The U.S. Military Supply Chain Is Ready For Peace, But Not War
Recent shocks in the defense supply chain have shown a surprisingly functional system that nevertheless can’t adapt quickly or forecast its own shortfalls.
From the Bismarck Brief, a weekly intelligence-grade analysis of an important institution, industry, or live player.
The ongoing war between Russia and Ukraine has created immense strain on U.S. weapons stockpiles due to the unexpected spike in demand for military aid. Around a third of Javelin missile stockpiles and a quarter of Stinger missile stockpiles have been sent to Ukraine as U.S. military aid. Raytheon, which manufactures the missile jointly with Lockheed Martin, admitted that while they were trying to increase production, stockpiles would not be replenished for at least a year due to parts shortages.1 This is not the first shock to the U.S. military supply chain in recent years. A report on the health of the defense industrial base through 2021 revealed that productive capacity and surge readiness had taken a big hit due to the COVID-19 pandemic.2 The combination of lockdowns and government stimulus caused demand to rebound faster than suppliers had anticipated. Then, cascading problems throughout the supply chain followed: shipping hubs became clogged, shortages in semiconductors occurred, and commodity prices skyrocketed. Now, with new lockdowns in China disrupting manufacturing and the war in Ukraine cutting off crucial natural resources such as titanium, neon, and wheat, these problems are only growing worse. The combined effect of spiking demand, new disruptions brought about by the COVID-19 pandemic, the conflict in Ukraine, and the sanctions on Russia, is a test case for the functionality of the U.S. defense supply chain.
The global balance of power is underwritten by U.S. military supremacy, which is in turn based on maintaining a very large and technologically advanced military that can, among other things, field overwhelming airpower. The advanced weapons systems that U.S. military might depends on in turn depend on wide-ranging and complex global supply chains. The high domestic political cost of losing U.S. soldiers abroad further reinforces the U.S. strategy of technological supremacy overwhelming opponents with minimum U.S. casualties. Whether or not the U.S. is able to ramp up production and supply during a crisis is thus a key factor that determines its ability to maintain the global balance of power. The U.S. military is not designed to fight wars without missiles, planes, and computers.
Intervention in conflicts like the one in Ukraine, or in future conflicts in Taiwan, the Korean peninsula, or Iran, will require vast increases in production of both basic goods such as prepackaged food and ammunition, as well as much more complex and advanced systems like missiles and smart munitions. Unlike Iraq and Afghanistan, where conventional warfare ended within months, these conflicts could drag on, as the war in Ukraine is, and involve large expenditures and losses in expensive materiel on both sides. Besides being inherently expensive for a technologically advanced military, such a situation would also necessitate higher production of more complex parts and the expansion of supply chains to source materials for them.
Fears about a globalized and fragile supply chain have been a main focus of U.S. government policymakers since the Trump administration started in 2017 and have continued under the Biden administration. Within his first six months in office, President Donald Trump commissioned a report about supply chain resilience and the defense industrial base.3 Two months into his presidency, President Joseph Biden made a similar move, but expanded the scope to include other non-defense agencies, many of which were unprepared for the pandemic.4 Both reports cited a need to develop domestic manufacturing capabilities and new methods of monitoring supply chains in order to keep the supply chain resilient, prevent sabotage, and preserve an American edge in innovation.
However, despite these general goals over the past five years, the strain of sending Javelin and Stinger missiles to Ukraine is forcing the U.S. to substitute other, more expensive weapon systems like howitzers as military aid, as well as delaying military aid shipments to allies such as Taiwan, who were expecting shipments of howitzers and Stinger missiles themselves.5 There are suggestions from members of Congress that the U.S. Department of Defense (DoD) should utilize the Defense Production Act (DPA), which would allow the government to compel companies to produce what was required and place government orders as a priority.6 Major logistical hurdles would nevertheless remain, including shortages of computer chips, which are likely only to worsen as the war in Ukraine drags on. About 50% of global neon production is sourced in the areas of Ukraine that have experienced some of the most bitter fighting, such as at the Azovstal steel plant in Mariupol.7 The noble gas is a key input to the computer chip fabrication process, necessary for creating a particular laser wavelength. Due to a lack of simple substitutes, a solution to the shortage will likely come from capital improvements adding neon capture to steel production in China and elsewhere.8 For modern weapons systems and munitions, computer chips are essential for navigation and targeting functions.
How resilient defense stockpiles are largely depends on future forecasting for demand and identifying potential supply chain vulnerabilities by the armed services and the Defense Logistics Agency (DLA), a support agency under the Defense Department. Until the war in Ukraine, worries about access to raw materials largely centered around being denied access to Chinese rare earth minerals and manufactured goods: between the two studies commissioned by Trump and Biden, China was mentioned 222 times, while Russia was mentioned only twice — once each time. Until the invasion, the relevant planners in the defense bureaucracy were not expecting, or perhaps even aware, that the U.S. may almost totally lose access to Russian and Ukrainian natural resources. Other vulnerabilities relate to specialized parts which have only one supplier or may even be out of production. This is not unrelated to raw material concerns, as without a reserve of material inputs the production of these parts may be insufficient to meet surge demand. This remains an issue in particular for Stinger missiles, which the DoD has not ordered for over 18 years. Raytheon is expecting that they will have to reverse engineer some parts which are no longer in production.9
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Originally published at the Bismarck Brief on June 15, 2022.
