May 23, 2024 | The Cipher Brief

The Military’s Supply Chain Problem

May 23, 2024 | The Cipher Brief

The Military’s Supply Chain Problem

American consumers love next-day shipping. Today, U.S. consumers can order nearly anything and have it delivered to their doors within hours. This expectation extends beyond consumer goods to U.S. military logistics. For decades, the U.S. armed forces have been able to send anything from tanks to toilet paper around the world in hours despite shrinking the number of parts maintained in storage facilities. During the Cold War, this supply-chain efficiency was powered by American manufacturing. However, since the end of the Cold War, the industrial manufacturing ability that fostered this on-demand system has gradually moved to the People’s Republic of China. 

The American public and policy makers were largely comfortable with this transition, as it drove down costs for consumer goods and military components alike. But this transition came with a hidden cost. The Chinese Communist Party (CCP) under Chairman Xi, now a direct U.S. competitor, has indicated its willingness to weaponize this industrial capacity for political advantage.  

China’s position as a manufacturing powerhouse has given it leverage over global supply chains, a fact that became painfully clear during the COVID-19 pandemic. For instance, when the U.S. needed personal protective equipment, which was largely produced in China, the CCP imposed export restrictions, manipulating access to crucial resources during a global health crisis. In 2023, the CCP imposed restrictions on sales of rare earth elements, which are critical raw materials for electronics, to the United States. Allies such as Japan, Australia, and South Korea have received worse treatment when displeasing Beijing.

This dependence is acutely problematic for military readiness and capabilities. The conflict in Ukraine has increased U.S. defense material production. However, the endeavor has laid bare the erosion of U.S. domestic manufacturing. Many essentials for military hardware and munitions, from gunpowder to radar systems, are reliant on Chinese production lines. This is particularly concerning as the CCP has stepped up its provocative military activity around Taiwan and in the South China Sea. The possibility of the CCP starving the U.S. military’s supply chain to dissuade Washington from interfering is a distinct possibility. America’s just-in-time supply chain has become a weapon for its primary adversary.  

Making matters worse, the U.S. military has no ability to understand the scope of its dependence. The U.S. Congress has targeted these vulnerabilities through legislation with provisions in the annual National Defense Authorization Act (NDAA). For example, Section 889 of the 2019 NDAA directed the elimination of Chinese-origin telecommunications and information technology equipment in U.S. military systems, known as 889 restrictions. The 2021 NDAA created the 1260H list of PRC-domiciled companies supporting the Chinese military. While these actions are steps in the right direction, they lack a comprehensive approach to address the full extent of the DoD’s reliance on PRC manufacturing. 

Wanted: A strategy 

A broad supply chain strategy must begin with an in-depth examination of the current dependencies across the entire spectrum of military procurement. This includes not just major weapons systems but also the vast array of components and materials that support military operations. Modern commercial technologies now enable an unprecedented level of supply chain visibility, allowing for the tracing of a product’s journey from the point of manufacture to its final assembly.  

Legislation such as the Uyghur Forced Labor Act of 2021, which prohibits the import of goods manufactured in China’s Xinjiang region using forced labor, has already forced major companies — from apparel manufacturers like Lululemon to automotive giants like Volkswagen — to scrutinize their supply chains. This act shows the feasibility and effectiveness of legislative action in compelling supply chain transparency. The military, guided by Congress, should apply similar scrutiny to its procurement processes to ensure that dependencies on potentially hostile nations are minimized. 

Furthermore, establishing common standards to evaluate and mitigate risks associated with foreign-sourced materials is essential. Different systems, such as batteries, drones, or rare earth elements, pose varying types of risk, and the DoD must define what constitutes an unacceptable risk and strategize accordingly. Solutions might range from developing alternative supply sources to stockpiling critical materials. The 2019 NDAA required DoD to develop and maintain a list of acquisition programs, technologies, manufacturing capabilities, and research areas that are critical for preserving U.S. national security advantages. This list must now be operationalized to identify vulnerabilities in our supply chains so that a prioritized to-do list can be generated to protect them.  

The changing geopolitics of supply chain management has transformed what was once a logistical marvel — a rapid global supply system — into a strategic vulnerability. Recent events — the COVID-19 pandemic, the conflict in Ukraine, and rising tensions in the Taiwan Strait — have all underscored the necessity of a supply chain that is not only efficient but also resilient and secure against foreign manipulation. It is imperative that Washington learn from these experiences. Congress must assist the executive branch to address vulnerabilities comprehensively, allocate the necessary resources toward the most pressing issues, and fortify our national supply chains against future threats.

Rear Adm. (Ret.) Mark Montgomery is a senior director at the Center on Cyber and Technology Innovation (CCTI) at the Foundation for Defense of Democracies. Isaac “Ike” Harris, CDR USN (Ret.), is an adjunct fellow at the Center on Cyber and Technology Innovation (CCTI) at the Foundation for Defense of Democracies.

Issues:

China Military and Political Power U.S. Defense Policy and Strategy Ukraine