Reindustrialization: The Missing Piece in America’s Defense Strategy

Only 22% of aerospace and defense organizations have a comprehensive reindustrialization strategy, despite mounting challenges in America’s defense industrial capabilities. The sector has witnessed a troubling 40% decline in small business participation over the past decade, while the experience level of skilled trade workers has dropped from 17 to 6 years.

These statistics highlight the urgent need for strategic reindustrialization of America’s defense industry. In fact, more than 60% of aerospace and defense organizations now cite supply chain pressures, reliability issues, and sustainability concerns as their primary challenges. The defense technology sector shows promise, however, with venture capital investment growing from $4.4 billion to $14.7 billion over four consecutive quarters last year.

This JOBSwithDOD article examines how reindustrialization can strengthen America’s defense capabilities, create new manufacturing jobs, and rebuild crucial supply chains. It explores practical solutions for modernizing production facilities, developing skilled workforce pipelines, and integrating small businesses into the defense industrial base.

The Economic Case for Defense Reindustrialization

The aerospace and defense industry stands as one of America’s most powerful economic engines, supporting nearly 2 million American jobs across the country. This sector represents a significant portion of high-technology manufacturing, making reindustrialization efforts particularly impactful for both national security and economic prosperity.

Job Creation Potential in Manufacturing Communities

Defense manufacturing creates high-quality employment opportunities that ripple throughout local economies. In 2024, the aerospace and defense workforce reached an impressive 2.21 million employees, representing 1.4% of the nation’s total employment base. Furthermore, these positions offer substantial wages, with the average labor income per job reaching $112,000—approximately 50% above the national average.

Manufacturing communities particularly benefit from defense investment. According to the Department of Defense, every manufacturing job spurs 7-12 new jobs in related industries. Additionally, each million dollars in end-use sales supports four jobs across both manufacturing and supply chain operations. This multiplier effect explains why defense reindustrialization initiatives can transform regional economies.

Major investments like Anduril Industries’ new manufacturing facility in Pickaway County, Ohio—projected to create over 4,000 jobs by 2035—demonstrate how defense production can revitalize former industrial areas. The Department of Defense’s Office of Local Defense Community Cooperation actively manages 252 grants representing $1.7 billion in federal funds and $623 million in non-federal contributions to support such initiatives.

Reducing Dependency on Foreign Supply Chains

Foreign dependency in defense supply chains represents a significant economic and security vulnerability. The Department of Defense notes that many foundational industrial supply chain sectors source a large percentage of their components from outside North America. For instance, in 2019, the FDA estimated that 72% of active pharmaceutical ingredient manufacturers supplying the U.S. market were foreign, with 13% located in China.

Consequently, manufacturing resilience has become a top priority. The Department of Defense is implementing programs to address these vulnerabilities, including the Defense Manufacturing Communities Support Program and Industrial Base Analysis and Sustainment initiatives. These efforts focus on creating secure global supply chains through domestic production capacity.

The economic case for reducing foreign dependency is compelling. Supply chain disruptions significantly impact costs—one semiconductor fabricator lost over $100 million during the 2021 Texas power outages. Through reindustrialization, these costs can be mitigated while simultaneously creating domestic manufacturing jobs.

Long-Term Economic Benefits Beyond Defense

The economic impact of defense reindustrialization extends far beyond military applications. The aerospace and defense industry generated $955 billion in total business output in 2023, contributing $425 billion in economic value—representing 1.6% of the nominal GDP. Moreover, the sector generated $56.8 billion in federal tax receipts.

Research shows that defense R&D has significant positive effects on economic growth. Studies have found defense spending multipliers between 0.6 and 1.2, meaning that each dollar of defense spending generates between $0.60 and $1.20 in GDP growth. Therefore, strategic investments in defense production facilities can yield substantial returns for the broader economy.

Defense manufacturing also drives innovation throughout the economy. As noted by manufacturing scholars Gary Pisano and Willy Shih, rebuilding the “industrial commons”—the shared resources that manufacturing clusters need to thrive—creates spillover effects that benefit entire regions. Notable examples include commercial successes from defense-originated technologies like jet engines, computers, radar, and the internet.

