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--> 1 New Context for Defense Manufacturing Introduction Defense manufacturing1—a keystone of the nation's security—is undergoing sweeping changes. Changing threats to national security, declining defense budgets, the consolidation of the defense industry, the globalization of industry, the increasing rate of change of technology, and requirements for environmentally compatible manufacturing are all contributing to new challenges being faced by defense manufacturing. Superior combat capability is achieved in part by the use of cutting-edge technologies in weapons systems. Manufacturing systems are required to successfully transform designs for high technology weapons systems into operational products. Since its establishment in 1947, the U.S. Department of Defense (DOD) has played various roles vis-à-vis the manufacturing sector, including customer, end user, service provider, co-developer and co-producer of products, and co-funder and co-manager of both basic research and technology research and development. The new context for defense manufacturing will result in a transformation of the relationships between defense and commercial sectors and will require that new priorities be set for the allocation of defense manufacturing resources. 1 Defense manufacturing is defined as manufacturing activities that produce defense-related products. For the purposes of this study, "manufacturing" has been broadly defined to include activities throughout the product life cycle (from needs assessment to concept formulation to production to disposal), as well as required resources (materials, infrastructure, information, workers, time, money).
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--> Changing Nature of Threats to National Security The nature of threats to U.S. national security are substantially different today than they were during the Cold War. For example, during the Cold War, defense policy focused on global conflict, and the engagement scenarios considered most likely involved nuclear weapons. Current defense policy is focused on regional conflicts with engagement scenarios involving conventional weapons. National policy requires that U.S. military forces maintain a credible nuclear deterrence, as well as the ability to engage in and prevail in one and one-half "contingency" or regional operations involving combat against enemy forces but no global political or global military implications. In addition, U.S. military forces will continue to be committed to a variety of operations, known as "military operations other than war." These missions, which are different in character and scope from traditional military activities, include providing support for drug interdiction and international peacekeeping. These activities present unique challenges and risks, as well as new demands on weapons and logistic systems. For example, military forces and equipment normally available for contingency operations, training, or maintenance might not be available during nontraditional military deployments. Declining Defense Budgets For the past decade, the resources available to DOD have been declining (see Figure 1-1). In 1997, the DOD budget was $258 billion, down from $382 billion in 1989. Projections to the year 2003 show a modest increase from current levels (OMB, 1998). Barring a major international crisis, however, defense budgets are not likely to grow significantly in the next decade. The decline is even more pronounced in terms of the development and production of new weapons systems. The procurement budget has been reduced from $106 billion in 1989 to $48 billion in 1997, while the operations and maintenance budget has remained stable at about $100 billion. Reductions in spending on engineering and manufacturing development also indicate that procurement programs for new weapons systems will be scarce for the next 10 years. Although the research, development, test, and evaluation (RDT&E) budget has remained relatively flat in constant dollars since 1989, this represents a loss of buying power of about 30 percent. According to DOD projections, the RDT&E budget will decrease by about 6 percent over the next five years in terms of actual dollars (OMB, 1998). Consolidation of the Defense Industry The defense industrial base has historically consisted of companies responsible for most of the research, development, and manufacture of defense systems.
