Analysis
Breaking the Boom and Bust Cycle
After decades of inadequate procurement and warnings of insufficient production capacity, the Department of Defense’s recent efforts to expand munitions production and invest in defense supply chains are encouraging. Even with the Pentagon’s fiscal year 2027 budget request in question, lawmakers are considering a serious boost in munitions spending, and increased procurement and framework agreements are intended to boost production of Patriot and THAAD interceptors, Tomahawk cruise missiles, Standard Missiles, AMRAAMs, and the Precision Strike Missile, among others.
With demand pouring in, the weapons industry is certainly experiencing a “boom” (no pun intended) for traditional munition manufacturers and newcomers alike. In the past, these highs have been followed by a “bust” once a conflict ends, munition inventories are restocked, and demands for new weapons drop back to their peacetime norms. As the story goes, this cyclical demand wreaks havoc on the industrial base, which contracts as firms shut down, realign, spin off, or consolidate underutilized munition production lines. Then, when another crisis arises, the United States finds itself back in a munitions-production hole like the one it is working itself out of now.
Between domestic and foreign buys to refill critically low inventories and amass stockpiles sufficient for future contingencies, demand appears sufficient to support relatively high rates of munitions production for some time. As conflicts end in some theaters and deterrence (hopefully) holds in others, however, demand will eventually slacken. Obviously, this is the ideal outcome for the nation, but historically it bodes ill for America’s munitions industrial base.
Given the current and foreseeable strategic environment, the most important question beyond “how do we expand munitions production to refill U.S. inventories?” is “how can we head off another bust once demands for weapons fall?” In other words, in a dangerous but relatively peaceful world—the world of “strategic competition”—how can the United States maintain sufficient munition production capacity for future contingencies?
Dial in the Requirements
Answering this question has two parts. First, the military services must determine their longer-term requirements, especially for protracted conflicts like those in Ukraine and Iran. These requirements should go beyond reassessments of stockpile objectives and consider peacetime, surge, and sustained wartime expenditure rates, much like planning conducted during the Cold War. For most weapons, peacetime needs are covered by existing processes and include expenditures from live-fire training and replacing the portions of stockpiles nearing the end of their shelf life. Surge requirements must consider the timely replacement of weapons expended during a limited contingency or during the often munitions-intensive opening phases of a larger conflict. The services can likely start by basing surge requirements off existing campaign plans.
Building on this, the military must also consider the sustained rate at which it might expend and replace weapons over the course of a protracted war. More analysis is needed to determine this requirement. For defensive munitions, the services should consider the rate at which adversaries can employ and replace their offensive weapons, such as ballistic missiles or one-way attack drones. For offensive weapons, the services should assess how rapidly an adversary might regenerate forces and repair infrastructure during a long war. Newly produced offensive weapons or freshly constituted forces represent additional targets above and beyond those considered in stockpile or surge requirements. As America faces adversaries with substantial military-industrial complexes, sustained expenditure rates during a protracted war become as important as the number of weapons on hand during a conflict’s opening phase.
Clearly, each of these rates will vary significantly by munition type and purpose. With history as a guide, the Pentagon should consider the potential needs of allies, as well. Incorporating foreign military sales into these requirements is one way to help establish a reliable long-term demand signal for American weapons. Estimating potential expenditure rates will require the U.S. military to make some assumptions and predictions about future conflict, which is always an endeavor clouded by uncertainty. The Department, however, has done this in the past and, thanks to ongoing conflicts in Europe and the Middle East, there is new data to inform estimates of future expenditures.
Sustain Capacity Beyond the Boom
Second, the Pentagon must determine the most economical and sustainable way to maintain the production capacities necessary to fulfill these peacetime, surge, and sustained munition requirements. Peacetime expenditures are easiest. Training expenditures, inventory roll-over, and stockpile objectives translate into continuous munition buys from year to year. The main challenge is ensuring that active production lines are sized so that procurement quantities remain above the line’s minimum sustaining rate, even after inventory objectives are met.
Maintaining surge production capacity and supporting sustained wartime output could be accomplished in a number of ways, each with different costs and timelines for expanding production during the next crisis. For some weapons, producers may be able to “build-in” surge capacity by maintaining the option to run additional shifts. Doing so might require increased funding to support hiring and training additional workers and would depend on the availability of additional components and materials, which could be supported by continued investment in munition supply chains or vendor-managed stocks of critical and long lead-time components. The Pentagon could also support the maintenance of additional production lines in a cold or mothballed status. After World War II, government-owned contractor-operated (GOCO) munition plants were maintained in a reserve status during peacetime and reopened to supply the wars in Korea and Vietnam. Throughout the Cold War, the Department sometimes supported the building and maintaining of multiple production lines at low rates in order to guarantee wartime surge capacity. The right tool or method for maintaining surge and reserve production capacity varies for different munitions, so these options are best tailored to a weapon’s estimated expenditure rates and its manufacturing complexity.
The important point is that maintaining these capacities will require continued government investment over the long run. Although the Department has proven unwilling to fund unused (maligned as “excess”) capacity since the infamous “Last Supper” between Pentagon and industry officials in 1993, there is ample Cold War precedent for supporting the continued maintenance of surge and reserve production capacity.
Looking to today, there are also opportunities for new approaches and technologies to help the United States sustain the production capacity it needs in more cost-efficient ways. The Department’s efforts to develop and field more modular and low-cost weapons may help reduce the amount of munitions-specific capacity that must be continually supported. If new weapons are designed around more commercialized components or parts built on flexible lines that can also produce commercial items, then manufacturers can rely on consumer demand to weather periods of reduced munitions funding. Dual-use materials and components also expand the number of new firms which can be called upon to surge output, potentially through arrangements like the Department’s new Civil Reserve Manufacturing Network.
Automation and manufacturing techniques pioneered by commercial firms and new defense entrants are critical to enabling these flexible production arrangements. Even for existing or more exquisite weapons, innovative techniques can help improve the speed or efficiency of established manufacturing infrastructure and reserve capacity.
Still, final assembly lines and some munition-specific materials and components, such as explosives or solid rocket motors, will require continued funding to maintain production capacity. The best way to do so depends on the purpose and producibility of the individual munition or component, but these considerations must be an important part of a weapon program office’s long-term planning and budgeting.
Munitions occupy a strange middle-ground between expendable commodities and highly complex defense systems, and their acquisition and industrial approach must reflect the unique ways they are produced, stockpiled, upgraded, and employed. This is particularly important for the smaller, less expensive drones and loitering munitions the U.S. military is currently developing and testing. The countermeasure, counter-countermeasure adaptation cycle for these weapons has proven extremely rapid, making the continual maintenance of production capacity and component suppliers more important than amassing large inventories of weapons that become obsolete before they are used.
With munition demands high, the market expanding, and the Pentagon focused on building production capacity, now is the time for the Department to begin thinking about what comes next. As long as the specter of great power war remains at the forefront of American security concerns, the U.S. military must prevent the inevitable bust that follows periods of increased munitions production absent government foresight, planning, and funding. Ongoing conflicts have reemphasized the immense rates at which weapons are expended in modern warfare. As it rebuilds its munition stockpiles and expands production, the Department of Defense must recognize that avoiding a future munitions crisis is a long-term endeavor requiring more than a one-time boost.
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