The U.S. Industrial Base Is Not Prepared for a Possible Conflict with China
The U.S. Industrial Base Is Not Prepared for a Possible Conflict with China
To deter a potential conflict with China, the United States must act quickly to resolve key challenges in its industrial base.
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The Need for Predictable Orders
Defense companies are generally unwilling to take financial risks without contracts—including multiyear contracts—in place.
It is not a sound business decision to build more munitions or weapons systems without a clear demand signal and financial commitments. This risk aversion is compounded if companies make additional capital investments—especially investments for facilities, infrastructure, and tooling.
As one DoD study concluded:
“Producers benefited from steady or predictable orders, so the DoD’s inconsistent procurement and concurrent production ramps (both increases and decreases) exacerbate the challenges suppliers face across the [defense industrial base].”
I guess, we'll really have to worry when the DoD starts putting in 5-year contracts in place.
Edit:
Consequently, it is important to buy munitions smarter to take advantage of scale and market power. Examples include advanced procurement, multiyear procurement, and economic order quantity processes.
Capitalism is so efficient it even creates just-in-time manufacturing for its armies! What could go wrong?