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--> Figure 1-1 Defense budgets from 1962 to 2002 (in 1997 dollars). Source: Congressional Budget Office, 1997. Since the late 1980s, these companies have been involved in a wave of mergers and consolidations (see Figure 1-2). As a result, only three major defense contractors remain in the United States today (Boeing, Lockheed Martin, and Raytheon), and these three are increasingly turning to commercial markets. In fact, commercial sales currently outweigh defense sales for all of them (Defense Science Board, 1997). Globalization of Industry Manufacturing is becoming an increasingly integrated global system as a result of several factors, including: the growth of emerging economies, the formation of companies of indistinct nationality, the dispersal of design and production capacity, and the outsourcing of design and production. The global economy is becoming highly integrated with information, funds, materials, components, final products, and workers crossing national and regional boundaries daily. Companies can design and manufacture products in many different locations in the world; manufacturing capacity has become a commodity (NRC, 1995). According to Brooks and Guile (1987), these changes have implications for the role of the United States in the global economy. Although the United States is no longer the dominant player, the country now has access to markets that were unreachable only a decade ago. Business leaders have become accustomed to
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--> Figure 1-2 Consolidation of the U.S. defense industry from 1985 to 1995. Source: Dowdy, 1997. thinking of the global marketplace as a significant source of consumer demand, as well as an attractive source of supplies, including foreign technology, intellectual capacity, manufacturing capacity, and investment capital, as well as traditional imports, such as natural resources and hard goods. The logistics of currency exchange, information exchange, and transportation are well understood, and facilitators of global trade are available. The trend toward collaboration on a global scale is part of the U.S. management culture, and companies often join with foreign partners to augment their capabilities. Increasing Rate of Change of Technology Several manufacturing technologies, including biotechnology, nanotechnology, electronic and microelectronic technologies, and information technology, are on the verge of revolutionary development. Changes in microelectronics have
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--> been particularly rapid with the minimum feature size of a 256-kbit dynamic random access memory microchip decreasing from 1.5 µm to 0.25 µm between 1983 and 1997. Soon, 1-Gbit dynamic random access memory microchips with feature sizes of 0.18µm will be available (Rothschild et al., 1997). Advances in information technology have affected and will continue to affect all aspects of manufacturing, including product and process design, shop floor controls, modeling and simulation, enterprise integration and business practices, communications, social structures, and education and training (Dertouzos et al., 1989; Friedman et al., 1992). Requirements for Environmentally Compatible Manufacturing Expectations of responsible behavior by industry and government have been rising with regard to environmental concerns. This trend is evident in national and international efforts to mitigate environmentally harmful effects of industrial processes and to improve the decision making for handling and disposing of industrial contaminants. Manufacturing as a whole is being driven to convert to environmentally benign processes (NSTC, 1997) and will continue to be affected by environmental regulations. Commercial industry will have to develop the necessary process technologies and practices, and defense manufacturing will have to reduce environmental effects of depot and field operations, as well as weapons disposal. Life-cycle design processes will have to include disposal costs and incorporate design features to mitigate them. U.S. Defense Industrial Base Manufacturing the products required by the U.S. armed services has traditionally been the responsibility of the "defense industrial base," industrial and military facilities devoted partially or entirely to the production of defense-related products. The size and character of the defense industrial base has changed many times since the nation was founded. Just after the War of Independence, the U.S. defense industrial base consisted of purveyors of powder and guns, storage locations for weapons and supplies, and state-owned shipyards. In 1950, the defense industrial base was formally defined by the Defense Production Act, which also established a priority system for obtaining military hardware and software during emergencies and provided seed money for improving manufacturing facilities and processes. The defense industrial base remained clearly defined throughout most of the Cold War and the conflict in Southeast Asia (see Appendix A for more details). The 1990s have been a decade of profound change for both the prime contractors of the defense industrial base and their suppliers. The boundaries between the defense industrial base and commercial industry have become increasingly difficult to determine. Although numerous aircraft plants, arsenals, and shipyards
