Industrial Base Strength Necessary For Future DOD Success
by Nancy Benecki , Defense Logistics Agency
May 19, 2023

The defense industrial base is facing serious challenges, and now is the time to help those businesses before it is too late, a former deputy secretary of defense said at the Defense Logistics Agency Supply Chain Alliance Conference and Exhibition in Richmond, Virginia.

If demands and rules become too onerous, those businesses may decide to stop working with their government clients, said David Norquist, president and chief executive officer of the National Defense Industrial Association and the deputy secretary of defense from 2019 to 2021.

"Here's the bottom-line challenge we all face: If we get this wrong and we do too little, there is a vulnerable supply system that is compromised and weighed down when we need it," Norquist said.

The national security environment is changing and in turn shifting demands on the industrial base and supply chains, he said.

"It's not an understatement to say that getting logistics right is make-or-break. When I was the deputy secretary of defense, we had a lot of issues we worked on. When you looked at the challenges of the future, the logistics challenges in both peacetime and wartime were the key ones. And if you don't get them right, you can't execute our national security strategy," Norquist said.

The United States is seeing the return of great power competition and can no longer outpower its adversaries on size alone as it once did, he added.

"The United States was simply bigger than Nazi Germany, Imperial Japan and the Soviet Union. We had a larger economy, and we could show up late to the fight, producing volume and eventually getting around to victory; it would just take us a little while," he said.

China now has an economy similar to the U.S. and a larger population.

"We're not going to be able to do that there. And we don't possess the Chinese central planning network, so we're not going to beat them by trying to be better central planners and better communists than they are," he added.

Instead, the U.S. will have to rely on two strategic advantages, the first being its allies and partners.

"The United States has an amazing group of countries that it works alongside, either through formal alliance structures or informal partnerships in Canada, Japan, Korea and Australia. That combination is about half the world's [gross domestic product],"he said.

The second strategic advantage is the defense industrial base, so long as industry understands what the government wants and government understands what industry can do, Norquist said.

"If you have that communication and it's done right, those advantages will position the United States to be able to deter aggression or to prevail should a conflict be necessary," he said.

After World War II and the Cold War, the U.S. was left with no global rivals. That's when just-in-time delivery, lower marginal costs and fewer vendors were prioritized, which eventually made supply chains more fragile, he said.

Key industrial readiness indicators are going in the wrong direction, he added. In 1985, the U.S. had 3 million workers in the defense industry. That number is now 1.1 million workers and remains flat, Norquist said.

 He restated information about DLA's shrinking vendor base that DLA Director Navy Vice Adm. Michelle Skubic presented earlier that day. From 2016 to 2022, DLA lost about 22%, or 3,000 vendors, according to agency data. Small businesses accounted for 2,300 of those losses. Overall, the Department of Defense lost 43.1% of its small businesses in the same timeframe.

"That's not a step towards resilience; that's a warning signal," Norquist said.

Recent global situations have revealed other weaknesses.

"COVID has shown us how vulnerable the supply chains can be, and the Ukraine conflict has shown us how a high-intensity conflict between nation states is very different in its consumption of munitions and parts than counterterrorism operations," he said.

Communication between DOD and its industrial base is vital, he added, and should be easy since both share the objectives of mitigating business and operational risk.

"For national security, we need to protect against both disruption as well as tampering. But what makes a market so powerful is exactly what makes this challenge so hard," Norquist said.

NDIA is helping build the resiliency of the defense industrial base through several factors, he added. It holds forums for industry, government and academic entities to discuss issues. It also has divisions and chapters based by region and subject matter, and studies and educational programs to identify and advocate for improvements to strengthen national security.

U.S. Department of Defense

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