Surging ahead: Accelerating a resilient ammunition supply chain
The escalation of war in Ukraine has exposed the limitations of established approaches to defence supply chains. In response, there is an imperative for nation states to increase national outputs and strengthen defence supply chains to enable surge capability.
Over the past two decades, ammunition demand was relatively low and consistent – even at the peak of the UK’s conflicts in Afghanistan and Iraq. Low-volume ammunition production runs on limited production lines were sufficient to support counterinsurgency and live training, with stockpiling discouraged by the Treasury. Simultaneously, increased investment in simulation further reduced demand for ammunition.
However, recent sources suggest that an escalation of warfare would see some countries run out of ammunition in days. And a recent war game involving the US, UK and French saw UK forces exhaust national stockpiles of critical ammunition after eight days.
Rethinking the supply chain
The Government has already earmarked £2bn investment over the next two years in response to the Integrated Review Refresh 2023 (IR2023), which identified the need for “replenishing and increasing our stockpiles and investing in the resilience of the UK’s munitions infrastructure”. This comes on top of £560m already put forward in the Autumn Statement. The UK Ministry of Defence (MOD) has also launched a £25m innovation fund to find solutions to support the defence sector, particularly ideas with fast initial delivery, as well as long term capability development. These are clear commitments to meet increasing demand.
An increase in spending can increase production outputs in the short term, but it won’t necessarily address the challenges supply chains face in responding to fluctuations in demand unless the MOD and its strategic industrial partners rethink their approach to the ammunition supply chain. Here, we highlight four key considerations for leaders in this space:
1. Unlock demand signals with data driven stockpile management
Spending needs to happen alongside consideration of other policy levers, incentives, and a long-term, data-driven approach to managing demand and restoring stockpiles. The UK already collects valuable data that it can use to model its business-as-usual training demand. Combining this with data being generated during the war in Ukraine, and from Afghanistan, will provide the MOD with the ability to generate insight and drive intelligent demand signals, increasing resilience. This can show refreshed realistic consumption rates for different types of operations. It can also help to inform where investment is required to unlock bottlenecks in the manufacturing and supply of ammunition by using scenario-based testing of likely demand signals from different types of operations on a modern battlefield.
Following the data will allow targeted funding and interventions such as skill-based incentivisation schemes. In recent times we have seen similar approaches have success, for example with COVID-19 vaccines intelligent stockpile management, each part of the system has contingency plans to respond to times of surge and can increase distribution capacity in times of demand.
2. Diagnose bottlenecks to increase adaptive capacity
To build a more flexible supply chain, with the ability to change distributions of work depending on contexts, bottlenecks must be minimised. Examining the supply chain in both a steady state and under stress, using modelling tools such as Digital Twins, enables bottlenecks to be identified and targeted, using mapping and modelling of the whole system. This can be used to identify and develop the supply chain’s adaptive capacity and measure its resilience allowing possible investments in the system to be valued and assessed.
With improved understanding, more flexible contracts can be generated, with flexible requirements and scenario-based contingency. For example, in times of surge, supply chains can have plans to incorporate vertical integration, use flexible workforce or effectively manage alternate sub-system supply chains to relive periods of pressure in the system. PA have helped the Department for International Trade to implement this approach by developing a rapid cycle analytics capability. This will help to assess the resilience of the UK’s most crucial pharmaceutical supply chains to improve the security of supply at critical times.
3. Contract flexible, scenario-based contingencies
To increase supply chain agility, communication is essential. The use of contracted, scenario-based contingencies creates a route of communication between suppliers and consumers that allows anticipation of demand to mitigate risk, and which builds trust into the system. Through the sharing of information – for example by flagging a shortage of material or skills – the supply chain can raise a potential risk and resolve this to adapt to demand. The supply chain may also consider business wargaming scenarios, allowing suppliers and MOD consumers to hypothesise potential risks and how to adapt when being asked to surge in response to demand.
The use of modelling allows new ideas to be tried and tested without the cost of setting up production lines. Multi-dimensional changes to shift patterns, make or buy propositions, and inventory strategies, can be tested to rethink the optimal balance of cost, resilience, and sustainability, to understand risks and opportunities with different approaches.
Conventional defence contracts’ commercial priorities focus on ensuring a balance between revenue generation and efficiency and are often heavily capped. With more flexibility and risk mitigation in place, both suppliers and customers agree a commitment to surge in periods of demand, demonstrating the importance of collaboration across the defence industry, which is supported and, in some cases, incentivised by Government.
4. Challenge boundaries with incentivised collaboration
Building a more resilient and adaptable supply chain demands a more collaborative approach that challenges traditional boundaries in agreements.
To address the challenge of doubling and tripling supply there are signs that the industry is shifting behaviours. There are some great examples of international collaboration within the defence industry to exploit spare production capacity across the supply chain. L&T MBDA Missile Systems, a joint venture, is supplying air-to-air missile launchers and sub-systems to MBDA France for Rafale fighter jets from its facility in India. The United States has onboarded new suppliers for artillery casing production to increase its manufacturing capacity, and a potential agreement will see Rheinmetall produce HIMARS for Lockheed Martin.
Governments can encourage this collaboration across the industry to continue and deepen, through alliancing or commercial incentivisation. Over the past few decades, there has been some shift in behaviours as industry primes move away from acquisitions towards alliancing and joint ventures. Alliances are most prevalent on new programmes, such as the BAE Systems, Babcock International and Thales Group alliance to build aircraft carriers, and the Team Tempest alliance - a combat air partnership consisting of BAE Systems, Rolls Royce Leonardo and MBDA.
Sharing the delivery challenge provides a precedence of risk-sharing in new programmes that can be used as a model for redesigning the industrial approach to manufacturing ammunition. However, when it comes to operational challenges there is less sharing of risk, which must be addressed through deliberate changes to culture and governance across the supply chain to encourage the desired behaviours. Sovereign-enabling contracts are one example of how the MOD can encourage positive action to deliver a more resilient national ammunition supply chain.
A resilient future
With the world becoming increasingly volatile, it's crucial countries take a proactive approach to military preparedness. The UK Government’s injection of significant investment into the ammunition supply chain is an important intervention that must not be squandered. Ensuring this investment not only restores UK stockpiles but uses its improved understanding of usage data and supply chain bottlenecks to intelligently restock with the right natures and quantities of ammunition.
This must be supported by the MOD and Government recognising their role to provide long term consistent demand signals and strike the right balance between sustainability, resilience, and value. By intensifying collaboration, industry and Governments can establish a more wartime-applicable posture that will continue to provide an adaptive and resilient supply chain post-Ukraine.