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--> are still devoted primarily or exclusively to producing military hardware, many now assemble systems from components manufactured elsewhere, usually by commercial industry. These changes are as dramatic as the changes during the build-up for World War II. New Challenges for Defense Manufacturing The major forces for change impacting defense manufacturing interact with each other and with the defense and manufacturing sectors to create both new pressures and new opportunities. Meeting the new threats to national security will require reconfigurable weapons systems, production surge capacity, and access to production sources. Overall, declining defense budgets and increasing systems complexity will result in fewer new weapons systems being developed and produced, as well as fewer weapons systems of any kind being procured. This trend toward fewer procurements will create a need for low-volume production processes and systems at a reasonable cost. At low production volumes, nonrecurring costs, driven largely by development costs and cycle times, are greatly magnified on a per unit basis, and reductions in both recurring and nonrecurring costs will be necessary. Budget constraints will also increase the demand for low-cost weapons systems that have favorable life-cycle costs and benefits. The lives of existing weapons systems will be extended. Currently, many aircraft in the operational force are more than 20 years old, and weapons systems for which no new replacements are planned are expected to remain in service an additional 25 years (NRC, 1997). The sustainment2 of aging weapons systems will require effective, low-cost maintenance in the field and at depots and maintenance facilities, which will require significant reductions in cycle time to reduce the costs. Cost-effective methods will also be necessary to upgrade aging systems and remanufacture spare parts. Due to reduced expenditures, the ability of DOD to influence industry will decline. During the 1980s, the defense industry, in response to demands from DOD for lower costs, vectored significant independent research and development funding into manufacturing related areas. However, in the 1990s, this investment has been decreased by as much as 70 percent because of reductions in military procurement budgets, and there has been a shift from funding of independent research and development to funding of bids and proposals, as the industry has increased its focus on winning bids. The loss of competition as a result of industry consolidations may significantly reduce the incentives for industry to invest in cost reduction measures. Defense consolidation has vastly diminished the flexibility required for surge capacity (due to plant closings), diminished competitive 2 For the purposes of this study, ''sustainment" refers to the provision of personnel, logistics, and other support required to maintain operations until successful accomplishment of a mission.
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--> innovations in products, and reduced competitive pricing based on multiple sources for products. The decreasing RDT&E budget has reduced DOD's ability to develop new technologies for effective and affordable defense manufacturing. Defense manufacturing will, therefore, have to carefully prioritize spending in priority areas and try to leverage innovations in commercial manufacturing by maintaining its awareness of developments, transferring new technologies to defense applications, and investing in the adaptation of commercial technologies to defense applications. Industry reacts predictably to fluctuations in defense spending. When budgets are rising or at peak levels, industry invests in defense-related infrastructure, equipment, and processes. When budgets are declining or at low levels, investments of all types are decreased or directed toward other markets. Defense authorities have always been able to mobilize the U.S. commercial manufacturing industry in times of national crisis. In peacetime, however, the influence of national defense requirements on the priorities of commercial industry are limited. Defense agencies were once able to dictate industrial directions even though commercial interest in these technologies was low. In the future, however, defense agencies will only be able to justify programs that meet defense-unique requirements, and the investment will have to come from the government. On the one hand, the globalization of industry has resulted in greater access to new processes and technologies that can improve the performance and quality of defense products while reducing costs. On the other hand, greater reliance on foreign sources could threaten the security of product information and, in times of conflict, product sources. If industry alone decides where products will be designed and manufactured, protections for U.S. defense technologies and capabilities will have to be established. If weapons used by U.S. forces are produced and supported by foreign industrial organizations or governments, then DOD will have to determine which products and processes must be protected and develop either alternative sources for critical foreign suppliers and/or rapid reverse engineering and remanufacture capabilities. DOD and its prime contractors will have to monitor the actual sources used by suppliers, either through guidelines to prime contractors that dictate where critical defense parts can be manufactured or through requirements that prime manufacturers be responsible for the life-cycle support of their products. New technologies create new opportunities. Technological advances can be used to upgrade weapons systems or to develop completely new capabilities. Weapons systems upgrades will most likely be accelerated, and new capabilities in weapons systems will be introduced. Future advances in information technology and applications of information technology to manufacturing can also be applied to defense requirements. Table 1–1 summarizes the forces that are changing the context of defense
