1. NS3040 Fall Term 2018 Defense Industrial Base

2. Overview
September 2018 report documents gravity of situation facing the defense industrial base
Evaluates seven tiers deep into the supply chain
Documents more than 280 supply chain vulnerabilities and finds
Alarming dependency on foreign nations
Particular problems with regard to China
Report finds a targeted approach involving
Funding
Policy
Legislation
Regulation
Could combat these declines and significantly contribute to outlook for American defense production

3. Problems Identified I
Many problems identified in report have been recognized for years
Foreign dependencies abound within the supply chain especially at sub-tier levels of component or raw material manufacturing
Even when U.S. military not entirely dependent on a foreign source for these supplies that source is often
A sole or single source
Fragile or
Only remaining producer of the material

4. Problems Identified II
Report identifies factors that have weakened the defense industrial base such as industrial policies of competitor nations
China has used illegal means to dominate critical global markets through
Espionage
Evasion of export controls
Market access restrictions
Subsidies and
Dumping

5. Macro Forces Driving Risk into America’s Industrial Base
Five macro forces are driving risk into America’s industrial Base
Sequestration and uncertainty of U.S. government spending
Decline of U.S. manufacturing capabilities and capacity
Harmful U.S. government business and procurement practices
Industrial policies of competitor nations
Diminishing U.S. STEM (science, technology engineering and math) and trade skills

6. Risks threatening America’s manufacturing and defense industrial base
Sole source
Single source
Fragile supplier
Fragile market
Capacity constrained supply market
Foreign dependency
Diminishing manufacturing sources and material shortages
Gaps in U.S. based Infrastructure
Product security

7. Recommendations I Recommended Areas for Action
First, creation of a national industrial policy to support national security efforts
Previous efforts underfunded with limited powers
Had no power over major program officers who tended to pursue low-cost globally options – often from unreliable foreign supplies
Second, report encourages use of direct funding to target and support critical sectors of the supply chain
Although programs already exist – Defense Production Act Title III – need additional resources to make significant changes in the industrial base.

8. Recommendations II
Third, additional efforts in education as to the magnitude and scope of the current vulnerabilities
Fourth, cooperation with allied nations to address workforce shortages and joint industrial challenges
Fifth, though not explicit in report – acquisition process reform to reduce challenges for innovative manufacturers
With red tape and
Uncertain funding
Driving many potential suppliers away