Comparing the 2023 National Defense Industrial Strategy (NDIS): A Critique and Comparison to Supply Chain Immunity

The Department of Defense released four days ago its inaugural National Defense Industrial Strategy (NDIS), which is intended  to  guide the Department’s engagement, policy development, and investment in the industrial base over the next three to five years. Taking its lead from the National Defense Strategy (NDS), this strategy sought to catalyze generational change from the existing defense industrial base to a more robust, resilient, and dynamic modernized defense industrial ecosystem.

The 59-page National Defense Industrial Strategy lays out long-term priorities that will guide DOD actions and resource prioritization with the aim of creating a modern, resilient defense industrial ecosystem designed to deter U.S. adversaries and meet the production demands posed by evolving threats.  Deputy Secretary of Defense Kathleen Hicks proudly announced the release:  “The current and future strategic environment demands immediate, comprehensive, and decisive action to strengthen and modernize our defense industrial base ecosystem so it delivers at speed and scale for our warfighters.  She added that the “DoD’s first-ever National Defense Industrial Strategy will help ensure we build the modern defense industrial and innovation ecosystem that’s required to defend America, our allies and partners, and our interests in the 21st century.”

The NDIS focuses on four key elements:  supply chain resilience, workforce readiness, flexible acquisition, and economic deterrents.  While these are certainly worthwhile objectives, the report is long on presenting problems the US faces in each of these areas, but falls short of providing basic or actionable recommendations.  More importantly, the report refers to various forms of sustainable, innovative, flexible off-the-shelf acquisition reforms, and changing acquisition mindsets, mechanisms, policies, and processes, but does not provide any clear examples of what such changes entail. More concerning, the report does not mention the acquisition workforce a single time in the entire report, thus leaving a gaping hole for acquisition officers to understand how to implement the recommendations!

In providing further detail into the actions necessary to implement the high level, senior insights of the report, my colleague Col. Dan Finkenstadt used his Chat GPT programs to analyze the NDIS and compare it to the recommendations developed in our book, Supply Chain Immunity:  Overcoming our Nation’s Sourcing Sickness in a Post-Covid World.  Our book also focuses on what is wrong with the DoD’s sourcing models, based on our personal experience during COVID, working on the Joint Acquisition Task Force finding critical hospital supplies given global shortages. I augmented the GPT summary with my own insights…here is what we came up with.

1. Flexibility: The NDIS emphasizes the importance of supply chain visibility to manage disruptions proactively, aggressively, and systematically. This aligns with the need for flexibility in supply chain management as mentioned in the Supply Chain Immunity Elements document. However, the NDIS’s focus seems to be more on visibility and risk management rather than on the flexible and dynamic planning and sourcing strategies highlighted in the Supply Chain Immunity Elements.  An example of dynamic planning occurred in February 2022, when the US Army established a demand plan based on a forecast for deployment of assets and working capital, that was scuttled immediately in the face of the Russian attack on the Ukraine.  It is imperative that the DoD be able to work with wargaming and scenario planning technology to test the resilience of their forecasts and demand plans, and establish critical insights into how to adjust, mitigate, and recover under different potential emergency scenarios.  This does not exist today. We will need to establish real-time visibility into inventory and material, and be able to react to unexpected events as they occur.
2. Traceability and Transparency: The NDIS discusses leveraging data analytics to improve sub-tier visibility, which involves tracking parts, materials, and services from prime contractors to sub-tier level suppliers. This approach is in line with the need for traceability and transparency as stated in the Supply Chain Immunity Elements. However, the NDIS does not explicitly mention the use of technologies like blockchain, which are emphasized in the Supply Chain Immunity Elements for achieving these goals.  The NDIS also fails to include insights such as establishing global inventory positioning metrics that track materials in real-time, similar to examples used in our book, as well as The LIVING Supply Chain.  Such technologies are plentiful, and do not require significant technology investments.  They do require leadership and vision, as well as a determined effort to gather the different branches together in an information-collection and standardization exercise.
3. Persistent and Responsive: The NDIS outlines the Department of Defense’s (DoD) efforts to ensure resilient, healthy, diverse, dynamic, and secure supply chains. This is consistent with the idea of a persistent and responsive supply chain system. However, the NDIS focuses more on resilience in the context of national security and defense, which may have different priorities and approaches compared to the broader public good perspective of the Supply Chain Immunity Elements.  It makes little reference to the importance of supply chain mapping, understanding tier 2, tier 3, and tier 4 suppliers, and mapping global events to potential disruptions of these parties.  It fails to prioritize the multi-tier nature of supply chains today, and the fact that the supply base is a living, breathing entity that is alive, and changing all the time.  This will require the development of a national category management and intelligence sector, that can create the requisite level of deep insight necessary to respond to all manner of different problems that come up.

