Matt Stagemeyer
in Connect on LinkedIn


Reshoring manufacturing operations from overseas to U.S. soil has been promoted as a way to jump-start domestic investment. However, it’s a trend that comes at a challenging time for executing projects due to labor shortages, lengthy lead times in sourcing critical materials and difficulty in finding suitable sites. Matt Stagemeyer shares his insights on the factors confronting light industrial manufacturing and offers a few solutions.

Matt is national director of operations, consumer products, at Burns & McDonnell. With nearly 20 years of industry experience, he specializes in design-build delivery of highly specialized fast-track projects in the food and consumer products sector.

Q: Let’s start with a look at what is driving the move to reshore more manufacturing facilities. Is it really tariff-driven or are there other factors?

A: We’ve actually been dealing with a reshoring trend that started well before the tariff discussions. Reshoring is really a consequence of the COVID era. The supply chain disruptions then caused a lot of people to start thinking about getting them shorter and removing as many potential disruptions as possible.

Q: Is reshoring translating into more construction activity?

A: Yes. We’re seeing consistent investment in new facilities as well as investment in upgrades and expansions. This has caused complications in siting because many of the most attractive, shovel-ready industrial sites have already been snapped up.

There are some regions, mainly the Southeast and Appalachia, where you still have land available. Many of those communities are also friendly for zoning and permitting. There may be other challenges like transportation, but there are a lot of advantages and we’re seeing projects for new facilities in those regions.

A lot of developers and owners are looking at converting or retrofitting an existing building. Many times, those will be spec warehouses or logistics facilities, and going this route will require heavy modifications. For example, warehouse roofs are mainly designed to keep the weather out, meaning they can’t take much more than a little snow load. You will have to retrofit with a lot of interior steel to support pipe and heavy equipment that needs to be positioned overhead.

A retrofit of an existing warehouse can have its advantages, but greenfields or new buildings may still be more cost-effective over the long term. With a new greenfield facility you get a facility that suits your needs and can be expanded later if new production is required.

Q: Are supply chain bottlenecks still a factor?

A: From the construction lens, procuring critical materials is a complicating factor. Critical electrical equipment like transformers, switchgear and many other components are now in short supply. A new transformer, for example, often comes with a lead time of 12 months or more.

There is no question that the tariff announcements are causing some uncertainty with the supply chains. Will I be able to buy goods and materials from Asia at the cost I used to budget? Will I be able to get steel, copper and other specialty metals from foreign sources at the cost I budgeted?

Designing and building consumer products and food production facilities means you start from the inside out with specifications for the specialized production and packaging equipment. Often, these items come from Europe, and tariffs are a factor there too, causing delays and price increases. Our projects are process and mechanical led, so we have to figure out the equipment first. Any delays in getting production equipment trickles down to impact the construction schedule.

Q: Are we still seeing labor shortages for construction?

A: Attracting skilled labor to your project site is definitely another area of complexity. With shortages hovering at around 400,000 vacancies, attracting the electricians, millwrights, pipefitters and other tradespeople needed to execute major manufacturing projects has become a challenge. There continues to be stiff competition among project owners and contractors to attract and retain craft labor, and the reports you read are borne out in the field.

Q: Is it just a matter of paying more than our competition to get the trades willing to work on our projects?

A: Paying premium wages is becoming a necessity, but that doesn’t always mean you will get who you need. Trades often have their pick of jobsites and it’s understandable when they might prefer a project that may take three, four or five years, versus one year. You have to consider other solutions.

Let’s start by creating a jobsite experience that workers actively prefer. Safety is the first thing. A commitment to a strong safety culture isn’t just a compliance goal. When the trades see it’s more than just checking the box, it becomes a differentiator. They notice when their wellbeing is a priority and you go the extra mile to prevent incidents.

Another factor is leadership. We invest in placing exceptional people in project management roles — individuals who are committed to making the job run smoothly. The men and women doing the work want to work for someone who knows what they need to do the job right.

And sometimes, little things like clean, comfortable break areas and a decent place to eat lunch can make a difference. Thoughtful amenities may not be the top factor in labor decisions, but they reflect a broader culture of care and professionalism.

Q: Are there strategies that can help to get plants online as fast as possible?

A: We can take some steps to offset possible supply chain delays by preordering and stockpiling certain components and pieces of equipment that we know will be needed on a variety of projects. As one of the largest engineer-procure-construct (EPC) firms in the power sector, our procurement team’s vendor relationships can shorten timelines for electrical equipment. No one is happy when schedules get missed, so some of those steps can help us limit factors that are difficult to control.

Q: Are there any other things we can do?

A: We can fabricate steel components through AZCO, a Burns & McDonnell subsidiary, which is our heavy industrial construction company headquartered in Wisconsin, and that has been beneficial on many of our projects. When we can get production of items like structural steel, piping or skidded systems in a controlled shop environment, it really helps manage costs, improve quality and reduce schedules. Not only are we reducing reliance on skilled labor at the jobsite, but it helps with quality control and safety. Instead of installing and welding 50 individual pieces of steel on-site, modules are preassembled off-site and delivered in one or two larger sections that can be moved into place with a lot less effort. When skidded pump systems or pre-piped tanks arrive preassembled, it shaves off a lot of days in the schedule.

Q: Any final thoughts on outlook for projects in the food and consumer projects sector?

A: Before tariffs became a discussion point, we were seeing inflation running as high as 9%. Even though the inflation rate has come down, everything is still more expensive. That means we’re not seeing as many projects driven by improving efficiencies and driving down costs. We might be able to create more efficient production lines and reduce waste, but the higher project costs will offset that. It’s much harder to get those projects off the ground in today’s environment. With everything more expensive, the owners can’t get the return on investment they need.

The projects that are going forward are those that expand production capacity to meet higher demand for a certain product. We’re also seeing new plants built for entirely new products. In the food and consumer products space, you have to constantly evolve to meet consumer tastes and those are the projects going forward.

The U.S. is too big of a market and companies will continue to invest in the U.S. With or without the threat of tariffs, if there is a business case, people will find a way to go forward with new projects.

Now that means we will see some strategic approaches, such as projects that are more staged or incremental. You won’t see many $500 million plants built for a 30-year production cycle. You will probably see a $100 million plant that can meet production for five years. Then we sit down and reevaluate the market to determine whether it makes sense to invest in another plant expansion after that.

 

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