Part 4: The New Age of Military Manufacturing
A Vision for the Civilian Industrial Base in Military Production
From the desk of James Blythe —
For my part, I’d like to be writing and publishing more but this series demands a significant amount of time and brain power along with my day job. Working in manufacturing adds significant value to the insight I’m able to bring to this topic. However, it would be nice to have those hours of the day back to focus on the completion of this task! There are certainly worse problems to have.
These next few sections will be a departure from what has come before. While Parts 1, 2, and 3 were primarily informative and introductory, the next sections will be more predictive and analytical. Necessarily, that means they will function as a “snapshot in time” to bamboozle future scholars and armchair experts. Whether you find this timely and topical or dated and needlessly abstract, I hope there is value to you in some form.
Current conflicts in Ukraine, Gaza, and Yemen continue to illustrate the series of principals codified in the late 90s by Chinese academics Liang and Xiangsui in their report entitled Unrestricted Warfare. For those of you unfamiliar with this piece and having any interest in military thinking and doctrine it is a must-read as fundamental as any of the writings by Clausewitz or Sun Tzu.
While many scholars at the time believed that Unrestricted Warfare was a searing critique of the West — and the United States in particular — it highlighted many ways in which Americans were the first to define the new era of warfare. Key to this was the statement that the “face of the God of War has become indistinct”. Essentially, that in the modern era the lines which demarcate, “why we fight”, “how we fight”, “who fights”, and “where we fight” are increasingly indistinct and the line between civilian and military activities is blurred.
We have certainly seen this come to fruition since the reports publication. This concept is fundamental to the remainder of my writing on the topic of the “new age of military manufacturing”. Essentially, we will be discussing manufacturing in a context of “total war by any means”. Necessarily, there are ethical implications to such a discussion.
Consider that much of the American ethos for war is tied up in justifications of “who is right” and “who is wrong” and “what is the right and noble and just way to proceed.” This seems diametrically opposed to any rationale for war in history. From ancient times to modern, war has been conducted as an extension of politics and to compel “others” to your advantage. That being said, your author does not have the expertise to debate philosophical or theological questions surrounding the use of violence or other, non-violent compulsion to achieve the aims of a society and safeguard its interests over others. As such, I won’t be addressing those things here.
This piece will analyze only to the maintenance and deployment of manufacturing resources that will shape the future of warfare. It is for other thinkers to determine in which instance the deployment of the tools of war are necessary and just.
Introduction
As discussed in Part 2, multi-domain operational doctrines (MDO) — and the reality of an increasingly interconnected technological age — necessitate that military thinkers consider the role of civilian industry and consumers in the art and practice of war. Historically, soldiers and civilians entertain the notion that they are segregated from the “other side of the fence” and inhabit a mystical domain somehow unique only to them and forbidden to the uninitiated. In ancient conflicts, it was easier to maintain this illusion (except in such situations were the barbarians were visibly at the gates) as the motivations for war were clear and the waging of organized war a matter for those thinkers with time and wealth to ponder matters beyond the seasonal harvest.
However, the reality has always been that civilian activities are inherently intertwined with the waging of war. This includes the conscription of farmers from their fields, the making of arms and armor, and the provisioning of grain to support conflicts domestic and abroad to name a few. In modern societies, the interconnectedness of civilian production and military action are further apparent.
First, it is increasingly clear that the health of the civilian industrial base (CIB) directly impacts a nation’s ability to produce and distribute the materials of war. Second, technology has blurred the lines which distinguish the “battlefield” and its participants from the civilian domain. Third, multiple State and non-State actors have demonstrated that application of non-traditional, “kinder” methods of war-making are extremely effective where conventional armed conflict is not.
With these three observations in-mind, concerns continue to grow that the next, near-peer, large-scale conflict is nearing. Despite this, there are very real limitations to the ability of most nations to sufficiently prepare for such threats.
It has been previously established that military budgets within the United States are unlikely to grow. Current economic trends make it difficult to imagine a future where sufficient financial resources are available to maintain the paradigms of conventional war-making in the modern world. These facts are not lost upon world leaders. While Europe clamors for more arms, relationships in the middle-east continue to deteriorate. With the emergence of new actors on the world-stage the hegemony of The West is challenged.
