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It’s Time to Revisit the ‘Arsenal of Democracy.’ Including Smaller Manufacturers Is Key.

Feb. 21, 2024
How can the U.S. best surge its industrial production capacity with the Industry 4.0 divide between haves and have nots?

The war in Ukraine has changed Western military doctrine. This is noteworthy as the Department of Defense embraces phrases like “near-peer competition,” “pacing challenge” and “great power competition” as a way to address growing concerns about the actions of China and Russia. Unfortunately, the stark reality is the U.S. and its Western allies have not shifted away fast enough from decades of focus on regional conflicts and counterterrorism operations. Like our pre-World War II forefathers, we are now scrambling to prepare for the real potential of a protracted global conflict.

Since the end of the Cold War, many Western powers have reduced their standing military personnel, paused or stopped their conscript services, and reduced munition stockpiles as well as defense manufacturing capacity. These major decisions are not easily reversible even with the necessary political will. A startling example of this can be seen in the 40% decline in the past decade of U.S. small manufacturers engaged in defense work.

‘Arsenal of Democracy:’ a History

It wasn’t always this way. At the beginning of World War II, with Axis troops attacking Britian after conquering parts of Poland, France, and China, the U.S. faced a growing national security threat. In his December 1940 radio speech to the nation, U.S. President Franklin D. Roosevelt coined the term “arsenal of democracy.” The term focuses on the ability to ramp up production of essential and critical supplies in times of need. At first, the need referred to support for Allied forces fighting in the European theatre. Later, after the U.S. entered the war in 1941, it included supplying U.S. military operations with everything they needed.

Bill Knudsen, an automotive executive President Roosevelt appointed as a three-star general, was charged with planning and orchestrating the ramp-up and sustainment of elevated production of munition, armor, airplanes, warships, etc. His background in the automotive industry equipped him with the experience, vision and ability to lead U.S. manufacturing to answer the call. Historians agree that the United States’ ability to outproduce the Axis forces and surge its industrial production capacity was key to winning the war.

A Downshift in Production Capacity

Society, industry, technology and the way business is done have changed significantly since the 1940s. Former industrial powerhouses like Pittsburgh, Detroit, Buffalo, Cleveland, and many others have lost much of their prior industrial production capacity of essential goods.

While the U.S. is still a global technology leader, there has been a shift from leadership in machine tools toward leadership in services and software. Globalization led to outsourcing and offshoring of production and a deep integration of manufacturing supply chains across the globe. As a result, major Western powers including the U.S. have reduced their production capacity of steel and other essential goods. Today, the U.S. would be hard-pressed to produce the approximately 60,000 tons of steel required for a modern aircraft carrier, such as the USS Gerald R. Ford, entirely on U.S. soil.

As a proxy metric of the decline in US production capacity, the example of U.S. metal-casting capacity shows that from 6,150 foundries operating in 1955 only 1,750 are producing today.

While one might argue technology and supply chain advancements led to more productive, larger facilities, thus increasing the overall output, statistics show a peak of production volume during the last century. Overall output of steel castings dropped from about 2 million tons in 1974 to about 1.2 million tons in 2016.

The United States has now fallen to third place in global metal casting volume, behind China and India. In parallel, the infrastructure in the U.S. and allied economies to mass produce systems declined significantly. For instance, Germany's capacity to produce its main battle tanks, Leopard 2s, declined from approximately 25 per month during the Cold War to about 4 per month today. And ramping up in time of need proves difficult. 

Building a Robust Defense Supply Chain

Now, this is hardly surprising and has been a matter of concern for decades. However, since the recent pandemic, supply chain challenges and calls for reshoring essential production, including semi-conductors and pharmaceuticals, are much more common (and rightly so). We learned the hard way that most products today involve global components sourced through complex and fragile supply networks.

Global competition, complex product systems resembling a combination of hardware and software and rapidly advancing technology have led to highly efficient, lean processes and companies focused on core competencies and value-adding processes.

In contrast to the 1940s surge of production to prepare the arsenal of democracy, today we face different challenges but also new capabilities at our disposal. Industry 4.0’s vision is to allow for customized production with similar efficiency and economies of scale as mass-produced parts.

This vision aligns well with requirements of most defense applications. The question arises whether smart manufacturing technologies and Industry 4.0 can resurrect the arsenal of democracy.

In the end, three fundamental challenges must be addressed:

1. Lack of availability and access to a skilled manufacturing workforce

2. Lack of diversity of the defense industrial base to ensure a more robust and resilient supply chain

3. The complexity and inaccessibility of smart manufacturing technologies in the defense context.

What are the steps to addressing these challenges? The key is to support small- and medium-sized manufacturers across the nation, representing more than 98% of all manufacturing businesses. They are the backbone of the manufacturing industry but have limited resources.

The good news is, there are already many promising initiatives underway to make a career in manufacturing more attractive to a diverse pool of candidates.

Upskilling is one of the major areas where manufacturing can build on existing strength. Providing approachable and targeted tools, such as micro-credentials and certifications, is crucial for small-and medium manufacturers and their workforce to be effective. Onboarding this demographic is key, as small- and medium-sized manufacturers represent the majority of industrial capacity after all but are often resource-constrained. Furthermore, today we have the ability to surge output with automation.

As for the second challenge, the DoD is actively engaged in diversifying its defense industrial base to include and empower small- and medium-sized manufacturers across the country and industries. However, there are a variety of barriers preventing smaller companies from engaging in defense supply chains. While some are rooted in policy, other barriers can be more easily overcome—such as the inability to efficiently and effectively search for manufacturing capabilities and capacities among small- and medium-sized manufacturers for future defense contracts. We must develop the technological means to derive identifiable and reliable metrics that allow efficient matching to requirements of sourced parts and products.

The third challenge—the complexity surrounding adoption and implementation of smart manufacturing technologies for small- and medium manufacturers in a defense setting—is difficult to address.

Today, defense suppliers face increasing demands on cybersecurity and export control. This is justified and a crucial capability moving forward. However, currently, it is prohibitive for many small- and medium manufacturers to meet these demands, especially if they are new to defense supply networks.

We must work towards making the implementation and use of cybersecure infrastructure and other requirements easier and less resource-intensive while maintaining or improving its effectiveness further. That sounds like an impossible task, yet, technologies such as blockchain offer new ways of trustless infrastructure that show promise in providing the required security without requiring extensive resources and taking on substantial risk.

Partnering small- and medium-sized manufacturers with larger defense contractors who have the capacity and capability to manage a decentralized data network can kickstart a more diverse and resilient defense manufacturing supply network.

Ultimately, the arsenal of democracy must embrace Industry 4.0 to deliver in the 21st century.

Dr. Thorsten ‘Thor’ Wuest is an Associate Professor at West Virginia University, Research Advisor of The Knudsen Institute for Applied Research on Surge Theory, former Officer of the German Federal Armed Forces, and co-author of Digital Supply Networks: Transform Your Supply Chain and Gain Competitive Advantage with Disruptive Technology and Reimagined Processes”.

Michael Morford is the Chairman & CEO of The Knudsen Institute; a founding board member for the Oklahoma Defense Industry Association (ODIA); and a decorated former Captain in the U.S. Army and veteran of the Iraqi War, where he was a theater logistics officer.

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