“BREAKING DEFENSE” By Jaspreet Gill
“While the larger defense industry may be unevenly bouncing back, they have mostly recovered, or at least adapted to the new normal where shortages of key items remain. One referred to the issues now as “whack-a-mole” rather than systemic.”
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“The COVID-19 pandemic exposed supply chain issues across the defense industrial base, affecting everything from missiles down to the microchips and software that direct them to their targets.
Top executives from several IT defense firms, whether in public or in interviews with Breaking Defense, suggest that they have mostly recovered, or at least adapted to the new normal where shortages of key items remain.
But experts said despite industry and US government alarm, not enough has been done to shore up IT supply chain vulnerabilities — weaknesses unlikely to have gone unnoticed by America’s adversaries.
Deborah Rosenblum, then-assistant secretary of defense for industrial base policy, said a year ago that the pandemic “revealed critical gaps in the US industrial base and an overreliance on foreign manufacturing … As such, supply chain resilience has become not just an economic priority — it’s not just about quality of life issues — it’s become a national security imperative.”
The Pentagon has tried to address these challenges in a number of ways, especially in the tech sector. So has Congress, with efforts like last July’s CHIPS and Science Act, which aimed in part at strengthening microelectronics supply chain resilience and reducing reliance on foreign nations.
But industry is still awaiting real outcomes from the CHIPS legislation, and questions remain on how the $2 billion allocated specifically for DoD microelectronics will be executed.
“It’d be premature to say that, yes, it’s already solved all of our problems,” Mark Lewis, CEO of the Purdue Applied Research Institute, told Breaking Defense. “The first impact you see, I think, is in everyone’s thinking. I mean, you see so much discussion now, ‘Okay, now that we have these resources, what can we do to onshore, to robust our supply chain.’ And I hear those conversations going on all the time.”
The pandemic gave DoD and industry a “wake up call,” Lewis said, but vulnerabilities remain across the board. And particular to the network and software sides of the department, those threats may be targeted from a potential competitor.
“Making sure our supply chains are robust against future disruption, either unintended or intended, is absolutely critical,” Lewis said.
A Recuperating Supply Chain
For the most part, company officials say they have figured out how to adjust to life after the pandemic. For instance, the president of L3’s Communication Systems division told Breaking Defense that the health of the supply chain is better than it was during the pandemic, but things still aren’t perfect.
“I joke [that] we’re going from systemic to whack-a-mole,” Samir Mehta said in May. “So we still have shortages pop up, we still have suppliers that pop up and say, hey, you know, we were gonna deliver you this at this time, and we can’t anymore, it’s been redirected or, you know, we had an issue with a sub-tier supplier. But a lot of the progress that has been made, it’s been made because we’ve invested heavily.”
Mehta said L3 has spent to produce replacement parts in house or finding alternative sources in order to help suppliers, which has helped. But keeping in touch with suppliers has been key for his team.
“So it’s all working together,” he said. “Like I said, there’s still challenges. And you know, I wake up every morning, that’s one of the first things I look for is to make sure we’re still on track, but I think it’s better than it has been certainly over the last few years.”
Amy Gilliand, president of General Dynamics Information Technology (GDIT), told Breaking Defense in June that the company did see disruptions in the supply chain, but that it has “adapted to what typical order timelines are.”
“I would say we’ve adjusted to it and so we’re not experiencing that now,” she said. “But it’s certainly a more prolonged procurement period. And so we have to make sure that our customers, if they want something delivered on X date, then we are definitely ordering it or sourcing it earlier than we would have in the past.”
General Dynamics Mission Systems (GDMS), on the other hand, has been hit harder, Phebe Novakovic, chairman and CEO of General Dynamics, said in May at the Bernstein Annual Strategic Decisions Conference.
“That has caused negative growth from decline in revenue for” GDMS she said. “We see the impact on us as largely behind us by the end of the year. Not that the supply chain is fixed, but we’ve been able to mitigate it through a whole series of actions that Mission Systems has taken quite effectively so that that impact will be behind us and they’ll continue to grow.
“You know that group as a whole has about $110 billion billion dollars of qualified pipeline, about $80 billion of that is GDIT and the remainder is Mission Systems,” she continued. “So there’s a nice, rich opportunity set here. The key is pursuing profitable growth. And that has always been our mantra.”