Current Challenges Facing America’s Defense Production

America’s defense industrial base faces severe structural challenges that threaten its capacity to meet current and future national security needs. Beyond the economic concerns, technical operational issues have emerged across multiple fronts that demand immediate attention for successful reindustrialization efforts.

Aging Facilities and Outdated Equipment

The Pentagon’s ability to prepare for future conflicts is increasingly compromised by deteriorating infrastructure. Currently, the Department of Defense operates more than 50 laboratories and testing centers across 22 U.S. states, many housed in structures built over 60 years ago that have not been properly maintained. This infrastructure deficit extends to critical naval facilities, where shipyards are on average seven years older than industry standard, resulting in numerous work stoppages directly attributable to facility conditions.

These aging facilities impact not just research capabilities but also production capacity. Representative John Garamendi highlighted that laboratory infrastructure issues constitute “a major part of the department’s facilities problem”. Notably, the organic industrial base—responsible for acquisition, sustainment, and maintenance—struggles to fulfill work in a timely manner due to outdated infrastructure and equipment.

Supply Chain Vulnerabilities Exposed by Global Crises

The COVID-19 pandemic brutally exposed weaknesses within the defense supply chain that had been developing for decades. In the initial months of the pandemic, Boeing temporarily ceased production at its Seattle-area and Philadelphia plants, affecting critical programs such as the V-22 tilt rotor aircraft, KC-46 tanker, and multiple helicopter models. Similarly, Lockheed Martin delivered only 120 F-35s in 2020—21 fewer than its initial target—primarily due to pandemic-related production disruptions.

A more systemic concern lies in the DoD’s limited visibility into its own supply networks. As revealed in a 2022 report, the Department “[does] not track these vulnerabilities… As supply chains have become more global in scale, prime contractors have lost some visibility into the sub-tiers of their supply chains, especially below third-tier levels”. This blind spot became painfully evident when, after 12 years, the Pentagon finally discovered that “every one of the more than 825 F-35[s]… delivered contains a component made with a Chinese alloy that is prohibited by both U.S. law and Pentagon regulations”.

Furthermore, America’s defense sector is alarmingly dependent on foreign sources for critical materials. The United States is 100% import-reliant on 16 minerals deemed “critical” to national security, with China controlling 63% of global rare earth mining, 85% of rare earth processing, and 92% of rare earth magnet production.

Workforce Shortages in Critical Manufacturing Skills

In addition to infrastructure and supply problems, the defense industry faces a growing workforce crisis. Presently, there are more than 800,000 open manufacturing jobs, with projections indicating the industry will require over 4 million jobs in the next decade to maintain sustainable throughput. If the skills gap remains unaddressed by 2030, it could impact over $1 trillion in GDP.

The aerospace and defense sector specifically experienced a personnel turnover rate of approximately 13% in 2023 (excluding retirements)—substantially higher than the overall U.S. turnover rate of 3.8%. This high turnover compounds challenges created by an aging workforce, with 25% of employees having more than 20 years of experience and being at or beyond retirement age.

Overall, the defense workforce has dramatically contracted, shrinking from 3 million workers in 1985 to just 1.1 million in 2021. Equally concerning, over 17,000 companies have exited the defense sector in the last five years alone, with small business participation declining by 40% since 2011.

The talent shortage has become so acute that, according to an NDIA survey, 70% of members reported experiencing negative financial impacts from COVID-19, and 30% expressed concerns about declining reliability in their supply chains. In essence, these workforce challenges threaten to further compromise an already struggling defense industrial base.

Rebuilding America’s Manufacturing Capabilities

Rebuilding America’s manufacturing base remains central to addressing the defense production challenges outlined earlier. Recent initiatives by the Department of Defense are breathing new life into production capabilities via targeted investments, technological modernization, and strategic partnerships.

