Burritos, blue corn, organic oats, and the Joint Direct Attack Munition (JDAM) smart bomb convertor kit: In the words of the old Sesame Street song, one of these things is not like the others.
The difference, in the supply chain world, is that we know with increasing accuracy what ingredients go into the burritos we eat, the chips we dip, and the cereal we wolf down, but we have very little idea where key metals and minerals in major U.S. weapons systems come from.
That's the lesson learned from separate stories in recent weeks.
First, the food news from the business page. Nature's Path, a Canadian organic cereal maker, bought a Montana farm to better source and certify its own access to organic wheat and oats. Tortilla chip maker Garden of Eatin' has entered into futures contracts with farmers for organic blue and yellow corn. And Chipotle, America's leading burrito supplier, is financing farmers and hiring organic farmer headhunters to ensure its feedstock for salsa and guacamole.
Across the organic food space, producers are locking down their supply chains, limiting or even eliminating uncertainty about their access to the organic ingredients they need.
The same cannot be said of the key ingredients that go into the Pentagon's major weapons systems.
That was the message of the recent 60 Minutes segment on rare earths, Modern Life's Devices Under China's Grip, for which this author was interviewed by Lesley Stahl. As 60 Minutes put it: "From smartphones to cars and defense missiles, modern U.S. life depends on rare earth elements, but China dominates the industry."
The piece parts for our JDAM kits reach U.S. defense contractors from the scattered corners of the global economy. Arriving by overnight express in the just-in-time world of global sourcing, metals are the defense industrial base's mystery meat.
Of course it's one thing for commercial manufacturers to operate in a just-in-time economy, and quite another for our warfighters to operate in a not-in-time conflict.
How dependent are U.S. weapons systems on Chinese-supplied rare earths? As part of its source material, the 60 Minutes website posted a link to a July 2014 "Official Use Only" Defense Department Inspector General report entitled Procedures to Ensure Sufficient Rare Earth Elements for the Defense Industrial Base Need Improvement. In the measured words of the DoD's IG:
DoD [Department of Defense] lacked a comprehensive and reliable process to assess REE supply and demand.... [and] As a result, DoD may not have identified all REEs with expected shortfalls, increasing the risk that those shortfalls will adversely affect critical weapons systems production in the DIB, and overall DoD readiness.
Why is it so hard to know which rare earths DoD needs, and in which amounts? Perhaps, as the IG report notes, it's because:
...changes in DoD acquisition strategy no longer require contractors to provide details on what materials are included in the weapon system components so the Services would have to pay contractors for this data.
It's a little like looking for a needle in a haystack - but first you have to find the haystack. U.S. Defense strategic materials planners face an incredibly complex forensic exercise. They must piece together the global supply chains for rare earth applications, and estimate demand for each individual rare earth element in the midst of material science advances and business-proprietary blind spots. For that very reason, having a diverse domestic rare earth supply chain is a prudent hedge against the unknown. And as we have known, since the time of Socrates and down through the days of Donald Rumsfeld, the "unknown unknowns" can kill you.
What we do know is worrying enough already. That's the takeaway from the just-released Strategic & Critical Materials 2015 Report on Stockpile Requirements, the Pentagon's comprehensive biennial assessment of key materials used in the defense industrial base, and of the potential shortfalls under certain emergency and crisis scenarios.
Of the dozen materials that the Pentagon report recommends for stockpiling, China is a top-tier supplier for 11.
And China, flush with cash at a time when so many other nations sit deep in deficit, is locking down its raw materials supply chain with the zeal of an organic burrito maker. In Greenland, a Chinese mining conglomerate has just taken a majority interest in a multi-metal mining project that will yield rare earths, uranium and zinc. Another Chinese state owned enterprise - this one already a major rare earths miner - has acquired a 50.1 percent stake in a Canadian rare earths mining company. Going beyond rare earths, a subsidiary of aluminum giant Chinalco acquired a major stake in a Mozambique graphite mine - a key ingredient in clean-tech apps such as EV batteries and fuel cells - that according to leading graphite analysts, may well constitute the highest-quality graphite mine under development outside of China.
And that's all within the past 30 days.
So the Pentagon has sounded the alarm, and 60 Minutes has turned its considerable investigative powers on the issue. What happens next - or what doesn't happen - may shape the outcome of conflicts yet to come.
And if a crisis cuts off the metals we need to maintain our advanced weapons systems, all the organic blue corn and non-GMO avocados in the world can't help us.