This section will discuss the fundamental role that the CIB will play in the future of military manufacturing and the conduct of war. Much of the thinking here is iterative (or perhaps derivative) of pre-existing trends and philosophies is similar areas. Among the roles of the future CIB are the following.
First, to create a healthy tax and export base to finance the country and its military activities. Second, to provide options for non-violent methods of conflict resolution and influence. Third, to provide better tools to the warfighter with novel capabilities to enable domination of multiple threat domains during armed conflict.
Financial Justification for a Reinvigorated Civilian Industrial Base
In the United States, manufacturing markets saw significant contractions in 2023. This is a continuous point of concern given the ever increasing national debt and import/export deficits that have evolved over the course of decades. The result of such trends have been a total debt allowance exceeding 120% annual gross domestic product (GDP) and interest service of nearly $400 billion in 2023 alone. It is not clear to what extent this is harmful to national security interests or when the total debt amount will become unsustainable for the economy but it contributes significantly to the $1.375 trillion excess in spending-over-revenue that occurred last year. [1][2]
This situation highlights the importance of revitalizing the CIB and the financial benefit it can potentially bring to the nation and national security. Estimates say that by revitalizing the manufacturing base in America there is potential to increase GDP by 15% over the course of a decade. This is notable because 60% of exports from the U.S. rely on the manufacturing sector. [3] As such, any boon to the manufacturing base is likely to confer a sizeable advantage to the nation’s exports. A vision for such a renaissance in domestic manufacturing is shown in Figure 1.
What is worth noting is the potential to meet debt service obligations by improving manufacturing outcomes domestically. Interestingly, we see the highest potential areas for gains within the CIB to include semi-conductors, metals and fabricated products, specialty chemicals, precision tools, and specialty machinery. Many of these areas overlap with those of interest to defense production. As such, investing in these areas is of benefit to the financial health of the nation and the national security.
It becomes apparent from this that the technologies essential to civilian life and financial prosperity are not altogether distinct from those necessary in military ventures.
These benefits, however, rely on the assumption that an American manufacturing base would be competitive in both domestic and international markets. Given the regulatory standards and cultural norms in the United States, it is not feasible for American manufacturers to be competitive with overseas imports in commodity markets for consumer goods. Production activities abroad are often able to mobilize large amounts of cheap human capital to produce low cost goods. Additional subsidies to companies in the form of tax relief or direct State interference further exacerbate this disparity in production cost. [4]
It is unlikely that AI or any other form of digital industry in the United States will solve this problem. Simply put, application of digital industry and machine learning are expensive and labor intensive ventures that none but the largest companies can pursue.
Reinvigorating the CIB in the United States has the potential to confer significant economic benefits on the nation. The solution to this problem, however, is more complex than simply “doing more with computers”.
Revitalization of the Commercial Industrial Base
When discussing the ability to generate depth in the CIB and realize greater financial gains for the nation — and their Armed Services — it is important to distinguish between existing industries with significant infrastructure build-up and emerging industries with little existing infrastructure.
New investments in semiconductor production will necessarily focus on world-class digital manufacturing metrology and production techniques. This industry — although preexisting in the United States — is weak or lacking altogether in areas that the past two administrations have acknowledged. Targeting investments on under-developed segments of chip production allows domestic providers to disrupt existing cost-models globally. Heavy subsidies from the federal government can be “passed on” to consumer markets as the need to show short-term returns on these significant capital investments is deferred to the federal government. In chip industries, recent supply chain disruptions and the need to continuously increase computing power has left a gap for the United States to fill a world-wide on-going need. [5]
On the other end of this spectrum are the mills, metal foundries, and heavy fabrication shops in America. Unlike semiconductor industries, most countries — the United States included — have significant amounts of pre-existing infrastructure surrounding metal production. Domestically, many of these facilities pre-date World War II and have been continuously modernized to varying degrees over years. [6] Historical examples of this include the rise and fall of American steel globally. Failure to modernize in the period following World War II resulted in European and Asian producers outcompeting the hegemony of American metal production. [7] It wasn’t until much later that companies in the United States began to modernize. The consequences of this have been significant.