Revitalizing Former Industrial Hubs

Across America, the Manufacturing Capability Expansion & Investment Prioritization (MCEIP) office is implementing strategic investments to transform once-thriving industrial centers. This effort aims to mitigate supply chain vulnerabilities previously identified by the Pentagon while investing in both major and sub-tier suppliers. The Defense Production Act Investments portfolio specifically targets these efforts, with a mission “to ensure hardy, resilient U.S. Defense supply chains, reduce reliance on foreign manufacturing, and correct domestic shortfalls”.

Regional manufacturing clusters have emerged as a critical strategy, creating specialized ecosystems that foster innovation and productivity. Throughout 2023-2024, the DoD allocated approximately $38.00 billion toward industrial base revitalization, with the vast majority directed toward areas where domestic industrial capacity has dwindled.

Investment in Modern Production Technologies

The Pentagon is actively modernizing production capabilities with substantial investments in advanced technologies:

• Digital transformation: Defense manufacturers are integrating Manufacturing Execution Systems (MES) with Enterprise Resource Planning (ERP) software to create a “single source of truth” for production data, enabling real-time decision-making
• Additive manufacturing: 3D printing technology allows for creating complex prototypes and parts with minimal waste and reduced lead times
• AI implementation: Artificial intelligence applications, supported by $1.80 billion in DoD funding, enable anomaly detection and pattern recognition throughout manufacturing processes

Remarkably, the upcoming 2026 budget represents the first comprehensive attempt to align program planning with the National Defense Industrial Strategy, focusing specifically on building manufacturing capacity.

Public-Private Partnerships for Facility Modernization

Public-private collaboration has become the cornerstone of facility modernization efforts. The DoD sponsors nine Manufacturing Innovation Institutes (MIIs) that connect stakeholders from government, industry, and academia through headquarters and hubs nationwide. These institutes serve as “industrial commons” where manufacturers can pool resources and risk while accessing world-class pilot manufacturing facilities.

International partnerships have likewise expanded manufacturing capabilities. Under the AUKUS arrangement, Australia has committed $3.00 billion specifically for U.S. submarine shipbuilding infrastructure. Additionally, Polish defense manufacturer PGZ is now co-producing Javelin anti-tank weapons with U.S. industry in Poland, while the NATO Supply and Procurement Agency is facilitating efforts to co-produce Patriot missiles in Germany.

These collaborative approaches are essential for modernizing the industrial base while sharing financial risk between public and private sectors—ultimately rebuilding America’s capacity to produce advanced defense systems at scale.

Creating Pathways to Defense Industry Careers

Building a skilled workforce stands as the cornerstone of America’s defense reindustrialization strategy. The Pentagon currently faces unprecedented workforce challenges, with more than 800,000 open manufacturing jobs today and projections indicating the industry will require over 4 million jobs in the next decade. Without addressing this skills gap, the U.S. risks losing an estimated $1 trillion in economic output by 2030.

Training programs for Next-Generation Manufacturing Skills

The Department of Defense has launched several innovative training initiatives to address critical manufacturing skills shortages. The Accelerated Training in Defense Manufacturing (ATDM) program represents a flagship effort, offering intensive 16-week courses across five essential trades: welding, CNC machining, additive manufacturing, quality assurance, and non-destructive testing. This program has already graduated 777 students from 45 states and boasts an impressive 90% job placement rate.

Meanwhile, the Office of the Secretary of Defense’s Manufacturing Education and Workforce Development (M-EWD) Program works alongside regional ecosystems to develop education systems that create a high-performance manufacturing workforce. Between FY20-FY24, DoD Manufacturing Innovation Institutes executed over 700 education and workforce development projects, training more than 500,000 students, teachers, and workers.

Attracting Diverse Talent to Defense Technology Fields

Currently, the defense sector is implementing strategic initiatives to broaden its talent pool. The Defense Civilian Training Corps for undergraduate students and the Science, Mathematics, and Research for Transformation program for graduate students serve as critical scholarship-for-service pathways. These programs help attract underrepresented groups to defense careers.

