The modern battlefield faces an unsustainable cycle; product consumption rates of less than a year considerably outpace established production timelines of five or six years, with no extra inventory waiting to replace them. That kind of pace of consumption in Ukraine has made it clear we cannot do business as usual, given other looming conflicts. The defense industry is confronting supply chain shortages and a shrinking number of suppliers, even as demand for our products increases. But there are steps we can take now to start rebuilding resiliency and capacity.
How we update our operations must be precise and scientific—starting with understanding how the procurement and production system works. Raytheon has invested in analytics tools to assess what and when people are buying by leveraging open-source information on government contracts. The result is a fuller understanding of the supply and demand side of the equation, with an eye to which suppliers are critical to the full industrial network—and to national security.
Visualizing our industrial base allows us to easily identify common suppliers across programs and determine where additional suppliers are needed to reduce risk. Data analytics also help identify vulnerabilities and potential disruptions likely to affect program execution. We can avoid potential problems by planning for specific impacts of a power failure or a cybersecurity threat. From there, we can find alternatives, provide accelerated funding or deploy our logistics experts to help companies recover more quickly from disruption.
These proposed solutions don’t just help Raytheon or another company. Looking into the data, it becomes clear how interconnected the U.S. defense industry is, and while our sourcing strategies are resilient, very few redundancies exist to protect the industrial base from a shock.
There are some critical products where only a handful of companies are responsible for supplying the whole industry. We need greater diversity and more options to manage increasing loads and mitigate the potential effect of a single supplier, which many companies may rely on, going down.
Traditionally, we have relied on the same sources year after year, but we are working to establish dual sourcing. On a day-to-day basis, additional sources also ensure a competitive market and the best value for our customers. Given global power dynamics, international demand for defense systems is significant and growing. We are partnering with companies overseas to develop local sources that allow us to avoid inefficiencies from shipping incomplete products and parts back and forth. This also relieves pressure on the U.S. supply base so that we can grow domestic capacity.
One innovative solution is embedding Raytheon employees directly within our suppliers. These employees navigate the information flow between the two companies, allowing suppliers to operate and fulfill orders more efficiently.
We can do more to increase transparency and communication, and we’re working to provide suppliers with forecasts and early demand indications from our customers. In some cases, we’re securing capacity and long-lead raw materials before a contract award so we can quickly start production.
We’re grateful to work with customers that understand the need to try something new, including leveraging recently enacted legislative authorities for multiyear procurements of high-demand military systems. Such deals stabilize the industrial base with predictable annual procurements, encourage industry investment and deliver incremental savings.
We also need to look at our internal capacity to ensure we can handle greater final assembly volume in the U.S. To this end, we’re increasing classified staffing and expanding our facilities, and hiring, training and retaining people better.
We will need help to bring about the scale of change necessary. This phase shift must be an industry-wide effort to shore up our domestic supply base and ensure every project has the resources it needs to move forward—without diverting them from elsewhere. The longer we wait to start doing things differently, the harder the task of deterring conflict and defending the U.S. and its allies will be. The resiliency of the industrial base won’t change until we do.
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