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--> Table 1–1 Pressures and Opportunities for Defense Manufacturing Force for Change Effect on Defense Resulting Pressures and Opportunities Changing nature of threats to national security Increased variety of military missions Increased unpredictability of military missions Increased emphasis on conventional rather than nuclear weapons Capability for customizing weapons systems Manufacturing surge capacity Design and manufacture for multiservice use Design for reconfigurability Rapid product realization Declining defense budgets Demand for affordable weapons systems Fewer new weapons systems procured and produced in lower volumes Extension of weapons systems life Reduction in development cycle times and costs Application of cost-as-an-independent-variable accounting Design and manufacture for multiservice use Use of commercial-off-the-shelf products Design for low life-cycle costs Low-cost processes for low-volume production Low nonrecurring costs in product realization Reduction in cycle times Extended life in new systems Design for maintainability Design for technology insertion Efficient maintenance and depot operations Remanufacturing processes Improved diagnostics Product and process databases Consolidation of the defense industry Potential for reduced capacity, competition, and innovation Potential for lower priority given to defense production Processes and systems for surge production Strategies for maintaining innovation and competition Production of defense systems on commercial production lines
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--> Force for Change Effect on Defense Resulting Pressures and Opportunities Globalization of industry Location of component and subsystem development, design, and production determined by industry Greater reliance on foreign suppliers Security threat for product information Potential loss of production sources in time of conflict Increased access to new product and process technology Guidelines on critical components and subsystems Identification of suppliers Development of security systems for product and process data Remanufacturing capability for components and subsystems Alternate sourcing strategies Adapt commercial "best practices" Increasing rate of change of technology Opportunity for more frequent improvement of existing weapons systems Opportunities for introduction of new weapons capabilities and new weapons systems Potential for improved product databases, program management, and retention of production know-how Open-architecture systems to enable technology insertion Reduced product realization time Use of industry road maps in product development and design Adaptation of technologies to defense-specific applications Development of product and process databases Requirements for environmentally compatible manufacturing Stringent environmental regulations for manufacturing and maintenance and depot operations Life-cycle design Environmentally compatible production processes Reduced pollution in depot and maintenance operations manufacturing and the resulting pressures and opportunities. These pressures and opportunities can be grouped into the following categories: low-cost rapid product realization expanded design capabilities environmentally compatible manufacturing adaptation of information technology security of product and process data access to production sources use of commercial manufacturing capacity sustainment of weapons systems
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--> Committee on Defense Manufacturing in 2010 and Beyond The National Research Council's Committee on Defense Manufacturing in 2010 and Beyond was formed in response to a request by the armed services3 that a framework for defense manufacturing in 2010 be identified and that strategies for attaining the necessary capabilities be recommended. The committee was asked to (1) review major trends that are changing the context of defense manufacturing and identify challenges to be met; (2) review existing defense planning documents to identify defense-critical and defense-unique manufacturing capabilities; (3) review advances in commercial manufacturing and identify those with the potential to meet defense manufacturing challenges; and (4) recommend strategies for developing the manufacturing capabilities required for the year 2010 and beyond. This report reflects the results of the committee's activities. Methodology and Report Organization The committee notes that the issue of forecasting the future, even from existing trends, is complex. Trends that are clearly visible today may rapidly change, and projections of technology advances may turn out to be either optimistic or pessimistic in light of actual events. Each trend is an aggregate of projections derived from the perceptions of many individuals. The availability of a predicted technology advance will depend on the actual timetable of discoveries and engineering applications and the probability that alternative technological mechanisms will emerge. To evaluate the needs of defense manufacturing in the year 2010 and beyond, the committee, therefore, relied on a variety of information sources. First, the committee reviewed requirements for defense manufacturing for the year 2010 and beyond, including DOD' s Defense Technology Area Plan (DTAP), and asked representatives of defense organizations, prime contractors, and program officers to present their future needs. Based on this material, the committee identified "defense-critical" manufacturing requirements, as well as "defense-unique" requirements (i.e., areas unlikely to attract significant commercial investment). The committee then identified required manufacturing capabilities (described in Chapter 2). Second, the committee reviewed forward-looking manufacturing studies (e.g., Next Generation Manufacturing [NGM, 1997] and Visionary Manufacturing Challenges for 2020 [NRC, 1998]), reviewed information sources available on the World Wide Web (see Appendix B), and invited speakers to assess 3 The study is sponsored by the U.S. Air Force, the U.S. Army, the U.S. Navy, and the Defense Logistics Agency.