Outreach to minority-serving institutions has become a priority, as these schools enroll 30% of all undergraduates and produce one-fifth of STEM bachelor’s degrees nationwide. The Defense Manufacturing Community Support Program has allocated $110 million to 23 Defense Manufacturing Communities between FY2020-2023, assisting over 5,366 defense businesses and 100,000 workers.

Career Advancement Opportunities in Reindustrialized Sectors

The Department of Defense offers structured career advancement pathways across its reindustrialized sectors. Defense employees can access multiple leadership development programs, including:

• Defense Civilian Emerging Leader Program (DCELP)
• Executive Leadership Development Program (ELDP)
• Defense Senior Leader Development Program (DSLDP)

Given that manufacturing jobs create 7-12 new positions in related industries, defense manufacturing presents substantial opportunities for career mobility and advancement. The emphasis on cross-discipline enablers (transferable skills) and role-based enablers (technical skills) creates what industry calls a “manufacturing T” of capability—allowing workers to develop both specialized expertise and transferable leadership skills.

Small Business Integration in Defense Supply Chains

Small businesses represent the backbone of America’s defense supply chain, comprising 73% of companies in the defense industrial base. Unfortunately, the Defense Logistics Agency lost approximately 3,000 vendors between 2016 and 2022, with small businesses accounting for 2,300 of those losses. This troubling trend underscores the importance of reindustrialization efforts focused on small business integration.

Reducing Barriers to Entry for Small Manufacturers

Small manufacturers face substantial obstacles when attempting to enter defense markets. Currently, the complex acquisition requirements, burdensome regulations, and cybersecurity mandates create disproportionate challenges for resource-constrained companies. The Department of Defense has established 96 APEX Accelerators (formerly Procurement Technical Assistance Centers) across the country to help small businesses increase readiness and find contracting opportunities. The DoD’s Mentor-Protégé Program enables experienced companies to provide business development assistance to small firms, with protégé companies performing an average of over $5 billion in contract work annually.

Innovation Opportunities for Specialized Suppliers

Despite representing just 10% of the workforce in key defense manufacturing sectors, small businesses deliver outsized innovation benefits. These firms produce sixteen times more patents than large companies and account for 43% of all high-tech jobs in America. The aerospace industry exemplifies this innovation potential—Brazil’s Embraer began as a government-backed venture before becoming the third-largest aerospace company globally behind only Boeing and Airbus.

Regional Manufacturing Clusters and Their Benefits

Regional defense industry clusters create significant competitive advantages by concentrating expertise, scale, research capabilities, and skilled labor. Manufacturing USA institutes have established seven Smart Manufacturing Innovation Centers across the nation, nurturing defense-oriented ecosystems. These clusters foster collaboration between military and defense sectors dedicated to technological innovation. For instance, Pittsburgh’s robotics cluster has expanded from 40 to 105 commercial companies in just 18 months, with the ARM Institute accelerating technology transfer and workforce development. Essentially, these regional networks help defense firms build and maintain competitive strength while accelerating commercialization in specialized sectors.

Conclusion

America’s defense reindustrialization stands as a critical national priority that demands immediate attention and sustained commitment. The compelling economic case, with defense manufacturing supporting 2 million jobs and generating $955 billion in business output, demonstrates the sector’s vital role beyond national security considerations.

Strategic investments through programs like the Defense Manufacturing Communities Support Program offer practical solutions for rebuilding crucial capabilities. These initiatives address pressing challenges while creating high-quality employment opportunities across manufacturing communities. Department of Defense efforts targeting workforce development through programs like Accelerated Training in Defense Manufacturing show promising results, achieving 90% job placement rates among graduates.

Small business participation remains essential for maintaining a robust defense industrial base. Though recent years have seen concerning declines in vendor numbers, targeted support through APEX Accelerators and the Mentor-Protégé Program helps specialized suppliers overcome entry barriers and contribute their innovative capabilities to defense supply chains.

Success requires sustained focus on three key areas: modernizing aging facilities, strengthening domestic supply chains, and developing skilled workforce pipelines. Regional manufacturing clusters, enhanced by public-private partnerships and technological advancement, provide proven frameworks for achieving these objectives while fostering innovation and economic growth.