Quantifying Systemic Risk and Fragility in the U.S. Defense Industrial Base

Abstract

This research quantifies fragility within the U.S. Defense Industrial Base (DIB) and translates it into supplier risk. The proposed model identifies systemically critical suppliers, where critically is characterized in terms of the supplier either being highly coupled within the industrial base, operating in a limited competition space, or owning a disproportionately large market share within a specific commodity. Each of these properties is quantified using centrality and community detection methods. By correctly assessing critical suppliers in the defense base, it allows for a methodical approach to addressing standard failure modes that typically result in material disruptions in advance of realizing interruptions. Quantifying fragility in supply chains based on systemic centrality and communities is a novel effort. Direct application of this process within the DIB fundamentally approaches assessing and strengthening our supply base resiliency in a completely different manner.