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--> advances anticipated in manufacturing. The committee summarized the current state of commercial manufacturing and identified several general advances in manufacturing that defense manufacturing can expect to draw on. These are described in Chapter 3, which also contains the committee' s analysis of the extent to which these advances will meet defense manufacturing needs. Finally, the committee developed criteria for setting priorities and identified the categories of manufacturing capability that could best meet these criteria. In addition, the committee developed recommendations on how DOD could develop the necessary manufacturing capabilities and identified new :roles and priorities for the ManTech (Manufacturing Technology) Program. These conclusions and recommendations are presented in Chapter 4. Manufacturing Technology Program Throughout the nation's history, the armed services have strongly supported new technologies and manufacturing methodologies. In the late 1950s, DOD established the ManTech Program under the provisions of the Defense Production Act of 1950 and its extensions. The objective of the ManTech program was to strengthen the U.S. defense industrial base by encouraging the development and use of innovative manufacturing methods and processes. The program was based on the premise that in manufacturing technology areas where the cost to develop and implement an innovative production methodology would not be a prudent business risk, DOD should invest in bringing these ideas to fruition. It was assumed that, if DOD funding was available to augment private investment, contractors would be encouraged to upgrade their manufacturing facilities and processes and that the overall result would be high quality weapons systems that could be produced and delivered in shorter times and at lower cost. The committee, although not explicitly asked to provide recommendations for the roles of the ManTech program, believes that ManTech is the logical organization through which many defense-critical and defense-unique manufacturing requirements should be developed. No other organization within the DOD has ManTech' s history of research and development or a support structure already in place from the three branches of the armed services. Each branch of the armed services has its own ManTech program and, during the first two decades of the program, there was little or no coordination between them. The Army applied its funds to improving processes used in the manufacture of various Army commodities and weapons systems. The Navy invested in the establishment of centers of excellence. The Air Force invested in large-scale, enterprise-wide information systems and technologies and improvements in materials processes. In 1975, the Secretary of Defense directed the armed services to increase their emphasis on and support of the ManTech program. A tri-service Manufacturing Technology Advisory Group was established to coordinate plans with industry associations. The review process created by the advisory group
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--> reduced, but did not eliminate, the duplication and overlap of projects. In the late 1970s, the joint logistics commanders (the Commander, Air Force System Command; Chief of Naval Materiel; and Commander, Army Materiel Command), acting as a joint body, forced the complete coordination of the ManTech program. At that time, some ManTech funds were allocated to the adaptation of commercial products for use by the military in the nondevelopmental item program, the forerunner of the dual-use program. In the early 1980s, the Defense Science Board recommended that the ManTech program be funded at 2 percent of the procurement budget, but this level of funding was never reached. Beginning with fiscal year 1991, the ManTech program was gradually incorporated into DOD's Manufacturing Science and Technology program, where it remains today. Funding for the ManTech program originally came from the budget for RDT&E, although many people in DOD and Congress believed that it should be funded by procurement dollars. In spite of varying levels of consolidation and support, the ManTech program has been responsible for a number of successes, including the following: the development of the first numerically controlled machine tool the establishment of automatically-programmed tools as an industry-wide standard language the establishment of processes and tools that have accelerated the development of the microelectronics industry the development of isothermal forging for net-shape manufacturing of titanium and superalloy parts the development of the first three-dimensional nondestructive inspection system for rocket motors and other critical parts the development of process modeling methods, such as integrated definition support for accelerating the development of computer-aided design, computer-aided manufacturing, and computer-integrated manufacturing significant improvements in night vision systems and capabilities Although the F-16 technology modernization program was not part of the ManTech program and did not have the ManTech objective of improving manufacturing equipment and processes across industry, this program represents another notable success for ManTech. The objective of the program was to reduce F-16 unit procurement costs, and it was initially funded completely by procurement funds. As the program progressed, the contractor, General Dynamics, became convinced that benefits would accrue to the ManTech program from a similar approach. General Dynamics entered into an arrangement with the federal government whereby both of them provided funding to implement manufacturing improvements, and they shared the cost reductions according to the ratio of funds contributed. The program's achievements surpassed the expectations of its most ardent supporters, and the secret to its success was the sharing arrangement.
Representative terms from entire chapter: