BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 1
U.S. Department of Commerce Bureau of Industry and Security Office of Technology Evaluation
U.S. Air Force C-17 Aircraft Supply Chain Impact Assessment
Final Results November 2018
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 2 Who We Are:
• Bureau of Industry and Security (BIS)
Mission: Advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership Develops export control policies Issues export licenses Prosecutes violators to heighten national security Develops and implements programs that ensure a technologically superior defense industrial base
• Office of Technology Evaluation (OTE)
Mission: OTE is the focal point within BIS for assessing the capabilities of the U.S. industrial base to support the national defense and the effectiveness of export controls
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 3
OTE Industry Surveys & Assessments Background:
• Under Section 705 of the Defense Production Act of 1950 and Executive Order 13603, ability to survey and assess: Economic health and competitiveness Defense capabilities and readiness
• Data is exempt from Freedom of Information Act (FOIA) requests
• Enable industry and government agencies to: Share data and collaborate in order to ensure a healthy and competitive industrial base Monitor trends, benchmark industry performance, and raise awareness of diminishing manufacturing and technological capabilities
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 4 OTE/OEA C-17 Project Overview
• Partnership with the U.S. Department of Defense, Office of Economic Adjustment (OEA), and in coordination with the City of Long Beach, to conduct a comprehensive survey and assessment of the C-17 aircraft supply chain industrial base
• Three Phase Project: • Phase I: C-17 Excess Tooling and Equipment Transfer Completed - 2015 • Phase II: Survey Development and Industry Deployment • Phase III: Survey Compliance and Final Results
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 5 What is the C-17 Globemaster III Aircraft? C-17 Aircraft Program
• The first C-17 production model was delivered to Joint Base Charleston, S.C. on June 14, 1993
• The USAF capped its C-17 fleet at 223 aircraft; its final delivery was on 12 September 2013 • Notable C-17 Missions Operation Allied Force 2010 Earthquake Humanitarian Operation Iraqi Freedom Relief Operation Enduring Freedom 2011 Pakistan Flood Relief
Achievements of the C-17 Program • The C-17 Globemaster III is the most flexible cargo aircraft to enter the airlift force • The C-17 flew half of the strategic airlift missions in the Kosovo and Operation Allied Force • The C-17 was awarded U.S. aviation's most prestigious award, the Collier Trophy, in 1994
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 6
C-17 Aircraft Production by Year
18
16
14
12
10
8
6
4 Number of C-17 Aircraft Number of 2
0
USAF Royal Air Force(UK) Royal Australian Air Force Canadian Armed Forces Qatari Emiri Air Force NATO Strategic Airlift Capability UAE Air Force Indian Air Force Kuwait Air Force Boeing Storage
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 7 Phase II: Survey Development and Deployment
• Survey Development and Outreach
• Develop survey data collection topics such as production, employment, financials, R&D, and competitive outlook
• Conduct initial site visits to better understand the impact of the loss of C-17 aircraft sales on the industrial supply chain
• Design, develop, and circulate the draft survey template for feedback from select organizations
• Survey Approval
• Formally field test final version of C-17 aircraft supply chain survey
• Obtain Office of Management and Budget (OMB) C-17 aircraft survey approval
• Survey Deployment
• Format and code approved survey template
• Distribute survey to all identified C-17 aircraft suppliers
• Conduct respondent compliance to ensure quality and timely data analysis
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 8 Methodology - C-17 Aircraft Assessment
• Organization size was established based on sales from C-17 related products manufactured in the U.S. • Small: Under $10M in annual sales • Medium: $10M-$50M in annual sales • Large: Over $50M in annual sales
• BIS received responses from over 420 organizations, representing 544 facilities. Organizations were categorized by business type: • Distributor • Engineering Firm • Non-Profit • Holding Company • Research & Development Firm • Laboratory • Service Provider • Testing Facility • Manufacturer
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 9 Methodology - C-17 Aircraft Assessment
• Scope of survey and assessment was limited to organizations with U.S. operations that supported the C-17 program
• OTE used a list of suppliers provided by the prime contractor and combined it with an internal list, which was accumulated through previous Defense Industrial Base studies and other suppliers identified by C-17 supplier organizations
• Survey exemption requests were handled individually and The Boeing Company was consulted on some cases
• If Boeing and the USAF was not a customer since 2012 and the respondent’s products/services were generic, an exemption would be provided
• Respondents that had Boeing and/or the USAF as a customer since 2012 but were unaware of specific C-17 support were NOT provided an exemption generally
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 10
Type of Supply Chain Support Self-Identified Support of C-17 Program by Type and Time Period (1991-2018)
Both 149 Former and 38 58 53 Current Total
142 Former 47 78 17 Total
85 Current 36 37 12 Total Time Period of Support (1991-2018) Time 0 20406080100120140160 # of Respondents
Direct Only Indirect Only Both Direct and Indirect
QRP, A1 376 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 11 Primary Customer: USAF or Boeing Primary Customers for Known Support of C-17 Program
291
46 and USAF Boeing Only Both Boeing 10% of respondents did not list Boeing or USAF as a primary customer 39 Primary Customer Primary
6 USAF Only Other
0 50 100 150 200 250 300 350 # of Respondents QRP, A1 382 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 12 Respondent Profile Type of Support to USAF or Boeing Boeing Only Both Boeing and USAF Other USAF Only
95 17 4
91 7 17 2 Type of Support of Type
63 47 1 Indirect Indirect Direct Both Direct and
0 20406080100120140 # of Respondents
QRP, A2 344 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 13 Respondent Profile Primary Customers of Suppliers to Boeing and USAF
Boeing 251
Both 71 72% of all primary customers surveyed were suppliers to Other 19 Boeing Primary Customer Primary
USAF 6
0 50 100 150 200 250 # of Respondents QRP, A2 347 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 14 Support of C-17 Program Suppliers of USAF or Boeing with C-17 Support
71, Former 17%
Current 189, 45% 82, 19% Has Never Supplied to USAF or Boeing Both Current and 78, Former 19%
QRP, A2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 15 Respondent Profile Involvement with the Maintenance, Repair, and Overhaul of C-17 Program by Time Period and Primary Customer
283 with MRO Never Involved
38 12 8 Boeing and Former
Both Current Never Involved with MRO
Both
31 14 2 3 Other Time Period of Involvement Time USAF
23 2 Former Current
0 50 100 150 200 250 300 # of Respondents QRP, A3 416 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 16 Small Business Qualifications Does Your Business Qualify as any of the Following Types?
