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Diminishing Manufacturing and Material Shortages: U.S. Industrial Base in Peril


9 The most important commodities restricted by the law are specialty metals, which include steel. [...] almost every component of a weapon system must be purchased from a U.S. manufacturer. According to the FairTax white paper: Nations around the world have scrapped their antiquated tax codes (i.e., codes like ours) in favor of newer, streamUned systems that help them compete globaUy while ensuring that their governments coUect adequate revenues.

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									  Diminishing Manufacturing and Material

                                                                                                                                          ROA NAtiONAl SecuRity RepORt
  Shortages: U.S. Industrial Base in Peril
  By Col Michael J. Cole, USAFR               budget for possible savings.2 As 2008      to spare. The unfortunate aspects of

                                              ended, the Institute for Supply Man-       DMSMS are that no U.S. agency is
           he defense of our country is in    agement reported that manufacturing        responsible for managing industrial
           a perilous state. The message      activity in the United States reached      policy as it relates to national defense,
           of the few who are aware of        its lowest level in 28 years.3 With this   and the loss of the industrial base is a
  the problem is not reaching the key         unending series of bad economic news,      self-inflicted wound created ultimately
  government decision-makers. Due to          the time has come to address diminish-     by corporate tax laws that encourage
  skyrocketing acquisition and sustain-       ing manufacturing sources and material     offshore manufacturing.
  ment costs, the U.S. defense budget is      shortages (DMSMS) and their strategic          Offshore manufacturing caused
  in severe trouble.                          effect on the sustainment of weapons       serious howls of disgust in 2008 during
      One experienced Department of           systems.                                   the ill-fated Northrop Grumman KC-X
  Defense (DoD) researcher, John Chris-           DoD defines DMSMS as “the loss         tanker award as it became a national
  tie, warns that costs to acquire and        or impending loss of manufacturers of      issue,5 but the practice has been perva-
  sustain equipment are growing at much       items or suppliers of items or raw mate-   sive for decades.6 As companies moved
  faster rates than the budget can ever       rials [that] may cause material short-     their manufacturing operations overseas
  grow, and that “if these historic trends    ages that endanger a weapon system’s or    and shuttered plants, the United
  are not addressed, the U.S. military will   equipment’s development, production,       States lost its manufacturing capacity,
  cease being a significant influence in      or post-production support capabil-        commonly referred to as its “industrial
  world events because of shrinking force     ity.”4 DMSMS has many other associ-        base,” and its manufacturing expertise.
  structure.”1                                ated terms, such as “obsolescence,”        Closed factories can be re-opened, but
      One can hardly open a defense pub-      which, in essence, means the non-avail-    once the knowledge base is gone, it
  lication without reading that the eco-      ability of a part or commodity used in     takes a long time to re-develop. Even
  nomic difficulties of 2008 are forcing      a weapon system that results from the      Boeing has acknowledged losing ex-
  the DoD to evaluate every area of the       source company going out of busi-          pertise, “yet it willingly and proactively
                                              ness or simply choosing not to make        outsources American jobs and engineer-
     This report is a publication of          the part anymore. When the original        ing to overseas companies.”7
                                              source of a component goes away, solu-         “In many cases, the United States
     the Defense Education Forum of           tions include reverse-engineering the      is already unable to manufacture the
     the Reserve Officers Association         component or redesigning the system        equipment and technology used to
     and is intended to advance               to do without it, both costly undertak-    fight and win the nation’s wars. This
     discussion and scholarship of            ings that have a negative impact on an     situation is not documented. It is not
     national security issues. The            already stretched defense budget.          monitored,” says Dr. Sheila Ronis,
                                                  The main cause of DMSMS is the         president of University Group Inc., a
     views expressed in this report are       erosion of the industrial base. Yet        management consulting firm special-
     solely those of the author and not       DMSMS is no ordinary budget prob-          izing in national security and public
     necessarily those of ROA.                lem that can be solved by an infusion      policy.8 Find the root causes of the
                                              of money, even if there were money         disappearing industrial base, and one

WWW.ROA.ORG                                                                                           the   Officer / SEPTEMBER 2009 53
                                    can take measures to counter them.            nomic and Security Review Commis-             grams may benefit from the solution
                                    One obvious culprit is cost. Sadly, it is     sion to study the strategic implications      and for performing “resolution cost-
                                    simply cheaper in almost all cases to         of doing business with China. The July        trade-off studies” when evaluating solu-
                                    make products in China and ship them          2006 hearing on China’s effect on the         tions for non-available parts.15 These
                                    to the United States than to make them        auto industry revealed some startling         recommendations, while useful, attack
                                    here.                                         findings:                                     DMSMS at the program manager level.
                                        In 1941, Congress passed the Berry        •	 As many of the Army’s traditional          For a meaningful, long-term solution,
                                    Amendment requiring DoD to give                     suppliers go out of business, it is     Congress must enact strategic legisla-
                                    preference to domestic manufactur-                  becoming more difficult to locate       tion, because DMSMS is a strategic
ROA NAtiONAl SecuRity RepORt

                                    ers for procurement. The intent of           
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