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Page 6 1 Introduction Owing to the expected nature of combat in 2010, U.S. military forces face a pressing need to transform themselves for rapid response to an unpredictable threat. Since DOD cannot be equipped for all contingencies, a necessary part of the transformation strategy will be an industrial base capable of satisfying the following needs: Flexible, fast response to military requirements for technological superiority given the situation at hand and Rapid replenishment of military consumables essential to readiness and sustainability. Today's defense acquisition system and industrial base processes impose unacceptable delays in meeting both needs. By contrast, the global commercial industrial base thrives on rapid introduction of new technologies and on fast, flexible supply chains. Rapid advances in commercial technology (particularly in electronics), coupled with the easy access to commercial technology enjoyed by potential adversaries, will compel DOD and defense contractors to excel at integrating commercial technology into defense systems. In many instances, this will require specifying and acquiring military variants of commercial components and subsystems produced on the same lines (or at least in the same ways) as commercial products. This integration of commercial and military manufacturing (ICMM) has begun on a small scale. By 2010, it needs to increase substantially if U.S. forces are to retain a technological edge.
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Page 7 Box 1-1 Statement of Task The overall objective of this study is to assess the opportunities for increased integration of commercial and military manufacturing in 2010 and beyond. Specific tasks are outlined below: Identify advances in commercial technology (e.g., flexible tooling, flexible manufacturing, and agile manufacturing) and best practices that will present opportunities for increasing the use of commercial enterprises in the manufacture of defense products in the next decade. Identify technology areas where rapid commercial advances in the next decade could be leveraged to improve military applications (e.g., computing, telecommunications, and biomedical technologies). Identify major weapons systems suitable for production by commercial enterprises in the next decade. Identify barriers limiting integration of commercial and military manufacturing (e.g., availability of spare parts, commercial willingness to produce defense products, design and tooling compatibility, and security issues) and methods for overcoming these barriers. Recommend strategies for optimizing the integration of commercial and military manufacturing in the next decade (e.g., developing the processes and technologies needed to increase the production of military products by commercial enterprises), including specific recommendations for DOD's Manufacturing Technology (ManTech) Program. STATEMENT OF TASK This NRC report was requested by the DOD Joint Defense Manufacturing Technology Panel. Its objectives were to assess the opportunities for increased ICMM in 2010 and beyond, identify barriers, and recommend strategies for overcoming them. Specific tasks are shown in Box 1-1. STUDY METHODOLOGY The NRC Board on Manufacturing and Engineering Design appointed a study committee with backgrounds in defense manufacturing processes and operations, weapons system design, industrial engineering, and commercial manufacturing processes and operations (see Appendix A for biographical sketches of the committee members). In the course of its deliberations, the committee heard briefings from DOD personnel who participate in demonstrations of ICMM, DOD acquisition managers and policy makers, and representatives of commercial firms that successfully integrate military and commercial business. Briefings to the committee are listed in Appendix B.
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Page 8 The committee also reviewed numerous earlier reports on ICMM and decided to rely on these reports and briefings rather than create new case data on the current state of ICMM. Chapter 3 of this report summarizes examples of successful ICMM experiences and benefits. Chapter 4 identifies barriers to ICMM, many of which were identified in the earlier studies, which often recommended policy changes to deal with these barriers. Many of these policy changes were made in the course of acquisition reforms over the past 10 years. Appendix C summarizes the earlier studies, their recommendations, and policy changes. Appendix D lists the acronyms and abbreviations used in this study. In the view of the committee, the current barriers to ICMM call not for more policy changes but rather for policy implementation, incentives, and culture change. These are the focus for recommendations in Chapter 7 of this report. DEFINITION AND SCOPE For the purpose of this study, the integration of commercial and military manufacturing (ICMM) means optimal use of the commercial production base to meet defense needs over the system life cycle. Integration is used to mean a complementary combination of commercial and military capabilities in manufacturing supply chains or within a manufacturing facility. Commercial implies a manufacturing base whose business goals, technical capabilities, and business practices are driven by commercial markets rather than government acquisition practices. Military implies both defense-unique capabilities unavailable in the commercial sector that must be maintained and defense-specific capabilities that may or may not be defense-unique. Manufacturing is used in the broad sense of a complete manufacturing enterprise, including design, fabrication, and support activities at all tiers in the supply chain. ICMM is not limited to the procurement of commercial off-the-shelf (COTS) end items for defense use. Such a narrow view would miss the broad range of opportunities for commercial sourcing of components and subsystems that can be integrated into higher-level systems by defense prime contractors. The opportunities include both COTS components and defense-unique parts and subsystems built on commercial or dual-use (producing both military and commercial products) lines. Because straightforward procurement of COTS end items is improving in the defense procurement system, this study focuses on the more complicated issues involved in dual-use manufacturing and in COTS insertion in weapon systems.
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Page 9 To do business with leading commercial firms, DOD and defense contractors will need to understand and implement the best commercial practices. These practices include (1) integrated product and process development, (2) commercial design, production planning, and decision processes, and (3) assuring that manufacturing processes and technologies are proven before entering production. These practices are critical to assuring that defense components and subsystems can be manufactured in commercial facilities, and they must be adopted completely, not piecemeal, and with total commitment. Reliance on commercial business practices rather than on government acquisition regulations is essential. DOD should use defense-specific manufacturing only when it results in unique capabilities that cannot be found or developed in the commercial sector. Primarily because of the large and increasing importance of systems integration, there will be little opportunity for major weapons systems to be produced as a whole by commercial enterprises over the next decade. The committee expects the greatest impact of ICMM to be on subsystems and components. Global Sourcing Global sourcing is an increasingly important part of modern commercial manufacturing, but the committee considered it to be beyond the scope of this study. The full military implications of global sourcing of components and subsystems are difficult to assess. In areas where national security risks are introduced by dependence on foreign sources, defense manufacturing may need mitigation strategies beyond those adopted by commercial manufacturers. The military faced this issue before for commercial integrated circuits and solved it by building up parts inventories to prevent military shortages. However, as ICMM graduates from individual components toward higher-level assemblies from commercial lines, inventory costs like this might wipe out the savings from ICMM (the committee has not done the economic modeling to come to a definite conclusion). Additional strategies will be needed to address this issue. Protection may also be needed to prevent unauthorized design features that can act as trapdoors or Trojan horses, although this can be an issue with domestic sources as well, even defense-specific sources. In light of the complexity of these issues, the implications of foreign sourcing might be an appropriate topic for a separate study. However, the fundamental findings and recommendations for increasing ICMM presented here are appropriate regardless of decisions related to global sourcing.
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