In areas like this — which include basic metal production, fabricated metals, tooling, and specialty component production — manufacturing policies and application of new technologies must take a more nuanced approach. Much metal and material production are inherently international endeavors requiring trade between countries. As a result, there are consequences to altering production arrangements in industries (like metals production) where pre-existing trade agreements are in-place.
To illustrate this, it is worthwhile to consider the current import/export balances in the United States. Currently, the country runs significant trade deficits with nations both allied and adversarial as shown in Figure 2.
It is likely not possible for the country to “make for us by us” and ignore foreign markets. Most metals markets have a significant international footprint and rely on trade of ore, raw ingot, or specialty cast/forged products traded between nations. This makes it difficult to pursue an isolationist form of market revitalization.
Instead, investments will need to be made in targeted areas to produce a globally competitive production capability — reducing reliance on adversarial states while maintaining satisfactory trade relations with allied ones.
Additional sources of investment for military manufacturing include sources of raw materials. Sources of bauxite and ilmenite must be found and exploited domestically in some quantity. Alternatively, investments in U.S. companies that are developing technology solutions allowing production from non-traditional sources provide another potential solution. Long-term strategic arrangements may need to be made with a nation’s closest military and economic allies in areas where few solutions are available.
If a nation can be successful in establishing a high quality, high throughput, cost-effective, semiconductor industry and mitigate reliance on foreign nations for critical fabricated metal products, it can draw in financial resources based on filling both domestic and international needs. This results in greater availability of materials necessary to the Armed Services — in time of war — and improved financial outlook to invest in the tools they need.
Use of the CIB in Non-Violent Conflict
As discussed previously, the DOD’s current doctrine acknowledges the utility of commercial industry in the non-violent, non-armed stages of conflict. This is not a uniquely American concept. Although there is some debate as to who was the first to develop and exploit this tactic, no nation has better embodied its principals than China and the United States of America. [9]
Analysis by Liang & Xiangsui in Unrestricted Warfare attempted to divine the future of conflict in a world where the United States had emerged as the sole dominant superpower at the end of the Cold War. Central to their thesis was an analysis of the first Gulf War in what they believed to be the first demonstration of the “shape of things to come”. Aside from direct applications of combat tactics and technologies, it was found that The West had become adept at exerting pressure on allies and adversaries by use of financial intersts. This allowed America to form supra-national combinations in the conduct of the Gulf War by consensus gathering among allies and non-violent pressure among adversaries.
Although the larger zeitgeist has been slow to acknowledge the influence of the CIB in non-violent conflict resolution, it has hinted at the edges of it. In the years since the Gulf War, China instituted its “Belt and Roads” policy. [10] By making significant investments in foreign infrastructure, trade agreements and control of critical assets has allowed China to exert significant influence around the world. Although modern analysis suggests this is a uniquely Chinese approach to warfare, the reality is that similar trade agreements are utilized by American, British, and European actors to steer allies and adversaries while maintaining their interests around the world.
Militaries of the future must acknowledge the growing lack of distinction between “civil” and “military” affairs. An invigorated CIB can be utilized to dominate foreign markets for materials critical to war efforts. Similarly, this type of dominance in one nation can result in the industry’s decline in another — hampering that nation’s ability to manufacture the materials of war. Consider that the recent conflict in Ukraine has resulted in the West applying significant financial pressures to Russia with effect. Similarly, shortages in titanium and key electronics from Russia and Russian allies have had a significant impact on American military and civilian markets for titanium. [11] If properly utilized, a dominant CIB can put significant pressure on adversarial nations an resolve conflicts without resorting to overt violence.
Although this article focuses on the importance of manufacturing to national security, ultimately service industries are increasingly important to the financial prosperity of America. These are areas too in which modern military affairs must be considered. Associated technologies (such as social media) have demonstrated their usefulness in covert and overt intelligence gathering, disinformation, and other forms of intrigue. We will not explore this topic extensively as disconnecting an adversary from Facebook is unlikely to have the same impact as denying them access to aluminum powders necessary for the making of explosive ordnance.