Types of Business Small Business 194 8 (a) Firm 4 197, 217, 48% HUBZone 17 52% Minority-owned 26 Woman-owned 48 Veteran-owned/service-disabled veterans 15
Several respondents qualified for more than one of the drop downs
194 out of 420 respondents identified as a small Yes No business
Q1a, C 414 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 17 C-17 Facility Support Number of Facilities That Have Supported C-17 Program By State
California 191 Missouri 29 Washington 22 New York 21 Texas 21 Georgia 21 Out of 518 facilities, 191 or 45% of Florida 21 C-17 Facilities are located in Ohio 17
State California Kansas 15 Arizona 14 Most respondents had at least 1 Illinois 14 facility that supported the C-17 New Jersey 11 Program Connecticut 11 Michigan 8 Oklahoma 8
0 50 100 150 200 250 # of Facilities 420 Respondents Q1b, B Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 18 Business Functions With C-17 Support Number of C-17 Respondents By Type of Business Function
Manufacturer 238 39 15
Engineering 69 16
Distributor 57 7 3
Service Provider 52 9 4
Testing Facility 27 4
Research & Development 18 9 Business Function
Laboratory 12
Holding Company/Headquarters 5 0 50 100 150 200 250 300 350 # of Respondents Both Other Aircraft Only C-17 Only Q1c, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 19 Types of Company Restructuring per Year Mergers, Acquisitions, and Divestitures from 2012-2017
2008-2012 1 10 2
2015 accounted for 2013 1 8 1 30% of all recorded restructuring 2014 1 15 5 Year 2015 3 33 9
2016 1 21 8
2017 2 16 8
0 5 10 15 20 25 30 35 40 45 50 # of Financial Activities
Mergers Acquisitions Divestitures Q2, A & B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 20
Acquisitions, Divestitures, and Mergers Primary Objectives 60
50 “Other” responses include 49 48 buyouts, equity restructuring, 40 40 and portfolio shaping 30
20 18 10 # of Financial Activities # of Financial 12 12 4 3 2 5 0
Objective Q2, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 21 Joint Ventures Per Year Joint Venture Activities from 1999-2017
1999-2012 22
2013 1 27% of joint ventures were with Chinese companies. The majority of these respondents’ joint ventures 2014 2 were to expand customer base and seek new business opportunities 2015 3 Year
80% of those with joint ventures 2016 2 with Chinese companies were classified as distributers 2017 0
0 5 10 15 20 25
# of Joint Ventures
Q2, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 22 Products and Services Top Products and Services Provided
Primary Business Line Additional Business Line
U: Raw Materials and Purchased Parts 141 58 A: Airframe - Forward, Center, and Aft Fuselages 64 59 V: Material Processing/Finishing 46 25 W: Testing, Evaluation and Professional Services 23 33 G: Hydraulic Systems 16 27 F: Fuel Systems 13 34 X: Aircraft Servicing, Repair and Overhaul 10 50 T: Cargo Compartment and Crew Accomodations 10 26 B: Airframe - Wings 8 99 E: Engine Build-Up Assembly and Nacelle 8 41 S: Environmental and Oxygen System 7 30
K: Landing Gear, Braking System and Loadmaster System 6 37 Respondents had 24
Product and Service Category Product and Service Category D: Vertical Stabilizer 42 choices (A-X) to list their product and services C: Horizontal Stabilizer 37 I: Auxiliary Power Unit Systems 31 0 50 100 150 200 250 # of Respondents
Q3, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 23 Primary Business Lines Top 5 Out of 24 Business Lines
U: Raw Materials/Purchased Parts 405 22 71
A: Airframe: Fuselages 401 24 36
B: Airframe: Wings 249 26 33
V: Material Processing/Finishing 80 73 24 Product and Service Product and Service Category X: Aircraft Servicing, Repair and 31 48 38 Overhaul
0 100 200 300 400 500 600 # of Respondents Product Service Both Q3, C-E 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 24 Program Participation Number of Federal, State, and Local Programs Supported Since 2012
80
70
60 30% of respondents 50 support more than 10 Federal, State, 40 74 and Local programs
30 59 61 # of Respondents
20 38 37 34 27 10 23 17 4 9 3 333 2 5 550 5 0 0 1-10 11-20 21-30 31-40 41-50 >51 # of Federal, State, & Local Programs Large Companies Medium Companies Small Companies Q4, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 25 Program Participation Revenue Attributable to Federal, State, and Local Programs 70
60
50 Nearly 60% of respondents noted that Federal, State, and 40 Local programs account for 20% or less of total revenue 30 62
# of Respondents 20 37 27 10 21 19 19 17 13 15 2 11 12 12 10 11 0 0 6 6 4 4 0 0% 1-10% 11-20% 21-30% 31-40% 41-50% >50% % Revenue
Small Companies Medium Companies Large Companies Q4, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 26 Program Participation Top Federal, State, Local Customers Since 2012 by Support Type
All other DoD Operations 155 136 50
U.S. Air Force 122 98 25
Non-Defense USG 41 30 11 84% of respondents supported DoD related 2 6 Customer Type programs State/Local Government 8 16% of respondents supported Non-DoD Intelligence Community (non-DoD) 1 related programs
5 4 0 50 100 150 200 250 300 350 400 # of Respondents
