{"id":7201,"date":"2026-03-14T12:06:13","date_gmt":"2026-03-14T12:06:13","guid":{"rendered":"https:\/\/sawahsolutions.com\/range\/demand-signals-are-up-but-supply-chain-risks-may-still-hinder-production\/"},"modified":"2026-03-14T12:06:13","modified_gmt":"2026-03-14T12:06:13","slug":"demand-signals-are-up-but-supply-chain-risks-may-still-hinder-production","status":"publish","type":"post","link":"https:\/\/sawahsolutions.com\/range\/demand-signals-are-up-but-supply-chain-risks-may-still-hinder-production\/","title":{"rendered":"Demand signals are up, but supply chain risks may still hinder production"},"content":{"rendered":"
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The Defense Department is planning more multiyear deals and expects they\u2019ll help smooth kinks in fragile supply chains. But the way prime contractors manage their suppliers, and the\u00a0 potential for bottlenecks, could stall progress.\u00a0<\/p>\n

Quadrupling munitions production \u201ctakes leadership\u2014and I think we’ve got that in the [defense] secretary and the deputy. I think it takes money. I think it takes commitment,\u201d Michael Duffey, the Pentagon’s acquisitions and sustainment chief, said Thursday during the Ronald Reagan Institute\u2019s national security summit.\u00a0<\/p>\n

Duffey said multi-year procurement deals, such as recent ones with Lockheed Martin and RTX, have helped create \u201ca trust level with industry because of that frequent engagement.\u201d The hope is that conditions set in those deals will flow down the prime contractor\u2019s supply chain.\u00a0<\/p>\n

\u201cOne of the key components of the deal is that all the conditions that are a part of the prime contractor will flow down. So the longevity of the deal will benefit all the suppliers, all the way down the supply chain, which hopefully then incentivizes a flywheel of investment in the key components, in the raw materials that we need,\u201d Duffey said, noting that high engagement with industry has helped foster conditions for these types of deals.\u00a0\u00a0<\/p>\n

While the Pentagon is happy with progress so far, Duffey said \u201cnot every program will be a perfect candidate\u201d for long-term production deals. Those that would be a good candidate share a few things, including long-term need, lack of an emerging competitor, and \u201cramp time\u201d needed to build a supply chain and intellectual property.\u00a0<\/p>\n

\u201cThat all, kind of, creates the incentive for a long-term deal here. And putting that contract in place, not only to incentivize the contractor to make the investment, but it’s putting real penalties in to ensure that we’re able to stick to the present and the secretary’s priority, which is speed and volume,\u201d Duffey said.<\/p>\n

In its annual report card analyzing the defense industrial base, the Reagan Institute found the Pentagon has gotten better at telling industry what its modernization plans are compared to a year ago\u2014jumping from a D-plus to a B-minus\u2014but still struggles to make those plans a reality.\u00a0\u00a0<\/p>\n

Roger Zakheim, who leads the Ronald Reagan Institute in Washington, said the second Trump administration\u2019s moves thus far have been positive \u201cbuilding blocks\u201d for substantive change, but there is still a long way to go.\u00a0<\/p>\n

\u201cThere are great aspirations for what has to happen within our innovation base and the impact it should have on our national defense. And we haven’t seen sufficient, in our judgment, movement there. The production, the modernization is sort of not revealing itself across the force like we think it should,\u201d Zakheim told reporters at a Defense Writers\u2019 Group event ahead of the summit. \u201cBut at the same time, we have seen some significant movements, particularly this year, in the customer clarity,\u201d due to policy shifts, among other things that \u201ccould ultimately drive this defense modernization.\u201d<\/p>\n

Defense modernization has received a grade of \u2018D\u2019 on the institute\u2019s report card since 2024.<\/p>\n

Some of the positive signs the report mentioned: acquisition reform and reorganization efforts, talks of $1.5 trillion defense budgets, and procurement contracts spanning several years\u2014which have clarified the Pentagon\u2019s intentions with industry.\u00a0<\/p>\n

But supply chain risks persist and likely need more attention.One of the barriers to increased production and defense modernization is supply chain management, which the Pentagon has typically left up to prime contractors, said Frank Futcher, the former director of NavalX.\u00a0<\/p>\n

\u201cI think for too long, the Department of War has relied on the big primes to do all of that, like it was more of the hands off, laissez faire economy\u2026We’ve now started to shift to more of an industrial policy,\u201d said Futcher, who is now a consultant with Ernst & Young.<\/p>\n

There’s a misconception that major defense contractors \u201cgo deep down the supply chain\u2026on a day-to-day basis\u201d and can actually see where risks to production could be, he said.\u00a0<\/p>\n

\u201cThere could be a mom and pop shop. There could be long lead material that they don’t realize that’s going to prevent them from scaling,\u201d Futcher said. \u201cAnd I think the program offices, or now these new PAEs, these portfolio acquisition executives, have to make this a priority\u2026they really need to be working together with industry in much more of an established sort of industrial policy as to how they’re going to do this together.\u201d\n\n<\/svg><\/p>\n<\/div>\n