journal, construction spending related to manufacturing reached $108 billion in 2022, Census Bureau data show, the highest annual total ever.

The article notes much of that growth is coming in the high-tech fields of electric-vehicle batteries and semiconductors, funded in part by billions of dollars in government incentives.

But it’s not only subsidy driven expansion.

“Other companies that once relied exclusively on lower-cost countries to manufacture eyeglasses and bicycles and bodybuilding supplements have found reasons to come home,” the Journal notes.

Even one sock company, FutureStitch, has opened a new factory in Oceanside, Calif, adding to offshore plants China and Turkey, in a sector that almost completely fled US production decades ago.

The driver for the move: much shorted cycle times, and the responsiveness to demand that speed brings with it. The US production helps as retailers are reducing inventory in their stores, and now FutureStitch allows the company to quickly replenish those retail distribution centers.

US production capacity has been flat for many years. However, the Journal article notes that last year it showed its strongest growth since 2015, as companies appear to be serious about reducing supply risk and avoiding the many supply chain disruptions seen since the start of the pandemic in 2020.

And even though much more automated factories require a lot less labor than in the past, the US Bureau of Labor Statistics says that nearly 800,000 manufacturing jobs were added in the sector over the past two years, to about 13 million total. That kept the percent of production jobs at about 10% of total employment.

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And there are about another 800,000 jobs openings that manufacturers are looking to fill, as some worry the worker shortage could derail the reshoring momentum.

Even toy maker Lego is jumping on the band wagon. It is building its first US plant near Richmond, Va, after years of supplying the US from Mexico, also to improve responsiveness.

But there are also examples of how such a US production strategy may not work out. For example, athletic shoemaker adidas opened a highly automated factory near Atlanta in 2017. Two years later, adidas shuttered the facility, moving production to China and Vietnam.

So this time will reshoring really stick? The factory construction numbers look promising for sure, but let’s wait for the numbers on output.

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