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1 THE COMPETITION FOR MANUFACTURING SUPREMACY
This nation's defense is threatened by a weakening
industrial base. The current problems of weapons with
uneven quality and reliability, long delivery cycles,
dependence on foreign suppliers for critical components,
and, most visibly, high costs are all symptoms of
the deteriorating manufacturing capabilities of U.S.
suppliers.
In attempting to meet the demanding and increasingly
sophisticated performance requirements of weapon systems,
the country is spending more and producing less. The
Department of Defense (DOD) has sought innovation in the
design and performance of weapon systems while largely
ignoring the production processes needed to make those
systems. As a result, obsolete manufacturing processes
are being used to build ever more sophisticated weapon
systems, leading to sharply rising costs of weapon
systems, shrinking numbers of units affordable to DOD,
and unreliable performance of those that are acquired.
More serious has been the declining competitive
strength of the defense industrial base. The steel,
machine tool, and shipbuilding industries--all essential
to winning World War II--have severely declined in the
face of the current global economic competition. Further.
the United States is gradually losing its competitive edge
in other industries that are currently vital to defense.
Even high-technology industries such as electronics,
semiconductors, and aerospace are challenged. Unless
the defense industrial base renews its focus on innovation
in manufacturing processes and equipment, more industries
will fall further behind in the competition for manufac-
turing supremacy.
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Representative terms from entire chapter:
manufacturing technology
THE ROLE OF DOD IN THAT COMPETITION
The defense industrial base ranges across a broad
spectrum of industries, and comprises approximately ~O,OOO
prime contractors and 100,000 vendors and suppliers.
While the entire U.S. industrial base--including producers
of commercial as well as defense products--faces many
common manufacturing problems, this report focuses on the
segment that manufactures materiel purchased by DOD.
The Department of Defense has a critical need and
responsibility to address the manufacturing technology
problems that arise within the defense industrial base.
DOD can spur major improvements in the health and perfor-
mance of industry by investing in longer-range, high-
risk,3 innovative projects that, if successful, would
yield major advances in manufacturing technology in areas
of strategic importance.
Neither DOD nor defense contractors have been investing
adeq4ately in manufacturing process and equipment technol-
ogy. The defense industrial base lacks incentives for
such investment under current procurement procedures, and
many federal policymakers concerned with defense do not
recognize the need to invest in advanced manufacturing
technology. Without adequate manufacturing processes,
even skilled and motivated workers and managers can
neither turn out high-quality products nor meet demanding
schedules.
The importance of production technology becomes clear
during wartime, when the objective is to produce the
largest number of acceptable quality weapons as quickly
as possible. During peacetime, the value of production
technology has been less obvious. Even in peacetime,
however, the United States needs to get significantly
greater value for its defense expenditures. Leading-edge
manufacturing technology offers an opportunity to improve
the availability, affordability, and performance of weapon
systems.
THE NEED FOR THE MANTECH PROGRAM
Within DOD, the Manufacturing Technology
6
The committee's phase I reports argued that research
and development in manufacturing equipment and process
technology are vital to the welfare of the nation.
Further, because government procurement policies and
regulations have disincentives that deter contractors
from investing in developing innovative manufacturing
technology, DOD needs to take an active role to promote
the development of manufacturing technology for weapon
systems. The report also recommended that DOD directly
fund manufacturing technology development, via the ManTech
program, in areas that:
· can solve generic problems,
· require long lead times,
· have the potential for substantial improvements in
the manufacturing system, ant
· are beyond the normal risk of business.
The committee concluded, however, that significant changes
were needed to improve the effectiveness of the ManTech
program. Thus, phase II of the study focused on develop-
ing recommendations for enhancing the program.
A NEW MANTECH PROGRAM
The ManTech program we recommend differs substantially
from the DOD program of the past decade. Basic changes
in the ManTech program, initiated by the Office of the
Secretary of Defense (OSD), can make it an effective part
of the competition for manufacturing supremacy. Because
of differences among the three services' programs, the
services will require different amounts of change. The
present Air Force program comes closest to the program we
recommend. The Defense Logistics Agency's ManTech program
is too new to have been included in our analysis, but our
recommendations apply to them as well as to the services.
