Politics The military supply chain is national infrastructure — and it needs attention

21:12  22 july  2021
21:12  22 july  2021 Source:   thehill.com

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The U.S. military system for acquiring spare parts and ordnance could be as fragile today as health care supply chains were two years ago, when conventional wisdom declared them to be sound and resilient. As with medical supplies and equipment, our defense supply chain is centered on a commercial model of rapid turnover inventory management and cost minimization. The result is that the nation's military logistics supply chain is unable to quickly and effectively respond to a significant spike in demand for weapons and spare parts in the event of an immediate national crisis with a near-peer competitor.

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Lt. Gen. Warren Berry, the Air Force deputy chief of staff for logistics, engineering and force protection, put it aptly when he said this pending crisis in spare parts "scares the crap out of me." He helped identify the problem when he said that the Air Force has incentivized parts suppliers to largely structure their "business model(s) around peacetime demand," at the cost of surge capacity in times of war.

So, how do we better prepare the private sector to surge production of key military supplies and components and build a more resilient defense supply chain? The short answer is to make it worth everybody's while. Many companies that are critical suppliers for defense generate 70 percent or more of their sales from commercial business. They cannot responsibly produce for a government customer if that work jeopardizes their future in a competitive commercial sector. Government policies that set private sector and government business realities at odds with each other make it harder to improve defense supply chain resilience.

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Some note that in times of emergency the Defense Production Act (DPA) could be used, and that the DPA is designed specifically for short-notice mobilization. But it will do a president little good to invoke the DPA if the infrastructure (physical plant and skilled workforce), as well as inventories needed to respond to initial surge demand, are lacking. Military weapons and spare parts are generally not dual use, and remain specific to the types of aircraft and other platforms they equip.

Instead, as the Biden administration seeks to restore and expand U.S. infrastructure, one solution that addresses shortfalls in our defense infrastructure focuses on sustainment and supply chain resilience at the platform level "upstream" in the program requirements.

Specifically, the Defense Department's acquisition community can work with operators to detail long-term logistic support plans for new platform acquisitions. Logistics requirements are part of current acquisition strategy requirements, but a more explicit call out of expected spare parts and components supplies needed during the life of the platform would address this issue. Building in requirements for the government buyer to acquire spare parts and components at a predictable rate and schedule mitigates risk and incentivizes industry to maintain a baseline production capacity to meet surge requirements.

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One argument against such an approach would be that it could lock in stockpiling equipment for platforms that technology or tactics later rendered obsolete, leaving ample supplies of unneeded items. To address this risk, the by-platform spare parts supply chain requirements should be reviewed for currency by both military service operations and acquisition executives on a periodic basis - perhaps every three to five years. Foreign military acquisition of such platforms through the FMS system can also extend the operational life of spare parts and munitions stockpiles.

An additional measure to bolster defense supply chain readiness would be to ensure budgets for programs that provide industry the profit margins to make it worthwhile to produce the parts we need. While it makes sense to separate original equipment manufacturers (OEMs) from spare parts suppliers to preserve competition and reduce costs, OEMs still have a place in the long-term parts supply chain. Many of the second- and third-tier suppliers that are now chokepoints in the system rely on OEM demand to stay in business. And these smaller companies typically operate on smaller reserves and from more precarious financial positions. Accordingly, the Department of Defense can encourage a public-private partnership mindset with industry by building on existing supply chain relationships, rather than institutionalizing adversarial relationships with and between defense, industry and government.

As with so much else in defense readiness, the issue comes down to funding and choices among competing objectives. Defense procurement is requirements-driven, so ensuring that more is done to address parts and component supplies at the requirements level, and earlier in program life, makes sense. This solution would help industry and government plan ahead, rather than playing catch up during some high-intensity and short-duration crisis that surges demand for key parts and weapons.

Bob Nugent is a retired U.S. Navy officer who served in intelligence, operations and acquisitions. He teaches in the Strategy, Management and Operations Department of the Busch School of Business at the Catholic University of America.

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This is interesting!