Reshoring Success: How Small Manufacturers Can Compete for Defense Contracts

The reshoring of American manufacturing isn't just a trend—it's a strategic imperative backed by hundreds of billions in federal investment. For small manufacturers, this represents the most significant opportunity in a generation to enter or expand in the defense contracting market.

The Reshoring Landscape in 2026

The numbers are staggering:

Over 350,000 manufacturing jobs — reshored or created through foreign direct investment since 2020

$200+ billion — in announced manufacturing investments

1,800+ companies — have announced reshoring or FDI projects

Defense-related reshoring — growing at 15% annually

Key Drivers

National security concerns — Reducing dependence on adversarial nations

Supply chain disruptions — Lessons from COVID-19 and geopolitical conflicts

Government incentives — CHIPS Act, IRA, Buy American provisions

Total cost of ownership — When factoring in logistics, quality, and risk, domestic production is increasingly competitive

Sectors with the Greatest Reshoring Opportunity

Semiconductors and Electronics

The CHIPS Act is driving massive investment in domestic chip fabrication, creating demand for:

Precision components for fab equipment

Clean room construction and equipment

Specialty chemicals and gases

Testing and inspection equipment

Critical Minerals and Materials

Executive orders mandating domestic sourcing of critical minerals create opportunities in:

Rare earth element processing

Battery materials manufacturing

Specialty metals and alloys

Recycling and reclamation

Defense Components

The DoD is actively seeking domestic sources for:

Castings and forgings

Printed circuit boards

Fasteners and connectors

Optical and electro-optical components

Energetic materials

Medical and Pharmaceutical

The pandemic exposed vulnerabilities in medical supply chains:

Personal protective equipment

Medical devices and components

Pharmaceutical ingredients

Diagnostic equipment

How to Compete: A Small Manufacturer's Playbook

1. Identify Your Reshoring Niche

Not every product is being reshored. Focus on areas where:

National security requires domestic production

Quality requirements favor domestic manufacturing

Lead time reduction is critical

Total cost of ownership favors domestic production

2. Invest in Automation

Automation is the key to competing on cost with overseas manufacturers:

CNC machining centers with multi-axis capability

Robotic welding and assembly

Automated inspection systems

Lights-out manufacturing capability

3. Leverage Government Incentives

Take advantage of available programs:

Manufacturing Extension Partnership (MEP) — Technical assistance and consulting

SBIR/STTR grants — R&D funding for innovative manufacturing

State and local incentives — Tax breaks, workforce training grants

SBA loans — Favorable financing for equipment and expansion

4. Build a Skilled Workforce

The manufacturing skills gap is real. Address it by:

Partnering with community colleges and trade schools

Creating apprenticeship programs

Offering competitive wages and benefits

Investing in continuous training

5. Demonstrate Made-in-America Value

Government buyers increasingly value domestic production. Highlight:

Your domestic supply chain

American workforce and job creation

Compliance with Buy American/Berry Amendment requirements

Reduced supply chain risk

Case Study: From Offshore to Onshore

Consider a typical reshoring scenario: A defense prime contractor was sourcing precision aluminum housings from a Chinese supplier. Quality issues, 16-week lead times, and concerns about intellectual property theft prompted them to seek a domestic source.

A small manufacturer in Ohio invested $2 million in new CNC equipment, obtained AS9100D certification, and developed a relationship with the prime through an SBA mentor-protégé program. Within 18 months, they had:

Reduced lead times from 16 weeks to 4 weeks

Improved quality acceptance from 92% to 99.7%

Created 25 new manufacturing jobs

Secured a 5-year supply agreement worth $8 million

The Competitive Advantage of Being Small

Small manufacturers have advantages that large companies don't:

Agility — Faster decision-making and implementation

Flexibility — Ability to handle small-lot, high-mix production

Customer focus — Personalized service and attention

Innovation — Willingness to try new approaches

Cost structure — Lower overhead than large manufacturers

Conclusion

The reshoring movement is real, it's accelerating, and it's creating opportunities for small manufacturers across the country. The key is to act now—invest in capabilities, pursue certifications, and build relationships with defense buyers who are actively seeking domestic sources.

Ready to Take the Next Step?

Whether you're a small manufacturer seeking defense contracts, a government buyer looking for qualified suppliers, or a business owner pursuing CMMC certification, KDM & Associates and the V+KDM Consortium are here to help.

Join the KDM Consortium Platform today:

Schedule a free introductory session to learn how we can accelerate your path to government contracting success.

Whether you're a small manufacturer seeking defense contracts, a government buyer looking for qualified suppliers, or a business owner pursuing CMMC certification, KDM & Associates and the V+KDM Consortium are here to help.

Join the KDM Consortium Platform today:

[Register as a Supplier (SME)](/register?type=sme) — Get matched with government contract opportunities, access capacity-building resources, and connect with prime contractors.

[Register as a Government Buyer](/register?type=buyer) — Discover qualified, defense-ready small businesses and streamline your procurement process.

*Schedule a free introductory session to learn how we can accelerate your path to government contracting success.*