As we will describe in the next three chapters, an
effective ManTech program must begin with the selection by
OSD, in cooperation with the services, of the critical
manufacturing capabilities on which to focus attention and
funding. ManTech program managers can then translate
DOD's strategic needs into specific technologies needed to
support future generations of weapon systems. OSD should
also be responsible for assessing the plans (but not the
individual projects) of the services ant allocating funds
for ManTech activities.
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The ManTech program should strive to support innovative
generic process technologies that are required for future
weapon systems. To convey to the defense community the
long-term, strategic policy orientation of the program, a
new name, such as the Advanced Manufacturing Technology
program, may be required.
A primary outcome of the program should be to demon-
strate the feasibility of new, critical process technolo-
gies that will permit future production of affordable,
high-performance products. In the long run, lower costs
are also likely to occur. However, because of the time
lags between project initiation and ultimate operation,
the impact of product design change decisions, and
inadequate accounting systems, such cost reductions will
be difficult to document.
The new ManTech program cannot address all of the
manufacturing problems faced by the 130,000 DOD suppliers.
A much more comprehensive DOD manufacturing policy is
required to accomplish not only longer-range advances in
manufacturing technology but also widespread application
of leading-edge technology and improvement of existing
production facilities. The new ManTech program can
provide only the first part of such a policy: to develop
new manufacturing capability.
Many of the low-risk, less generic projects that are
currently funded by the ManTech program are worthwhile but
outside the scope of the new ManTech program. Even with
an extremely successful new ManTech program, weapon
systems will continue to face short-run manufacturing
problems when entering production. Projects that address
such problems should be directed by individual weapon
systems program managers.
The new ManTech program will get maximum leverage from
its investments by:
· focusing on generic issues in which the potential
impact across contractors is high, and
· using the funds as seed money to stimulate further
investment by defense contractors.
NOTES
1. According to The President's Commission on Industrial
Competitiveness, the United States has lost market
share in 7 out of 10 high-technology sectors. (Global
Competition: The New Reality, January 1985, p. 13.)
8
2. Information obtained from Richard Donnelly, Director,
Industrial Resources, Office of the Under Secretary of
Defense (Research and Engineering).
3. High-risk projects involve economic or technical risk.
Companies are less likely to support a project that
requires a mayor investment in time, expertise, and
equipment if technical success is uncertain. If the
costs of research and development cannot be recovered
within a specified time, then investment is minimal--
if it occurs at all.
4. Japan, France, West Germany, and Great Britain have
had higher capital investment as a percentage of out-
put in manufacturing than the United States, at least
since 1965. See, for example, Manufacturing Studies
Board, Toward a New Era in U.S. Manufacturing (Wash-
ington, D.C.: National Academy Press, 1986), p. 16.
As in our initial report, the processes and equipment
used in production are referred to as manufacturing
technology (with lower case m and t). The DOD program
studied is referred to as the Manufacturing Technology
or ManTech program (with upper case M and T).
6. Independent research and development (IR&D), materials
R&D, Title III, and facilities grants all include some
expenditures for manufacturing technology. Only the
ManTech program has the upgrading of manufacturing
technology as its raison d'etre.
7. National Research Council, Manufacturing Studies
Board, The Role of the Department of Defense in
Supporting Manufacturing Technology Development
(Washington, D.C.: National Academy Press, 1986)
.
8. The recent change in law to allow multi-year contracts
under some circumstances increases the incentive to
invest in manufacturing technology. The disincentive
of renegotiating contracts to reduce profits that re-
sult from increased efficiency, however, still applies
to most contracts. Further, the continuing separation
of design from production contracts severely limits
opportunities to design products that take advantage
of advanced manufacturing technology. On balance, the
disincentives still overwhelm the incentives to invest
in process technology.
