An article at CNBC outlined the company’s latest investment: a $400 million “manufacturing, office and amenities space” in Ohio — a bona fide U.S. production site. It might seem like this is just a response to COVID-19, but Peloton had been planning something like this for years. Before the pandemic and the boom in Peloton sales, the company had already been trying to plant a flag at home.

The new Peloton factory, which is estimated to be up and running in 2023, will be 1.6 million square feet (as a point of reference, Apple Austin, the company’s major new campus, is 3 million square feet). Peloton estimates that it will bring 2,000 jobs to the area of Troy Township, Ohio. This buildout comes on the heels of their acquisition of Precor back in December 2020, which included factories in both North Carolina and Washington, but apparently wasn’t enough to accommodate everything they wanted to do stateside.

Why has Peloton been planning this for so long? “Mitigating geopolitical risk” was a major reason cited by CEO John Foley (until the end of 2020 they had only manufactured via partners abroad). Of course manufacturing in lower cost markets like Asia can have attractive sticker prices: low cost of labor, goods, etc. but there are hidden costs, or at the very least a large list of possible costs that hang like the Sword of Damocles and can hit with surprising force.

COVID-19 aside, there have been trade wars, tariffs, regional conflicts, even things as parodical as a beached tanker in the Suez Canal. Needless to say, the global supply chain is not guaranteed. In February 2021, product demand was high and Peloton was behind on orders. They spent over $100 million on expedited shipping, 10x their usual shipping costs.  Their revenue for 2020 was $1.7 billion, which means they were spending almost 6% of income just to get goods into the U.S. — that’s a big line item on cost of goods!

Manufacturing in the U.S. is not cheap and is not without its own set of risks. Indeed, Peloton doesn’t plan to end any of its partnerships abroad, so this should be seen not as a divestment, but rather an attempt to diversify its production options. If this had been in place years ago, they might have weathered the storm of the past few years more effectively, and in the future they will be able to minimize the damage to the company from catastrophic issues in one region or onone trade route. Peloton is not the only company to reorient in this way, and it certainly won’t be the last. The landscape will be shifting a lot over the next few years and we’ll be paying close attention.

Read the whole article over at CNBC here.