Indirect Support Both Direct Support Q4, B3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 27 USG Programs Support Top 10 Products/Services Supported through USG Work
U24 - Other Purchased Part 170
U11 - Fasteners 83
F4 - Other Fuel System 82 769 Total Products G4 - Other Hydraulic System 78 and Services
U4 - Castings and Forgings 76
V6 - Other Material Processing/Finishing 69 “Other” responses include Searchlights, Control U9 - Connectors 57 Actuation, and Hardware
Products and Services Consumables among other M4 - Other Guidance, Navigation and Control 54 miscellaneous products
U1 - Aluminum Sheet/Plate/Rod 51
U19 - Switches 49
0 50 100 150 200 # of Respondents Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 28 USG Program Support Top 10 DoD Programs Supported
Boeing Helicopter (Chinook, Apache, etc.) 156
Lockheed Martin F-35 Lightning II 155
Boeing (McDonnell Douglas) F/A-18 Hornet 140
Bell Boeing V-22 Osprey 139
Lockheed C-130 Hercules 136
Boeing F-15 Eagle 132
USG Program Boeing KC-46 101
Lockheed Martin F-22 Raptor 97
Boeing P-8 Poseidon 95
Sikorsky Helicopter (MH-53E Sea Dragon, Black Hawk, etc.) 91
0 20 40 60 80 100 120 140 160 180 # of Respondents Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 29 USG Program Support Top 3 Primary Products/Services Supported by DoD Program
U24 - Purchased Part Boeing Helicopter (Chinook, Apache, etc.) 17 7 7
Lockheed Martin F-35 Lightning II 12 9 7 F4 - Fuel System
Boeing (McDonnell Douglas) F/A-18 9 7 5 Hornet G4 - Hydraulic System
Bell Boeing V-22 Osprey 13 7 7 U11 - Fasteners Lockheed C-130 Hercules 9 7 7
U4 - Castings and Forgings Boeing F-15 Eagle 11 5 5 USG Program Boeing KC-46 7 5 6 U9 - Connectors
Lockheed Martin F-22 Raptor 12 6 M4 -Guidance, Navigation and Control Boeing P-8 Poseidon 7 5 6 A6 - Center Fuselage Sikorsky Helicopter (MH-53E Sea Dragon, 8 6 5 Other/Boeing Part Number Black Hawk, etc.) starting with 17B2, 17N2 and 17P2 0 10203040 # of Respondents Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 30 USG Program Support Top DoD Programs Supported and C-17 Termination Impact
Boeing Helicopter (Chinook, Apache, etc.) 131 15 7 2
Lockheed Martin F-35 Lightning II 132 12 11
Boeing (McDonnell Douglas) F/A-18 Hornet 121 11 7 1
Bell Boeing V-22 Osprey 115 11 12 1
Lockheed C-130 Hercules 115 10 7 2
Boeing F-15 Eagle 111 12 8
USG Program Boeing KC-46 86 9 6
Lockheed Martin F-22 Raptor 82 7 8
Boeing P-8 Poseidon 85 5 5 Sikorsky Helicopter (MH-53E Sea Dragon, Black Hawk, 82 45 etc.) 0 20 40 60 80 100 120 140 160 180 # of Respondents No Change Unknown Negative Impact Positive Impact Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 31 Sales and Customers Average Sales Per Year 2012-2016
$45
$44 $44.0 $44.0
$43 $42.6 $42 $41.5 $41 Average total sales $40 increased by 13.5% from $ in Millions $ in 2012 to 2016 $39 $38.8
$38
$37
$36 2012 2013 2014 2015 2016 Year Q5, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 32 Sales and Customers Aggregate Sales Per Year: 2012-2016
$200 $185.7 $180 $183.4 $181.0 $173.7 $160 $153.9 $140
$120 Total sales increased $100 by 20% from 2012 to
$ in Billions $ in $80 2016 $60
$40
$20
$0 2012 2013 2014 2015 2016 Year Q5, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 33 Sales and Customers Aggregate U.S. and Non-U.S. Sales: 2012-2016
$180
$160 $158.7 $156.2 $159.8 $150.7 $140 $134.1 $120 Between 2012-2016, Non-U.S. sales $100 grew by 31% $80
$ in Billions $ in U.S. sales grew by 19% $60
$40
$24.7 $24.8 $25.9 $20 $19.8 $23.0
$0 2012 2013 2014 2015 2016
Year Non-U.S. Sales U.S. Sales Q5, A-B 396 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 34
Average Percentage of Attributable Sales Broken Down By Category: 2012-2016
70%
63% 64% 64% 64% 64% 60%
Revenue streams can be accounted for in more 50% than one production category
40% 37% 37% 36% 36% 35% 30% % ofSales
20%
13% 13% 13% 14% 14% 10% 6% 6% 5% 3% 3% 0% 2012 2013 2014 2015 2016 Year C-17 Non-US Defense Aircraft Q5, B-E 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 35 Sales and Customers Estimated Direct Customers Per Respondent: 2012-2016
• 420 respondents supported an estimated 433,000 direct customers
• The average respondent supported 182 direct customers • Only 77 respondents reported over 1,000 direct customers • 57% (44) of these respondents were categorized as distributers
Q5, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 36 Type of Customer Supported Number of Respondents By Type of Customer 2012-2016
Government Government Non-Defense, Defense, 325, 13, 1% 11% Other, 52
Commercial, 2585, 87% Other Customers, 39, 1%
Q5, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 37 Type of Aircraft Supported Number of Customers By Aircraft Supported: 2012-2016
C-17 only, 42, 1%
C-17 and other aircraft, 320, 10%
1.3% of identified
Unknown, 503, 16% customers were exclusively involved with C-17 production Other aircraft only, 2328, 73%
Q5, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 38 Sales and Customers Top 15 Non-U.S. Customers by Country 2012-2016
Canada 91 France 70 United Kingdom 59 Germany 26 Brazil 26 Japan 23 South Korea 16 Sweden 13 Out of 445 Non-U.S.
