Amid concerns that large shipments of U.S. weapon systems and munitions to Ukraine are beginning to deplete Defense Department inventories, defense industry officials this week said that they can surge their capacity to build weapons more quickly with more advance planning and investments in long-lead materials.
It typically takes 24 to 30 months to increase capacity but if DoD advances funding for long-lead materials it could get industry to surge capacity in 12 to 18 months, Frank St. John, chief operating officer for Lockheed Martin [LMT], said at an event this week hosted by the Center for Strategic and International Studies.
Russia’s invasion of Ukraine was “telegraphed months” if not two years before it happened, he said, adding that “should translate to leadership in a broad sense that something needs to happen,” Gordon Stein, vice president of U.S. Operations for General Dynamics’ [GD] Land Systems division, said at the CSIS event that addressed challenges to the defense industrial base.
Stein agreed that it’s less a capacity issue than it is providing the “analytics and early demand signals” and making the long-lead investments to be able to produce things more quickly. He also said that the typical peaks and valleys that define defense spending over time that makes it difficult for the industrial base to plan.
There needs to be “some analytics” around finding the “equilibrium point” in defense spending, Stein said.
The industry has also modernized its facilities, giving it the ability to produce faster and more affordably, Stein said.
The supply chain has become “fragile” over the years through lean business initiatives, disaggregation and globalization all aimed at reducing costs, St. John said. To become “more resilient” will require investment into the supply chain for long-lead materials, he said.
“There’s tooling, there’s test equipment that that flows through all the levels of the supply chain and to the extent that we can get ahead of some of that and prepay long lead elements of the supply chain,” St. John said.
Where risks and reward balance out, the industry does have buffer stocks through the supply base but it takes working with customers on the “demand signals” to avoid “just putting inventory on the shelf,” Stein said.
Multi-year contracts provide another means to boost capacity, St. John said. When Lockheed Martin had a four-year agreement to make Hellfire missiles, the company and its suppliers “made significant investments” knowing they would recover their costs, doubling “capacity in the supply chain and in the factory,” he said.
Amy Gowder, president and CEO of military systems at General Electric’s [GE] Aviation segment, said additional factors also complicate the ability to surge capacity, highlighting the international dimension of the war in Ukraine.
“NATO and our allies are certainly facing the same need to ramp up capacity, have resiliency in their own supply base and capability,” she said. “As we look at some of the export laws and the movement of assets within the NATO region, that can become very cumbersome and it can frankly inhibit and create long delays in the supply chain and it makes [it] challenging for us to partner with the NATO industry because it just adds more complication.”
Gowder also said that Congress can improve funding stability for the supply chain by passing budgets on time rather than using continuing resolutions to keep the government functioning at the start of every fiscal year. The government can start new programs under a continuing resolution, creating “instability,” she said.