Defense Manufacturing Challenges

As manufacturers try to rebuild the domestic arsenal, they face inflation, supply chain problems, and labor shortages.

FREMONT, CA: In response to Russia's war on Ukraine, the US has committed to increased defense production to replace items withheld from its domestic stockpile and sell to nations seeking to enhance their security.

Governments must undergo a lengthy acquisition process for weapons, even longer for foreign powers buying domestic weapons from Washington. Manufacturers have several years to improve their supply chains and hire more employees, and the US needs to replenish its stockpiles sooner rather than later.

Supply chains' weak links: The National Defense Industrial Association (NDIA) reports that the defense industrial base faces ecosystem challenges because of a lack of new market entrants, a smaller number of small businesses, and an escalating shortage of skilled workers.

According to NDIA's Vital Signs 2022 survey, nearly one-third of respondents identify as single eligible suppliers, posing a single point of failure for US defense supply chains. A large portion of the manufacturing capacity in the industry comes from overseas sources. The microchip shortages showed how over-reliance on these sources could lead to supply chain fragility.

NDIA also reports that new vendor companies dropped 28 percent in 2020 compared to 2018. The defense supply chain relies heavily on new vendors, as they provide innovation, redundancy, and increased capacity. During the past five years, 20 percent of total defense vendors left the sector.

Compounding issues: In the Defense Logistics Agency, the government organization in charge of military acquisitions, shrinkage in the supply base is attributed to reduced competition caused by mergers, labor shortages, shortages of trades people with experience in aging aircraft, and probably the biggest factor is the supply chain issues that impacted smaller suppliers.

Some raw materials sourced from Russia are subject to new tariffs due to changes in the financial infrastructure and compound supply chain problems. There is a wide range of military applications for titanium, and commercial aviation also uses titanium.

Reuters reports that Russia has 13 percent of the global market for titanium, the intermediate between raw minerals and finished metal.

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