Country Italy 13 customers, 35% or 156 Israel 11 are attributable to Ireland 8 European Union members Turkey 8 Taiwan 8 Netherlands 7 Mexico 7
0 102030405060708090100 # of Respondents Q5, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 39 C-17 Termination Impacts Due To The Termination of The C-17 Program 2012-2016
Gained Customers, 8, 2%
Lost Customers, 63, 15% 15% of respondents lost customers due to the termination of
No Effect/Neutral, the C-17 program 349, 83%
Q5, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 40 Pre-Termination Business Model Respondents’ Most Recent Year of C-17-Related Activities
250
The spike in 2017 can be attributed to 208 200 spare parts, repairs, maintenance, and repurposing for foreign orders of the C-17 aircraft 150 Domestic production of the C-17 aircraft ended in 2013 100 # of Respondents
50 51 37 30 16 15 16 7 0 3 Pre 2000 2000-2012 2012 2013 2014 2015 2016 2017 2018 Year Q6, A1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 41
C-17 Production by Company Size What type of businesses were involved in the C-17 Aircraft Supply Chain?
Approximately 30% of Small, 130, companies involved in C-17 31% Large, 158, 38% aircraft production were small businesses
Medium, 132, 31%
Q6, A1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 42 C-17 Termination Notification Was your organization notified in advance of the C-17 aircraft program termination?
Unknown, 25% of respondents were 133, 32% Yes, 185, not notified of the 44% termination of the C-17 program
No, 102, 24%
Q6, A1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 43 C-17 Termination Notification Source of Notification of the Termination of C-17 Production
“Other” - respondents commonly indicated
Other, 29, 16% they were notified by Boeing, 155, 84% either lower-tier customers or the media
USAF, 1, 0.54%
Q6, A2 185 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 44 C-17 Termination Business Transition Did the termination of the C-17 program change your organization's involvement in the defense industry?
Not Applicable, 21, 5% How was your participation in the defense industry affected?
Reduced Involvement in Defense 49 No, 343, 82% Yes, 56, 13% Increased Involvement in Defense 3
Left Defense Industry 4
Total: 56
Q6, B1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 45 C-17 Termination Business Transition Did the termination of the C-17 program change your organization's involvement in the aerospace industry?
Not Applicable, 23, 5% How was your participation in the aerospace industry affected? Reduced Involvement in Aerospace No , 364, 87% Yes, 33, 8% 24
Increased Involvement in Aerospace 7
Left Aerospace Industry 2
Total: 33
Q6, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 46 C-17 Termination Business Transition Did your organization substitute your C-17 sales with a new or different program?
Haven't Platform for C-17 sales substitutions Tried/Don't Know, 118, 28% USG 21 Yes, 193, 46% Commercial 60
Both USG and 112 No, 109, 26% Commercial
Total 193
Q6, B3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 47 C-17 Termination Business Transition Commercial Platforms Used as Substitute for C-17 Program
Boeing Commercial Jets/Aircraft 149
Airbus Commercial Jets/Aircraft 78
Other Small Aircraft 66 “Even still, these platforms haven't been much of a Other Commuter Aircraft (Bombardier DHC-8, Embraer 145, 58 Commercial Platforms etc.) substitute. We don't do near the volume we did with C-17.” Other Transport Aircraft (Illyushin ll-96, Bombardier Cseries, Small Business etc.) 30 -
0 20 40 60 80 100 120 140 160
# of Respondents Q6, B4 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 48 C-17 Termination Business Transition Top 15 DoD Platforms Used as Substitute for C-17 Program
Lockheed Martin F-35 Lightning II 76 Bell Boeing V-22 Osprey 35 Boeing F/A-18 Hornet 33 All Other DoD 28 Lockheed C-130 Hercules 27 Boeing Helicopter (Chinook, Apache, etc.) 27 Boeing F-15 Eagle 27 Boeing KC-46 20 Boeing P-8 Poseidon 16
USG Platform Bell Helicopter (AH-1 SuperCobra, UH-1, etc.) 14 The top 15 out of 37 Sikorsky Helicopter (MH-53E Sea Dragon, Black Hawk, etc.) 13 categories Other - Drone 13 accounted for 28% Other - Cargo/Transport 9 of total substitutes Northrop Grumman E-2 Hawkeye 9 Lockheed Martin F-22 Raptor 7 0 1020304050607080 # of Respondents Q6, B4 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 49 C-17 Termination Lessons Learned Did your organization adjust its business plan in response to the C-17 Aircraft program's termination?
Unknown, 19, 4%
Not Applicable, 25, 6%
Yes, 57, 14% 14% of organizations adjusted their business plans due to the C-17 programs termination
No, 319, 76%
Q6, C1A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 50
C-17 Termination Lessons Learned Leading Actions Used for Business Plan Alterations After C-17 Termination
Other 31
Reorganization 18
Retraining of Employees 18
Strategy Repurpose of Equipment 14
“Other” frequently included laying Liquidation of High Value Assets 7 off employees and adding more facilities in foreign countries
Increased Investment 7
0 5 10 15 20 25 30 35
# of Respondents Q6, C1B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 51 C-17 Termination Lessons Learned Self-Scoring of Organizations’ Response to C-17 Termination
250 61%
200 Many companies were unaware of project termination while working on 150 the C-17 program
236 100
# of Respondents 18% 16% 50 70 5% 60 20 0 Managed with significant Managed with only minor Handled Moderately Well Handled Well difficulties difficulties Organization Responses Q6, C2 386 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 52 C-17 Termination Lessons Learned Leading Advice for Vendors Experiencing the Loss of a USG Program
350
300 “Less concentration of customers and products 250 offers less risk.” Other responses include: -Small Business 200 providing transition assistance, and providing “Try to implement a balance 150 earlier notice of termination 301 of commercial work with multiple defense programs.” 100 -Large Business # of Respondents 50 “Find other programs, sell, 7 32 41 sell, sell.” 0 -Small Business Increase Other Reduce Diversify Minimum Buys Dependency on USG Leading Advice
Q6, C3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 53 C-17 Termination Lessons Learned Supplier Advice for Government and Defense Prime Contractors when Handling the Closure of a Major Program
250
200 206 “Consumables bought 187 for one government aerospace program 150 “Due to the lead times for raw should be able to be materials, earlier notice of the used on others.” cancellation would have prevented us - Large Business 100 from buying raw material for the C17 Program.”
