Congress enacted the Buy American Act to ensure domestic vendors had protections from low-cost overseas competitors, when selling to the government—with substantial protections in place for sales to the Department of Defense (DoD). Since 1933 procurement agents have ensured that U.S. companies received certain preferences when awarding contracts.[1] Recent investigations, using social network mapping of DoD sub-vendors, indicate that the number of overseas vendors involved in the production of goods delivered to the U.S. military is far higher than originally thought.
From the industrial revolution onward, a major factor in the United State’s success and growth into world power status was the country’s diversified manufacturing base and internal supply chain. It allowed the country to quickly and efficiently produce a variety of products, an advantage that also helped the United States surpass the Soviet Union during the Cold War. Over time, supply chains have become global; corporations have optimized production locations, transportation costs, and international tax structures to develop supplier networks that are exceptionally complex, and transnational in nature.
A diversified supply chain bestows many benefits, but also creates inherent risks. It would be unrealistic to imagine that one sub-vendor supplies only a single upstream vendor. Sub-vendors often supply multiple customers all along the chain, thus increasing their individual impact on the supply chain as a whole. If a small problem arises in a sub-vendor, it may become a major problem once it goes through the various levels of manufacturing. Not only that, but when the defect is spread to multiple other vendors, the issue becomes proportionally much bigger.
Understanding the networked nature of U.S. supply chains and how sub-vendors may impact downstream vendors becomes more interesting when overlaid with geography. The vendor map in figure 1 shows the relationship between 1200 companies in the supply network of two major Department of Defense vendors (3M Corp & Rockwell Collins) with those vendor relationships touching Russia, China, Israel, or the Korean Peninsula highlighted in red. At first glance, it is impossible to tell if these companies are part of a healthy and efficient global supply network, at risk due to regional tension, or are avenues for the insertion of malicious products that will find their way into the hands of U.S. soldiers, sailors, airmen, and Marines. What is clear is that before this type of analysis was conducted, it is unlikely that anyone would know that products sold by well-established US firms, had their origins in nations whose relations with the US are uncertain at best.
Figure 1: Supplier relationships with companies headquartered in high-risk regions.
Vendor maps like this one aid in providing a better picture of the entire supply chain. By studying these maps, one can see how natural disasters, economic disruptions, or political conflict in one region can significantly affect another country’s economy due to how interconnected the global supply chain has become.
When entities based in the United States actively trade with companies based in a country with which the United States has an unstable relationship, there is a possibility that sabotage down the supply chain (supply chain insertion) could come into play.[2] Now, you may be asking yourself, why is this important? Why should I care? Well, if the United States is in fact buying products from vendors in countries that might be looking to sabotage it, these vendors may purposefully give the United States defective products. Even the tiniest defect can cause major damage in the later stages of manufacturing, which could injure those working on the project or set the project back by months. Therefore, it is vital that the supply chain in the United States is constantly monitoring not only what parts they are buying, but where those parts are from in order to catch any possible tampering or sabotage.
This is not a small phenomenon. Global supply chains are a fact of today’s economic reality, but the scope may come as a surprise to most. Looking at vendors of vendors for MMM and ROC (through the fourth tier), Figure 2 shows that nearly a third of the vendors are incorporated overseas, with a large number in unstable parts of the world.[3] Through constant vigilance of small details such as where our products originate, the US can better protect itself in a world that continues to grow in complexity.
Figure 2: Nation of incorporation for ROC & MMM vendor network.
We do not recommend that our military buy products without any foreign sub-vendors; the world economy is too interconnected for that. With well over ⅓ of the sub-vendor network incorporated overseas, we do feel it is important, especially for key weapon systems that the DoD understands where its sub-vendor universe resides so that it can monitor products, and respond to disruptions.
The views presented in this paper are the authors’ and not necessarily those of the Department of Defense, or U.S. Navy.
Notes
[1] 41 U.S.C. §§ 8301-8303
[2] Miller, John Supply Chain Attack Framework and Attack Patterns, MITRE Technical Report 2013. McLean VA.
[3] Kidd, Michael A. Social Network Analysis of DoD Supply Chain Vulnerabilities, Small Wars Journal, 2019