Clearly, a vibrant CIB will be utilized to fuel a range of missions in the future of warfare and enables the realization of “gentler” (non-violent) means of waging war or maintaining national interests. Production and control of the materials of humanitarian aid gives a country the ability to strengthen relations and build influence in areas of interest. Exporting critical knowledge and hardware and design expertise in power production or infrastructure gives the exporter the ability to influence the host country’s policy-making or tailor it to suit the needs of the originator. In instances where a nation sufficiently dominates a certain area of finance or manufacture, it can force adversaries to the negotiation table or to participate in efforts and policy-making that they would otherwise actively oppose if able.
Role of the CIB in the Production of Military Goods
Since Eisenhower coined the term “Military Industrial Complex” there has been significant controversy around the business of civilian contractors manufacturing the weapons of war for profit. Despite a significant amount of media focus over decades, it is unclear whether Eisenhower’s fears have been justified or realized in any appreciable way. To date, accusations leveled against civilian production of military goods cite the influence of profiteering lobbyists in instigating conflict and global instability have remained unsubstantiated. The ethics of producing weapons of war for profit largely relies on assertion of whether said wars are considered “just” — something outside the scope of a manufacturing concern. Despite the lack of clarity on the true effects of the military industrial complex on modern societies, debate continues on the “business of war” and who should conduct it.
In an idealized world, the totality of military production activities would be conducted by military depots, arsenals, shipyards, munitions plants, etc. Essentially, production of defense articles would be conducted only by the DOD and Armed Services directly. In this way, some concerns surrounding the ethics of producing war materials might be alleviated. Unfortunately, this is impractical. In practice, such a strategy has never been deployed in the history of humankind. In the ancient world, the majority of militaries arose from assembled hordes of individuals pressed into service and expected to either provide their own arms and armor or to have them sponsored by some private individual of wealth. Naturally, such endeavors were only occasionally conducted as a matter of defensive action and were more regularly incited by civilian and military leaders looking to annex nearby territories or peoples for some form of profit. Similarly, every modern war has been armed and armored by civilian industry.
Consider the practicality of the Army or Marine Corps running the wide range of civilian production services and processes necessary to design, produce, and equip a modern fighting force? Would the procurement experts, welders, assemblers, tailors, teamsters, and janitors all necessarily be soldiers and marines? This seems like an improper application of military personnel who already manage a diverse range of military occupational specialties.
Instead, the DOD employs a number of civilians within their ranks to perform such tasks within the organic industrial base (OIB). However, the scope of work that they tackle is — admittedly — narrow compared to the totality of production needed to equip and support the warfighter. Does it make sense for the DOD to fund and develop a completely independent, vertical supply chain to support the warfighter? Given existing budgets and procurement philosophies in the modern world this does not seem feasible. For one, no government could afford to make, from whole cloth, the range of production items necessary to support a modern military. For another, military markets are only a tiny portion of demand in a given industry. As such, it is unlikely that any military — even in the United States — has the raw purchasing power to merit the complete attention of a company or industry. The OIB will be discussed in-depth in the next section of this work.
As a result of this, it is unlikely that there will be a major shift in the role the CIB plays in military manufacturing. Defense providers will continue to consolidate and change hands through acquisitions and mergers. Conventional procurement activities will continue to lend themselves to the existing paradigm of the commercial OEM as leading the design and manufacturer of weapon systems. Despite continued debate about the cost effectiveness of such a business model, and the presence of individual “bad actors”, no independent research organization has found systemic instances of war profiteering within the majority of OEMs. [12 — 15] Given lack of willingness to reduce or streamline regulatory burden in defense procurement and lack of incentive for OEMs to provide truly novel services to their customers and take major technological risks, the existing contractor-to-sub-contractor network is likely to remain in-place without significant alterations.
This is likely to hamper a nation’s ability to provide truly next-generation capabilities to the warfighter at a reasonable cost.