# of Respondents -Medium Business
50 60 53 14 25 0 Assist with the Provide Other Provide Transition Facilitate/aid in Recognition/Award identification of more/earlier notice Assistance to requalification for Service new substitute MRO phase programs Leading Advice Q6, C4 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 54
Full Time Equivalent Employment Average Number of FTE Employees Reporting at the Corporate and Division Level from 2012-2017
300
250 252 254 254 248 244 246
200 64% of respondents reported FTE Employment at the Corporate/Whole 150 Organization level
# of Employees 100 95 92 92 85 91 90
50
0 2012 2013 2014 2015 2016 2017 Year Business Unit/Division FTEs Corporate/Whole Organization FTEs Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 55 Full Time Equivalent Employment Average FTE Employment by Company Size 800 74 73 73 711 700 691 694 699 694 72 671 71 600 70
500 68 68
400 66 65 300 64 64 240 223 237 226 236 200 213 62
100 60 # Of Employees (Small Businesses)
0 58 2012 2013 2014 2015 2016 2017 # Of Employees # Of Employees (Medium and Large Businesses) Year
Medium Large Small
Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 56 Full Time Equivalent Employment Aggregate FTE Employment by Company Size
23,000 3,250
22,500 22,432 3,200 3,189 22,087 22,000 3,174 3,156 21,757 21,500 3,150 21,230 3,136 21,000 21,090 3,100 20,643 20,561 20,500 20,590 20,310 20,356 3,080 3,050 20,000 19,877 19,658 3,016 19,500 3,000
19,000 2,950 18,500 Businesses) (Small # Of Employees
# Of Employees # Of Employees (Medium and Large Businesses) 18,000 2,900 2012 2013 2014 2015 2016 2017 Year
Medium Large Small
Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 57 FTE Employee Work Designations Average Percentage of Defense, Aircraft, and C-17 Related Employees from 2012-2017
80%
70% 67% 65% 65% 66% 67% 67% 60%
50%
40% 41% 41% 41% 41% 41% 41%
30% Employees can be categorized by more than
% % of Related Employees 20% one field
10% 10% 10% 9% 8% 7% 7% 0% 2012 2013 2014 2015 2016 2017 Year % of Defense Related Employees % of Aircraft Related Employees % of C-17 Related Employees
Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 58 Full Time Equivalent Employment Primary Business Line Full Time Employment Averages 2012-2017 1200
1000 979 998 935 930 935 927
800 773 782 762 744 755 752
600 582 582 568 587 482 506 500 450 442 400 404
# of Employees 359 360
200
0 2012 2013 2014 2015 2016 2017 Year
Manufacturers Distributors Services Engineering Q7a, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 59 Workforce Operations Primary Business Operation Lines of Employment
2.6
Distributor 28.6 25.7 30.3 6.3 10.9 2.7
2.6 3.3
Services 43.8 18.2 7.7 13.5 12.3 2.2
2.4 2.7
Manufacturing 52.3 15.6 5.5 10.5 11.1 1.6 Business Operation 3.4 4.2
Engineering 44.2 15.3 6.4 15.9 9.6 2.0
2.2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of Employment Machinists Admin Marketing Engineers Testing/Support Design Facility/Maintenance IT
Q7a, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 60 Difficulties Hiring and Retaining Workforce Workforce Difficulties Stratified by Occupation
70 66 60 60 54 52 50 48
40 35
30 24 25 21 21 21 18 20 18 20 16 17 16 15 11 # of Respondents 9 10 9 10 66
0
Workforce Difficulties
Hiring Retaining Both
Q7a, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 61 Impact of C-17 Termination on Workforce Respondent Self-Identified Impact Severity on Workforce
Change Un-Related to C-17, Respondents indicated layoffs, reduction in 41, 10% benefits, reduction in overtime, and forced time off as the leading workforce impact they experienced
Minimally Negative, 47, 11% Some large companies indicated that the C-17 termination allowed Negative, 42, 10% them to reallocate resources to new Neutral/No Impact, 290, business opportunities, and to 69% develop new technological advancements to replace losses in employment
Q7b, A1 Source: U.S. Department of Commerce, 420 Respondents Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 62 Workforce Preservation Plan Do you have a workforce preservation plan for the post C-17 environment?
“We have additional contracts to Not Sure, 71, sustain the “Headcount is 17% workforce.” adjusted -Large Company commensurate with sales volume to No, 216, maintain profitability 51% “[We implemented] required by our Yes, 133, redeployment to investors.” 32% project work for other -Large Company customers, including non-aerospace customers.” -Large Company
Q7b, A2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 63 Implemented Workforce Modifications Changes Made In Response to C-17 Termination
16
14 “Other” included layoffs of 14 personnel 12 12 92 of 420 respondents 10 indicated they made changes to their 9 8 workforce
6 # of Respondents 4 4 3 2 2
0 Repurpose Other Retraining Reduction in USG Automation Outsourcing Trained personnel Workforce Modifications Q7b, A3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 64 Loss of Critical Skills/Capabilities Broken Down by Product or Service Line
Product or Service Losses Indicated
Airframe: Forward, Center 3 and Aft Fuselage Testing, Evaluation and 1 Professional Services
Engineering Expertise 1
374, 89% Flight Control Systems 1 35, 8% Fuel Systems 1 5, 1% Machining 1 4, 1% Unknown 38 2, 1% Total 46
No Loss Unknown Yes - Aircraft-related Yes - Both Yes - Non-aircraft-related
Q7b, A4 Source: U.S. Department of Commerce, 394 Respondents Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 65 Developmental Work With Outside Institutions Respondents’ Indication of Work with Outside Institutions on Development/Training
“[We] work with local colleges on employee skills “We visit training.” classrooms, host - Large Business interns, host Yes, 178, 43% MFGDAY, contribute to No, 232, 57% school programs and equipment.” -Medium Business “[We conduct] thorough outreach of Colleges, Trade Schools, High Schools and Veterans/Disabled/Minority groups.” -Large Business
