Challenges of Ramping-Up Defence Production Capacity

In response to the evolving security landscape shaped by the Russian war of aggression against Ukraine, European Union (EU) and NATO members are compelled to enhance their defence production capacities. This task, however, is not without its challenges, and ASD’s recent paper explores this complex process.

1. Predictability: A major hurdle faced by the industry is the lack of visibility on customers' long-term plans and concrete contracts. The absence of stable demand outlooks makes it challenging for companies, especially privately owned enterprises, to make informed decisions regarding investments in production and workforce.

2. Supply chain challenges: Original Equipment Manufacturers (OEMs) face obstacles in scaling up production due to limited visibility beyond immediate suppliers. The concentration of key suppliers and dependence on non-European sources for critical inputs contribute to supply chain bottlenecks, driving up prices and posing security risks.

3. Skills and competences: Acquiring and retaining a skilled workforce is a significant challenge, exacerbated by limited availability of professionals with expertise in advanced weaponry. Negative public perceptions and stiff competition from other industries further hinder talent recruitment.

4. Legal and administrative processes: Slow and burdensome regulatory processes, divergent purchasing rules among Member States, and stringent quality requirements contribute to delays and inefficiencies in defence procurement. The EU's regulatory framework, while essential for environmental protection, may inadvertently impede defence production.

ASD’s recommendations

  • Careful management of defence budget constraints to prevent stifling innovation.
  • Coordination and strategic placement of new manufacturing facilities to avoid competition and inefficiencies.
  • A balanced approach to co-production or licensing agreements.
  • Investment in domestic manufacturing capabilities to avoid over-reliance on foreign sources.
  • Proper management of ramp-down phase to prevent over-capacity, loss of return on investment, and workforce lay-offs.

Challenges of Ramping-Up Defence Production Capacity

Download this ASD Paper on the challenges for ramping up European defence production, and ASD’s recommendations from a secure and competitive future for Europe. Published by ASD in August 2023.