Logistics: Messy Military Manufacturing Monopolies


April 22, 2010: The U.S. Congress has discovered, once more, that complex systems, including weapons, are made from components manufactured all over the world. In this case, the legislators are aroused because it turns out that certain specialty magnets, used in several American weapons systems, come from China. In some cases, China is the only supplier. These magnets are made from "rare earths" (metals like cerium, europium, lanthanum, neodymium and yttrium). The United States used to manufacture some of these components, but China did it cheaper, and most manufacturing shifted to there.

This dispersal of components to nations throughout the world is nothing new. It has been going on for over half a century. Some nations have specialized in certain components, especially electronic, to such an extent that a local disaster could cause global shortages. This happened in 1999, when severe earthquakes in Taiwan shut down factories that produced the majority of the world supply of some computer components. There were worldwide shortages for months. There have been several less striking incidents since then.

As China has become a major industrial manufacturer, they have, like neighbors Taiwan, Japan and South Korea, come to concentrate on certain items, and assemble a world monopoly (via lowest price and reasonable quality). Western nations, especially the United States and Germany, have the largest number of these mini-monopolies. But what the American legislators were worried about was war with China, and an instant shortage of key weapons components. It could take months, or years, to restore necessary supply quantities.

During the Cold War, there were war reserves of certain raw materials, and subsidies to keep American firms manufacturing certain components. But since the Cold War ended in 1991, there has been an enormous growth in electronic and specialty metal components. Many of these are now largely made in foreign countries, particularly Taiwan, Japan, South Korea and China.

Trying to stockpile these items is more expensive than just having a lot of them sitting in warehouse. These items become obsolete rapidly, so many of these warehouses would suddenly be full of scrap, as they were made obsolete by new technologies. Any solution is going to cost billions, and it's unlikely the Department of Defense will be eager to give up a chunk of its budget to prepare for a long war no one wants.





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