Q7b, B1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 66
Developmental Work With Outside Institutions Participation Broken Down by Business Size
Small, 37 Total Participation With Outside Institutions
Large, 88 56% of Large 40% of Medium 28% of Small Businesses Businesses Businesses
Medium, 53 42% of all businesses participated
Q7b, B1 178 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 67 Workforce Development Programs Participation in Workforce Development Programs
250 225
200 182
149 150 128 127 107 100 71
# of Respondents 51 50 34 10 11 13 2 7 8 4 0
Workforce Programs Current Participation Past Participation Q7b, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 68 Workforce Development Programs Developmental Programs Deemed Most and Least Useful Among Respondents in Post C -17 Transition
40 35 35
30 25 25 23 21 20 19 18 15 16 15 15 14 13 11 11 12 12 12 10 9 10 9 10 7 8 7 4
# of Respondents 5
0
Developmental Programs
Very Useful Somewhat Useful Not Useful
Q7b, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 69 Critical Vendors & Suppliers Total Supplier Support
• 1,307 unique suppliers supported 420 respondents
• The top 15 most cited suppliers only accounted for 7% of all supplier support
• 97% (1,267) of all identified unique suppliers are considered domestic
Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 70 Critical Vendors & Suppliers Suppliers by Country
Canada 9 United Kingdom 8 France 7 Germany 6 Japan 5 Israel 5 Switzerland 3 Mexico 3 India 3 Taiwan 2 420 respondents
Country Sweden 2 were supported Singapore 2 by a total of 62 China 2 Spain 1 Non-US suppliers South Korea 1 Malaysia 1 Ireland 1 Cameroon 1 012345678910
# of Suppliers Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 71 Critical Vendors & Suppliers Suppliers by Top 15 State
California 459 Pennsylvania 66 New York 61 Ohio 60 An estimated 1,307 unique suppliers supported 420 Washington 52 respondents Illinois 49 Missouri 47 California accounts for 35% of all Texas 46 identified vendors and suppliers State Florida 34 Connecticut 31 Respondents could list multiple New Jersey 27 suppliers Massachusetts 25 Georgia 25 Arizona 25 Michigan 24
0 50 100 150 200 250 300 350 400 450 500 # of Respondents Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 72 Critical Vendors & Suppliers Top 10 Supplier Input Categories
Raw Materials and Purchased Parts 1,113
Material Processing/Finishing 259
Testing, Evaluation and Professional Services 56
Airframe: Forward, Center and Aft Fuselage 28
Aircraft Servicing, Repair and Overhaul 28 Over 70% of identified Electrical Power System 23 suppliers provide raw materials and purchased Input Category Fuel Systems 22 parts
Flight Control Systems 18
Landing Gear, Braking System and Loadmaster System 17
Communication and Recording Systems 16
0 500 1000 1500 # of Respondents Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 73 Critical Vendors & Suppliers Top 5 Supplier Input Product/Service Areas
U24 - Other Purchased Part 360
U23 - Other Raw Material 181
U1 - Aluminum Sheet/Plate/Rod 118 Other Purchased Parts include Hydraulic Systems, and Switches
V6 - Other Material Processing/Finishing 103 Product/Service Areas Other Raw Materials include Castings & Forgings, and Composites V1 - Coating and Painting 87
0 100 200 300 400 # of Respondents Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 74
Supplier Association With C-17 Program Number of Respondent Suppliers Associated With C-17 Program
C-17 Specific, 127, 8%
8% of 1,661 identified suppliers were exclusively
C-17 and other involved in C-17 Unknown, 637, 38% aircraft, 897, 54% specific operations
Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 75 Supplier Impacts Impact of C-17 Termination On Domestic Supplier Shut Downs
Only one respondent indicated that one or more of their suppliers ceased operations following the termination of the C-17 program. Both suppliers were located in California. Both sold raw materials and purchased parts.
“Less income. Had to lay off long time employees.” -Small Business
Q8, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 76 Operating Profit Margin Average Operating Profit Margin Across Small, Medium, and Large Businesses 2012-2016 16% 15.4% 15% 14.3% 14.2% 14% 13.7% 13.9%
13% 13.1% 12.6% 12.7% 12.7% 12% 11.6% 11.5% 11% The average operating
10% profit margin was 12.7% across all business sizes 9.8% Operating Profit Margin 9% in 2015
8% 7.4% 7% 2012 2013 2014 2015 2016 Year Small Business Medium Business Large Business Q9 396 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 77 Financial Risk Levels Number of Companies and Financial Risk Level 400 362 357 356 350 350 341 Financial Risk calculation based primarily on profit margins, debt 300 levels, liquidity
Reasons for lack of measurement: 250 Source data mismatches (e.g. 200 reporting income statement data at the facility level and balance sheet 150 data at the corporate level) # of Respondents 100 Unavailable or missing data (e.g. no 67 assets or sales listed, newly formed 54 45 49 business) 50 42 13 12 5 6 10 4 10 6 9 3 0 2012 2013 2014 2015 2016 Year
Low/Neutral Risk Moderate/Elevated Risk High/Severe Risk Insufficient Data Q9 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 78 Financial Risk Levels Company Sizes for Overall Financial Risk Status 2012-2016
140
120 117 108
100 93 25% of all respondents were 80 financially categorized as moderate/elevated or high/severe risk 60 # of Respondents 40 31 26
20 13 10 9 5 6 0 2 0 Low/Neutral Risk Moderate/Elevated Risk High/Severe Risk Insufficient Data