4. Globally Independent: The NDIS recognizes the importance of global defense production and supply chain resilience. It emphasizes international alliances and partnerships, acknowledging the critical role of global supply chains in defense. This approach is somewhat aligned with the Supply Chain Immunity Elements’ mention of maintaining a balance between domestic sourcing and a global network of trusted suppliers. However, the NDIS seems to prioritize international collaboration and defense industrial relationships over the concept of global independence as discussed in the Supply Chain Immunity Elements document.  There is also little consideration of what it takes to truly establish domestic sourcing capabilities.  An example is the nature of the semiconductor supply chain, which is largely housed in Taiwan and Korea, with tens of thousands of suppliers in the network as well as complex IP.  There is little recognition that even the CHIPS act supporting growth of TSMC and Intel will hardly make a dent on our reliance on overseas chips.
5. Equitable: The NDIS does not explicitly address the concept of an equitable supply chain system as described in the Supply Chain Immunity Elements. The focus of the NDIS is more on ensuring the resilience and health of supply chains for national security purposes, which may not necessarily align with the equitable distribution concept highlighted in the Supply Chain Immunity Elements.  It will be critical to understand how allocation priorities should be set in the event of another pandemic or similar emergency event.  We learned this in our experience during COVID, and there is a need for improved insight into distribution priorities.

How Supply Chain Immunity Elements can Support NDIS:

1. Resilient Supply Chains:
   • Flexibility: Aligns with actions like diversifying the supplier base and investing in new production methods to ensure adaptability in response to various requirements and emergencies.
   • Traceability and Transparency: Corresponds with leveraging data analytics for sub-tier visibility, which helps in the identification and proactive management of strategic supply chain risks.
   • Global Independence: Reflected in engaging allies and partners to expand global defense production, balancing domestic sources with a global network of trusted suppliers.  This will require deep supplier segmentation, and defense actions to prioritize key supply capabilities, based on category intelligence insights.
2. Workforce Readiness:
   • Persistence and Responsiveness: The need for a properly trained workforce to meet production goals, which is critical for national security, aligns with the persistent and responsive nature of supply chain immunity.  Proper training using wargaming and other real-time technologies can dramatically improve capabilities to react to unexpected events in the global supply chain.
3. Flexible Acquisition:
   • Flexibility: NDIS’s emphasis on acquisition strategies that balance efficiency, maintainability, customization, and standardization speaks to the flexible nature of supply chain immunity.  Here again, category management and market intelligence are essential to this capability.
4. Economic Deterrence:
   • Equity: The goal of fair and effective market mechanisms that support a resilient defense industrial ecosystem among the U.S. and its allies aligns with the equitable aspect of supply chain immunity. This includes policies that advance a modernized defense industrial ecosystem and vibrant defense-related supply chains, both domestically and internationally. 
   • Global Independence: Strengthening economic security agreements with allies and partners, focusing on sourcing from countries that are geopolitical allies (“friend-shoring”), reduces reliance on potentially adversarial or unstable nations. This aligns with the concept of global independence in supply chain immunity, promoting international security and economic collaboration.

There is clearly a lot of work to be done.  Unfortunately, there is not a single mention of the “acquisition workforce” in the entire NDIS.  These are the people who are on the ground, making decisions, building contracts and relationships, and establishing the KPI’s that will derive these capabilities.  While the NDIS is good at identifying the problems we face, it does not provide any real guidance for the DoD Acquisition community.  Supply Chain Immunity offers the concepts that might help to jump start it.