In summary, the main players within the CIB, their role, and the tools with which they produce military materials is unlikely to appreciably change. Unfortunately, such models are rife with inefficiency. Better ways of doing business exist and are enabled by the growing understanding of advanced manufacturing techniques and their integration within a manufacturing venture. As a result, the future of military manufacturing will be determined by the emergence (or lack thereof) of true commercial innovators and their ability to utilize current technology to disrupt the existing paradigm of manufacturing in defense.
In short, the future of military manufacturing is in vertical integration of weapon systems.
CIB in the Future of Military Manufacturing: Vertical Integration as a Disruptor in Production & Procurement.
The long consolidation of defense contractors has created the curious misconception of a few, large companies holding a virtual monopoly on the production power of weapons. The reality, however, is that any given production item made for the DOD is the result of hundreds — if not thousands — of individuals companies, consultants, fabrication shops, and program management firms creating an impenetrably intricate web of logistics to deliver a single product. [16] In this way, while prime OEMs such as Lockheed Martin and General Dynamics outwardly present the image of the monolithic and all-powerful Lords of War, the truth is that they are administrative middle-men trapped between an unforgiving customer and an unruly supply base with little control or influence over either.
This means that the prime value an OEM provides to the DOD is in their ability to manage the mountain of legal paperwork that flows down from the government and weather the multi-million dollar financial hot and cold seasons that result. In the most optimistic cases, an OEM may hold the design expertise and authority over a weapon system or a unique aspect of manufacturing capability critical to a specific technology. In this way, the largest defense conglomerates act locally more like mid-sized contracts organizations resulting in maximal overheads with minimal ability to reap value from their distributed supply chains.
Digital manufacturing and advanced fabrication technologies make it more realistic for a prime contractor to conduct a larger portion of its production in-house. As Tesla and Relativity and others have recently demonstrated, it is now possible for companies to pull more fabrication work in-house and — by doing so — realize greater efficiencies. Large, established companies including GE Aviation and Siemens Energy have recognized the benefits of a more vertically integrated supply chain as well.
Vertical integration of the product line enables future manufacturers for the military to be more innovative, more cost effective, and respond more rapidly to new customer needs. Truly, the greatest competitive concern for OEMs and threat to the “old way of doing business” would be the appearance of a truly commercial innovator in the way Tesla has disrupted the automotive industry and Space X has disrupted the aerospace industry.
Consider the following rationale for the benefits of vertical integration in military manufacturing.
The primary advantages to a vertically integrated enterprise are as follows — 1) cost and lead-time reduction due to supply chain simplification and, 2) improved speed to market by enabling rapid decision making within a unified quality system. Further, vertically integrated enterprises have the added advantage of influencing outside vendors when a make/buy decision is required. In this way, manufacturers with expertise and capability to produce vertically are not mandated to do so but have the option to do so as it benefits the product. [17] Figure 3 illustrates — loosely — the structure of a traditional diversified “buy-centric” supply chain that is typical within the CIB.
In this way, each additional level within a supply chain adds complexity, cost, and lead-time. Value is only added where a vendor provides a unique capability not producible elsewhere. The benefits of doing business this way are the reduction of production liability and capital investment by an OEM. Essentially, organizations are able to “co-manufacture” products at job-shops. These job-shops disperse the amortization of equipment and exploit commonality in procurement strategies to realize greater savings to individual customers (who would otherwise have to bear the financial weight and liability themselves). It also allows OEMs to take advantage of lower labor rates or pre-existing skills and expertise. Additionally, there is some thought that focusing on strategic partnerships and avoiding vertical integration allows tech debt in manufacturing to be deferred down to sub-vendors. In this way, an OEM could theoretically have access to the latest-and-greatest in production technology simply by switching vendors when a better solution emerges.
Unfortunately, the reality is that production-locked processes do not lend themselves to on-the-fly changes in technology. Alterations in defense production can often halt a product line pending review and approval. This largely negates the potential benefit of deferring tech debt. Similarly, realizing cost reduction by competing various sub-vendors can be difficult. It is problematic to assess the competency of a range of shops in a timely and accurate manner. To do so requires a significant number of administrators, contract reviewers, and subject matter experts tasked with managing sub-vendors which inflates overhead costs, negating much of the percieved value in going with a “cheaper vendor”.
Often the result of competitive bidding is that a shop that was performing a task well and is familiar with the true challenges associated with production will be under-cut by another company who has little experience in the manufacture of a specific article. As a result, the challenger underbids the full scope of effort required. In the ideal case, this estimating failure is due to inexperience. Alternatively, in can be a malicious ploy used to “get on contract” at which point schedule pressures force customers to accept pricing hikes and scope changes to attempt to manage bad actors. This can result in poor quality in delivered products and unforeseen cost and schedule overruns. This is exacerbated by the fact that multiple tiers of sub-vendors must be coordinated and miscommunication between parties is common.
Key enablers of vertical manufacturing in the future will include additive manufacturing, effective utilization of skilled labor, internet of things (IoT) enabled sensors, and a truly digital workflow. Most importantly, to be successful in the new age of military production companies will need to retain design control of their products and to handle such activities with a holistic view of the end product — from initial production, through sustainment, to end-of-life.
Vertical manufacturers will likely employ a range of skilled labors, much as they do today. Welders, machinists, and assemblers will continue to fulfill much the same roles they have historically. Co-bots and digital work controls, then, are intended to augment the capability of a laborer rather than replace them. Most all vertically integrated shops will have basic painting, welding, assembly, and machining capabilities as the necessary investments in these areas are relatively low. More costly manufacturing investments associated with foundry work (forging and casting), specialty coatings, or complicated electronics may be deferred. To supplement the classic “metal benders and wrench turners” is in-house additive manufacturing (AM) capability. Process selection will necessarily be dependent on the production needs of a company or weapon system. As a result, successful OEMs will conduct extensive up-front cost and use-case analysis to select the appropriate capital equipment.
Manufacturers will be driven to procure the lowest price AM technology that meets their minimum requirements. Academic and production data continues to support that the true cost of AM is largely driven by the need to amortize capital equipment. As much as 60% — 70% of the cost of a part produced by AM is related to deployment of capital assets. [18] As a result of this, the vertically integrated manufacturer will need to consolidate to a small number of processes and materials. Typically, development of multiple machine parameters and material substitutions necessitates significant non-recurring expense which should be avoided unless absolutely necessary.
When selecting these materials and processes it is essential criteria is based on the design of fundamentally “new parts” optimized for AM rather than production of existing components optimized for conventional manufacturing. Use of topology optimization and computational analysis is key.
In many instances, products optimized for AM can be produced by other means, albeit less effectively. This means that a vertically integrated fabricator has a powerful bargaining tool within supply chain. If a product is designed with its core functionality and usage in-mind and produced additively to start, sub-vendors can bid against an equivalent cast, forged, or fabricated product. This gives vertically integrated suppliers the ability to avoid costly sole sourcing exercises and enable alternative production routes to assure military customers are able to get products in a timely manner.
The second benefit to this type of vertically integrated producer is that a “single source of truth” now exists for the majority of a weapon system. Currently, a large number of different sub-vendors own small aspects of each weapon system. Contractual agreements and regulations then make it difficult for problems in sub-systems to be addressed during production due to “opacity” between customers, vendors, and sub-vendors. IP related to 3rd party production of parts and systems can be negotiated with fewer entities and royalty agreements reached.
Finally, vertically integrated manufacturers who retain design control of the products they provide have key insights into their sustainment, deployment, and effective maintenance. Designing with modern digital tools in-mind allows products made in conventional manufacturing environments to later be sourced closer to the point-of-need. Spares can be produced on-demand without artificially inflating the cost of production. This would allow the DOD to realize its goal of reduced supply chain logistics, decentralized sustainment, and rapid fielding of upgrades. As previously mentioned, companies can include negotiations of 3rd party production royalties in their business model to capture additional production and sustainment markets.
It is worth noting that similar concepts have been utilized by the DOD since at least 2014. Unfortunately, the success of such applications is limited due to concerns surrounding negotiation of IP royalties with multiple entities, the prohibitive cost of printing, and questions surrounding the efficacy of reverse engineered surrogate parts. Essentially, the DOD has attempted to use AM to produce parts made by casting, forging, and machining in-field. In most cases, the resultant “printed part” is not 1:1 with the piece it is replacing making it less effective and less durable overall. In all other cases, the resultant “replacement” is typically 5X — 10X the cost of the original which is difficult to justify in all but the most severe need cases. Fully functional replacements have been regulated to semi-trivial commodity plastic parts, small tools, production aids, and non-essential bracketry.
In this way, to realize the DOD’s goals of the “next generation of agile manufacturing for the military” a vertically integrated disrupter is needed within the CIB. By realizing such an organization, weapon systems with greater performance and improved sustainment logistics is possible at significant cost and lead-time reduction.
Key Barriers to the Vertically Integrated Military Manufacturer
The ability for a “new type of defense contract manufacturer” within the CIB has been demonstrated in other industries as mentioned previously. However, these successes are only capable of existing due to three factors — first, major financing from high-power individuals who are focused on product performance (not administrative processing); second, embracing a truly commercial outlook which eschews the supervisory environment which is typical of defense procurement; and third, greater control of IP ownership and handling of cybersecurity issues.
To date, no interested private funding initiative has been identified with the will to disrupt the existing defense procurement environment despite large potential to do so. This may be the result of perceived risk in working with the DOD and low overall market potential. In short, it is more profitable for innovators and investors to fund SAS start-ups than to contribute to the national defense.
In terms of the second point, mature defense contractors within the CIB are known quantities within the DOD. As such, they are especially adept at managing the mountain of regulatory paperwork and administrative oversight required in working to the DFAR. Although such items are important to ensure that government agencies and services are “getting what they pay for” they do not — by themselves — add value to a product. Extensive accounting reviews do not result in a missile that flies further. Regular design reviews and TDP approvals do not typically result in maritime vessels which “sail better”. The DOD is not infallible in the manner with which it determines minimum production requirements though failure to conform to such mandates is likely to result in significant legal penalties to the offending parties. [19] An example of the effectiveness of a “performance based regulatory model” in opposition to the standard DOD procurement methodology is the success of the MRAP program. [20] These regulatory weaknesses within the DOD are well understood and a successful commercial business must understand how to navigate them effectively.
At this time, there is no clear path forward on the management of digital IP and cybersecurity issues within the DOD as relates to a truly integrated and futuristic manufacturing capability. Agreements on IP sharing/royalties and acceptable cybersecurity procedures will need to be assessed. One possible solution might be the offline, on-site integration of all digital sensors and technical data. For many, however, it is prohibitive to develop such a repository when so many proven cloud-based systems exist. It is beyond the scope of this article to discuss the minutae of cybersecurity and IP concerns inherent to this topic. As such, it will be left to others to determine the best path forward.
These IP and cybersecurity issues are of specialt concern when it comes to machine learning and the ethical implementation of such things in military affairs. [21] Whether it is the implementation of machine learning or AI within a defense product or its usage to guide production optimization there are many concerns with how such things are evaluated by human assessors and their ethicality and effectiveness determined.
Conclusions for the New Age of Military Manufacturing Part 4
As has been explored herein, the civilian industrial base (CIB) serves three key roles in the future of military manufacturing. First, the CIB is essential to a healthy tax and export base which allows a country to finance its national defense. Second, the CIB provides options for non-violent methods of conflict resolution and influence. Third, a vertically integrated manufacturer has the potential to significantly disrupt the existing procurement paradigm in the DOD by providing a more innovative product that allows the military to achieve key goals within its MDO doctrine.
Ultimately, digital technology and additive manufacturing do not — alone — have the ability to mystically revolutionize the production of military weapon systems. Rather, it is by integration of these technologies and optimizing system design for them that allows for the true revolution in military production. Products can be made more cost effective by eliminating inefficiencies in procurement. The DOD’s desire to harden its supply chain by decentralizing the “Iron Mountain” logistics approach can be realized if a weapon system is developed with “print on-demand” in-mind at the outset.
The key barriers to the realization of a novel and disruptive military manufacturing organization are the need for large independent investment into a market with low profitability potential, extreme non-value-add regulatory burdens, and IP/cybersecurity concerns with some of the critical enabling technologies.
In the next segment, we will discuss the role of the organic industrial base (OIB) in the new age of military manufacturing. Where this section covered the applications of civilian actors the OIB is representative of the native manufacturing capability held directly by the DOD.
References and Footnotes
[1] Reference Pew Research report by DeSilver entitled 5 facts on the U.S. National Debt.
[2] Reference press release from White House by Yellen and Young.
[3] Reference report by McKinsey entitled Delivering the U.S. Manufacturing Renaissance.
[4] Reference Sheller’s Aluminum Dreams (page 147–246).
[5] Reference report by Senonner et al. entitled Using Explainable Artificial Intelligence to Process Quality: Evidence from Seminconductor Manufacturing.
[6] Reference report by McCloskey entitled International Differences in Productivity? Coal and Steel in America and Britain Before World War I.
[7] Reference Bloomberg report by Mihm entitled How the U.S. Squandered its Steel Superiority.
[8] Reference ITIF report by Moschella entitled America Doesn’t Import Too Much from China; the Real Problem is That U.S. Exports Are Too Low.
[9] Reference Liang & Xiangsui report entitled Unrestricted Warfare. Similar discussions referenced in article by Beskin entitled Leaked Documents Reveals China’s Intense Cyber Focus of Tracking Ethnic Minorities Amid U.S. Tensions.
[10] Reference article by Thurston entitled China Has Financed Power Plants, Airports, and Roads around the Globe — but Has It Made the World a Better or Worse Place?
[11] Reference article by Desal entitled Explainer: Importance of Russian Titanium to Global Industry. Similarly, reference article by Beskin entitle Unlocking Supply Chain Resilience: Key Lessons from Global Disruptions for additional examples relevant to modern global supply chain issues addressable within the CIB.
[12] Reference report by Arnold et al. entitled Defense Department Profit and Contract Finance Policies and Their Effects on Contract and Contractor Performance
[13] Reference report by Wang & San Miguel entitled The Excessive Profits of Defense Contractors: Evidence and Determinants
[14] Reference report by Zhong entitled Are Defense Contractors Rewarded for Risk, Innovation, and Influence?
[15] It is important to note that the metrics by which “excessive profitability” is judged does not report to any known standard assessment criteria. As such, historically many metrics have been cited as the “true criteria for excess” despite inability to show that the majority of defense contractors realize any profits beyond that expected in most commercial industries. Most arguments for the “excess” of defense contractors stems from individual bad actors or the position that current DOD policy on profit management (typically to < 15%) are insufficient and that contractors should, in fact, make less money off their services. This is difficult to reconcile as most major automotive manufacturers make ~10% — 12% profit. Technology companies (software, consumer electronics, etc.) routinely generate net profits in excess of 20% from companies with total revenue of hundreds of billions of dollars. For reference, the world’s largest defense conglomerate (Lockheed Martin) seems to generate profits < 12% on a total revenue of < $70B.
[16] Reference GAO report by Cooper entitled Defense Industry Consolidation: Competitive Effects of Mergers and Acquisitions.
[17] Reference article by Loertscher and Riordan entitled Make and Buy: Outsourcing, Vertical Integration, and Cost Reduction.
[18] Reference report by Thomas and Gilbert entitled Costs and Cost Effectiveness of Additive Manufacturing.
[19] Reference article by Mizokami entitle Foundry Employee Faked Steel Strength Tests for Navy Subs because They‘re “Stupid”. First, it is worth noting that the employee in-question faked impact toughness tests — not strength tests. Second, no failures of any submarines were ever found relevant to the tests that were falsified. The decision to do so was made by a degreed metallurgist who disputed the value of the testing. Previous submarine losses have never been attributed to failure to meet regulatory requirements of this nature. As a result, it is difficult to assess which requirements are necessary and which are non-value-add.
[20] Reference article by Judson entitled 30 Years: MRAP Acquisition Success.
[21] Reference article by Beskin entitled Exploring AI Ethics: A Guide to Moral Decision-Making in Artificial Intelligence.