Large Medium Small Q9 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 79 Financial Impacts Self-Assessed Financial Impacts Experienced Due To The End of C-17 Program
No Change 267
3 respondents indicated that the C-17 program’s closure had a positive effect on their business Negative Impact 102 Negative Impacts:
“Loss of revenue and jobs.” Unknown 48 -Medium Business Financial Impact “Stock (inventory) became obsolete.” -Small Business
Positive Impact 3 “Unable to pay back loans.” -Small Business
0 50 100 150 200 250 300 # of Respondents
Q9, C1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 80 Financial Risk Level vs. Financial Impact Financial Impact Due To Termination of C-17 Program According To Financial Risk Levels 250
218
200
150
100 # of Respondents 63
50 34 34 26 6 8 0 0 1 1 2 0 High/Severe Risk Moderate/Elevated Risk Low/Neutral Risk Financial Risk Positive Change Unknown Negative Impact No Change Q9, C1 393 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 81
Financial Risk Level vs. Financial Impact High/Severe Risk and Moderate/Elevated Risk Companies
High/Severe Risk Commonalities: High/Severe Risk, 7 6 out of 7 Respondents have known C-17 support and all production is aircraft-related Primary business line is manufacturing
Locations in different states, Only 2 are in California
Majority small businesses
Moderate/Elevated Risk, 69 Moderate/Elevated Risk Commonalities:
Majority large businesses
44% stated C-17 termination had a negative impact on their business
Q9, C1 76 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 82 Capital Expenditures Reporting Number of Respondents with Capital Expenditures 2012 - 2016
No Capital 26% (110) of Expenditures, 110, 26% respondents had no capital expenditures
Capital Over 50% (55) Expenditures, 310, 74% with no capital expenditures were small businesses
Q10, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 83 Capital Expenditures Average Capital Expenditures 2012-2016
$1,600
$1,462 $1,400 $1,300 $1,239 $1,200 $1,139
$1,000 $949
$800 Average Capital Expenditures $600 $ in Thousands $ in increased by 54% from 2012 to 2016 $400
$200
$0 2012 2013 2014 2015 2016 Year Q10, A 310 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 84 Capital Expenditures Average Capital Expenditures Broken Down By Allocation
60%
55.0% 54.7% 53.0% 53.9% 50% 50.5%
40%
30% 26.1% 26.8% 26.7% 26.2% 26.9%
20% % of Capital Expenditure Capital of %
10%
2.7% 2.4% 2.5% 1.7% 1.4% 0% 2012 2013 2014 2015 2016 Year C-17 Related Defense Related Aircraft Related Q10, A 310 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 85 Average of Attributable Capital Expenditures Broken Down By Allocation
$900 $799 $800 $700 $700 $681 $604 $600
$500 $479
$393 $400 $331 $341 $306 $ in Thousands $300 $248
$200
$100 $25 $27 $30 $23 $20 $0 2012 2013 2014 2015 2016 Year C-17 Defense Aircraft Q10, A 310 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 86 Reduction of USG Defense Spending Impact of Reductions In USG Defense Spending on Capital Expenditures
Negatively Impacted, 34, 8% 16 of the 34 respondents who were negatively impacted are small business enterprises.
“We had no reason for growth. We just Unknown, 88, 21% needed to survive, and we have so far. -Small, Moderate/Elevated Risk Business
Not Impacted, 298, “From 2013 through 2015, there was little 71% need for more equipment as government procurement was flat.” -Medium, Low/Neutral Risk Business
Q10, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 87 Use of 3D Printing for Obsolescence Number of Respondents Utilizing 3D Printing To Manage Obsolescence Issues and Aircraft Program Applicability
No Obsolescense Issues, 54, 13% General Aircraft Related, 68, 16%
Other, 77
No, 289, 69%
Not Aircraft Related, 9, 2%
Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 88 General 3D Printing Capabilities Number of Respondents With 3D Printing Capabilities 2012-2016
Unknown 22 5% Only 7 of the 65 respondents with 3D printing capabilities experienced a decline in aircraft-related capital Yes 65 expenditures due to a reduction in USG 16% defense spending
None of the 65 respondents who have 3D printing capabilities are classified as high/severe risk companies No 333 79%
Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 89 3D Printing Top 10 3D Printing Product/Service Categories
Testing, Evaluation and Professional Services 16
Raw Materials and Purchased Parts 12
Material Processing/Finishing 9
Communication and Recording Systems 4
Fuel Systems 4
Propulsion Systems 4 Respondents were asked to list up to two products or
Product/Service Engine Build-Up Assembly and Nacelle 4 services which have 3D Flight Control Systems 3 printing capabilities
Emergency Systems and Fire Detection 2
Airframe: Forward, Center and Aft Fuselage 2
0 2 4 6 8 1012141618 # of Respondents Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 90 3D Printing Top 5 3D Printing Product/Service Areas
U24 - Other Purchased Part 5
W9 - Engineering Services 2 Other Systems/Services listed cover a wide array of product and service areas W10 - Other Testing Service 2 Examples include:
Flight simulators, interior lighting F4 - Other Fuel System Product/Service Areas 2 systems, aircraft and engine level fuel components, component testing, and prototyping
L6 - Other Communication and Recording 2
0123456 # of Respondents
Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 91 Research and Development Percent of Respondents That Conduct R&D
152 of the 420 respondents (36%) Small 14% 18 respondents indicated that they conduct research and development
Medium 33% 43 respondents Company Size Company
Large 58% 91 respondents
0% 10% 20% 30% 40% 50% 60% 70% 80% % of Respondents Q11, A1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 92
Research and Development Would Your Organization Conduct R&D if the U.S. Government Provided Funding?
