Why Supply Chain Disruptions Are a Growing Challenge in the Defense Industry and How To Overcome Them

In recent years, the defense industry has been grappling with an issue that doesn’t involve boots on the ground or advanced weapons systems. While those are certainly ongoing concerns, there’s another, quieter battle being fought—one in which the enemy is a disrupted supply chain.

If you’ve been keeping an eye on the industry, you already know this is becoming a serious issue, but why exactly is the defense supply chain so vulnerable right now? And more importantly, what can be done about it?

Let’s dig in by asking some common questions around the challenge of supply chain disruptions in defense, and then take a detailed look at how we can tackle it.

Why is the Defense Supply Chain So Complex?

First off, let’s talk about complexity. The defense supply chain is not like your everyday commercial supply chain. It’s not just about getting parts from point A to point B. It’s more like getting those parts from point A, point B, and point Z, while juggling national security concerns, regulations, and a web of subcontractors.

Here’s why it’s so complicated:

- **Multi-Tiered Suppliers**: You’ve got primary contractors and then layers upon layers of subcontractors. Each one has their own suppliers, who might also have their own. The deeper down you go, the more opaque it gets.
- **Long Production Cycles**: Tanks, aircraft, and missile defense systems take years to build. Components need to be sourced for decades-long programs, which means even a small hiccup in the early stages can have ripple effects for years.
- **Security Clearance and Compliance**: You can’t just source parts from anywhere. There are strict regulations around who can provide parts and materials to the defense industry. One wrong move and you’ve got a compliance nightmare on your hands.
- **Geopolitical Risks**: With defense supply chains stretching across the globe, you’re vulnerable to geopolitical unrest. If a supplier in another country faces instability, it could severely delay your programs.

Take, for instance, the F-35 program. The aircraft requires components from hundreds of suppliers across multiple countries. If even one of those suppliers faces issues—such as a factory closure due to a natural disaster or political instability—production can slow down or stop altogether.

Are Supply Chain Disruptions New to the Defense Industry?

No, disruptions aren’t new, but they’ve certainly become more frequent and severe. In the past, issues like natural disasters, labor strikes, or temporary shortages might have caused hiccups. Today, we’re dealing with far more complexity. Now, you have to factor in things like:

- **Cybersecurity Threats**: A cyberattack on even a seemingly insignificant supplier can halt production. Remember, defense companies are prime targets for hackers.
- **Pandemic Effects**: COVID-19 showed us just how fragile the supply chain can be. Factories closed, shipping routes were disrupted, and workforces were reduced, leading to major delays in production.
- **Global Semiconductor Shortage**: The ongoing shortage of semiconductors has affected everything from cars to missile guidance systems. Defense contractors are competing with the consumer electronics industry for these critical components, and that’s a race nobody wants to lose.

Consider the case of the Aegis Combat System, a complex naval weapon system. It relies heavily on electronic components, including semiconductors. With the global shortage, production of these systems has slowed significantly, delaying delivery and potentially affecting national security.

How Do Disruptions Impact National Security?

When the defense supply chain falters, it’s not just about delayed deliveries or unhappy contractors. It’s about national security. Here’s why:

- **Delayed Programs**: Disruptions can push back the delivery of critical military equipment, leaving warfighters without the tools they need.
- **Increased Costs**: When you have to scramble to find alternative suppliers or rush shipments, prices go up. The Pentagon is already working with tight budgets, and supply chain inefficiencies only exacerbate the issue.
- **Vulnerability to Adversaries**: If a potential adversary knows your supply chain is weak, they could exploit it. For example, a cyberattack on a key supplier could cripple production, giving them a strategic advantage.

In 2020, the Department of Defense (DoD) declared the supply chain for rare earth elements (REEs) a matter of national security. REEs are essential for producing everything from radar systems to fighter jets, and the majority of the world's supply comes from China. If there were to be tension between the U.S. and China, access to these critical materials could be severely restricted, putting U.S. military capabilities at risk.

What Can Be Done to Strengthen the Defense Supply Chain?

Okay, so we’ve established that supply chain disruptions are a big deal. Now, let’s talk about solutions. What can be done to reinforce the defense supply chain and make it more resilient? Spoiler alert: There