Over at Raytheon, company president Wes Kremer said it is starting to “see stabilization and a few positives” in the workforce, but there are still “constraints” around microelectronics. Kremer said when there are shortages it “ripples through” the rest of production.
“On the microelectronics, we’re cautiously optimistic, we keep hearing and as other companies have said that, in Q3, and Q4 of this year, we expect, you know, a significant uptick in availability of parts and the type of electronics that we use,” Kremer told Breaking Defense during last month’s Paris Air Show. “We’re seeing signs of that. Unfortunately, you actually need all the parts to build something, and so you’re only as good as, kind of, your weakest supplier.”
Creeping Concerns Over Future Threats
The pandemic exposed vulnerabilities that rippled America’s military engine, and it’s certain that potential adversaries, like China, have taken notice.
Shivaji Sengupta, an AFCEA International board member and founder and CEO of the NXTKey Corporation said that companies need to keep that in mind going forward.
“I think we will continue to face challenges from some of our adversaries who will continue to steal and probe, but I think one of the biggest challenges is that adversaries are going to start taking aggressive actions to disrupt the supply chain, which is the next level of aggression,” Sengupta said in June.
Lewis noted that non-traditional supply chains could be impacted in new ways going forward.
“I’ll give you a perfect example. As we move to additive manufacturing…[it] opens up amazing capabilities,” he said. “Think about the implications across the board, but especially for defense, if I can build components on site…instead of having to ship them, as just one example. That’s an amazing capability” which could be sabotaged by a clever competitor.
To that point, DoD and industry need to be “really careful” of adversaries messing with the digital files that go into those additive manufacturing systems, he said. For example, if an adversary is able to change specifications on parts being built to replace components on an airplane, and it goes undetected, it could “introduce significant disruption.”
But while the pandemic’s impact was primarily on a physical supply chain, Sengupta warned that the “digital supply chain” is an area companies aren’t paying enough attention to protecting.
“The first part is disrupting the physical availability, the next is stealing of intellectual property… actually messing with our intellectual property and digital supply chain, because everything today is…run by big data flows…and that’s one of the bigger aspects also which is going to be impacted,” he added. “So we have to ramp up to be able to meet that.”
Lewis is also convinced that protecting the non-physical supply chain, especially intellectual property, is a real challenge going forward.
If “you categorize across the board what some of our peer competitors have been doing, I often say they basically stole our homework,” Lewis said. “They looked across the board, it’s not just in IT. It’s in almost every category where they studied what we did, they examined our technology, in some cases they exfiltrated information using illegal means.
Thinking about future threats to the supply chain, physical or digital, is particularly critical as the US moves into new technologies that may not have a real supply chain built yet. Lewis pointed to hypersonics as an example.
“At present we’re building handfuls of systems that are mostly in demonstration mode, but the department has plans in place to move to hundreds and ultimately thousands of high speed weapons,” Lewis said. “So we actually need to be putting those supply chains into place now and make sure that they are robust against disruption. You know, a hypersonic system requires microelectronics, as one example. It requires high temperature materials. Those high temperature materials in some cases depend on rare earth elements, so making sure all that is in place before we get to large scale production, I think is going to be absolutely critical.”
A report from the National Defense Industrial Association’s Emerging Technologies Institute, which was formerly led by Lewis, highlighted risks faced by the hypersonics supply chain and provided recommendations to DoD and industry.
“Given the clear emphasis the CCP has placed on emerging technologies, including hypersonics, and their long history of stealing intellectual property in order to build up their own programs, every level of the U.S. hypersonics supply chains is vulnerable,” according to the report.
The recommendations in the report included DoD creating a “bug bounty” program for contractors working on hypersonics, industry more thoroughly vetting employees and the government continuing to fund programs that track IP theft across all emerging technology supply chains.”
https://breakingdefense.com/2023/07/it-defense-industry-has-adapted-to-post-covid-supply-chain-but-future-challenges-loom/
ABOUT THE AUTHOR:
Jaspreet Gill covers defense networks, C4ISR and emerging technologies for Breaking Defense. She previously worked as the senior technology reporter and an associate editor for Inside Defense, where she reported on emerging technologies, cybersecurity and the US Army, focusing on the service’s modernization priorities and acquisition programs. Jaspreet, an upstate New York native, is an alumna of Syracuse University’s renown S.I. Newhouse School of Public Communications, where she received a master’s degree in journalism.
Aaron Mehta in Washington contributed to this report.
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