Small 30% 66% 4%
Medium 41% 58% 2% Company Size Company
Large 44% 51% 5%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of Respondents Yes No Yes but not aircraft-related Q11, A1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 93 Research and Development Average Small Business R&D Expenditures 2012-2016
$1,400
$1,200 $1,218
$1,046 $1,058 $1,000 $978
$800 Small Business R&D $721 Expenditures have $600 increased by 47% from
$ in Thousands $ in 2012 to 2016 $400
$200
$0 2012 2013 2014 2015 2016
Year Q11, B1 18 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 94 Research and Development Average Medium Business R&D Expenditures 2012-2016
$8
$7 $6.7
$6
$5.2 $5 $4.9 $5.1
$4 $4.0 Medium Business R&D $ in Millions $ in $3 Expenditures have increased by 29% from $2 2012 to 2016
$1
$0 2012 2013 2014 2015 2016
Year Q11, B1 43 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 95 Research and Development Average Large Business R&D Expenditures 2012-2016
$97 $96.7
$96 Large Business R&D Expenditures have increased by 5% from $95 2012 to 2016
$94 $93.7
$93.1 $93 $92.9 $ in Millions $ in $92.4 $92
$91
$90 2012 2013 2014 2015 2016
Year Q11, B1 43 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 96 Research and Development Average Annual R&D Expenditure By Area of Research 2012-2016
70%
65% 60% 63% 64% 64% 60%
50%
40%
34% 35% 30% 34% 34% 34%
20% % % of R&D Expenditures 10%
2% 2% 2% 1% 1% 0% 2012 2013 2014 2015 2016 Year
C-17 Defense Aircraft Q11, B2-4 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 97 Research and Development Average R&D Expenditure By Area of Research and Company Size 2012-2016
90% Medium Businesses 80% 74% Large Businesses 70% 70% 63% 60% 64% Small Businesses 50% 45% 42%
40% 36% 40% 41% 31% 30% 32% 33% % % of R&D Expenditures 20%
10%
6% 2% 0% 0% 2% 2% 0% Defense Aircraft C-17Defense Aircraft C-17Defense Aircraft C-17
2012 2016 Q11, B2-4 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 98 Research and Development Top R&D Funding Sources 2012-2016
Internal/Self-Funded 135 49
DoD 12 16
U.S. Industry 4 14 1 “Our equipment can be applied to commercial Other 17 as well as military aircraft part construction, so our R&D efforts are equally applicable to both segments.” Other USG 5 -Large Business
State and Local Government 2 R&D Funding Source R&D Funding
Universities 1
Non-U.S. Investors 1
0 50 100 150 200 # of Respondents Primary Funding Source Secondary Funding Source
Q11, C1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 99 Research and Development Top Aircraft-Related R&D Funding Sources 2012-2016
Internal/Self-Funded 98 27
DoD 9 12 Approximately 72% of respondents that conduct R&D utilize their primary
R&D Funding Source R&D Funding source of funding for
U.S. Industry 3 11 aircraft-related activities
0 20406080100120140
# of Respondents Primary Funding Source Secondary Funding Source Q11, C1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 100 Security Expenditures Average Aircraft-Related Physical and Cyber Security Expenditures
$4.0
$3.5 $1.8 $1.7 $3.0 $1.5 $1.5 $1.6
$2.5
$1.0 $2.0
$ in Millions $ in $1.5
$1.0 $1.6 $1.6 $1.5 $1.7 $1.3 $1.4 $0.5
$0.0 2012 2013 2014 2015 2016 2017
Cyber Security Expenditures Physical Security Expenditures Q12, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 101 Security Expenditures Average Small Business Cyber and Physical Security Expenditures
$7
$6 $5.8
$5
$4 $4.1 $3.6 $3.4 $3 $2.8 $ in Thousands $ in $2 $2.1
$1 $0.9 $1.0 $0.7 $0.8 $0.7 $0.7
$0 2012 2013 2014 2015 2016 2017 Year Cyber Security Expenditures Physical Security Expenditures
Q12, A 130 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 102 Security Expenditures Average Medium Business Cyber and Physical Security Expenditures
$30
$25 $23.9
$20 $18.1
$15
$12.2
$ in Thousands $ in $10 $10.0 $7.8 $6.1 $5 $4.8 $3.8 $3.0 $2.5 $2.4 $2.6 $0 2012 2013 2014 2015 2016 2017 Year Cyber Security Expenditures Physical Security Expenditures Q12, A 132 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 103 Security Expenditures Average Large Business Cyber and Physical Security Expenditures
$350 $324.1 $300 $288.7 $280.2
$250 $238.6
$200
$159.3 $150 $ in Thousands $ in $100 $86.5 $69.9 $73.0 $69.8 $66.6 $50 $56.0
$0 2012 2013 2014 2015 2016 2017 Year Cyber Security Expenditures Physical Security Expenditures Q12, A 158 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 104 Cyber Security Policies Cyber Security Policies in Place for All Respondents
Restrict IT Priviliges to Specific Employees 96.0%
Inventory of Authorized and Unauthorized Software 78.8%
Inventory of Authorized and Unauthorized Devices 78.1%
Maintain, Monitor, and Analyze Audit Logs 77.1%
Security Policy Security Written Protocols for Security Breach 67.6%
Annual Cybersecurity Training Requirement 60.7%
Two-Factor Authentication 35.2%
% of Respondents Q12, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 105 Cyber Security Policies Cyber Security Policies in Place By Company Size
Under 50% 50-75% 75-100% Small Medium Large
Restrict IT Priviliges to 98% 99% 89% Specific Employees
Inventory of Authorized 86% 87% and Unauthorized 62% Software Inventory of Authorized and Unauthorized 65% 80% 87% Devices
Maintain, Monitor, and 55% 80% 93% Analyze Audit Logs
Cyber Security Measures Security Cyber Written Protocols for 43% 67% 89% Security Breach
Annual Cybersecurity 36% 56% 85% Training Requirement
Two-Factor 24% 33% 46% Authentication
0% 100% 0% 100% 0% 100% % of Respondents Q12, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 106 Cyber Security Policies Cyber Security Policies in Place By Company Size
Under 50% 50-75% 75-100% Small Medium Large
Restriction Against Non 80% 80% 71% U.S. Storage of CSI
Data Exfiltration 54% 67% 71% Safeguards
Encrypt CSI Transmitted 44% 64% 77% Externally Cyber Security Measures Security Cyber
Encrypt CSI in Storage 34% 50% 53%
Encrypt CSI Transmitted 27% 34% 56% Internally
0% 100% 0% 100% 0% 100% % of Respondents Q12, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 107 Outreach and Assistance Effectiveness of Assistance from Outside Organizations
Federal Government 2 2 1 State and Local Government 2 4 1 1 Other 3 5
Both Government and Industry 8 3 4 1
Type of Organization of Type Non-Profit 4 14 9
Industry 41 43 15 3
0 20406080100120 # of Respondents
Very Effective Somewhat Effective Neutral Not Useful
Q13, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 108 Outreach and Government Programs Top 10 Government Programs selected by Organization’s Interest
Market Expansion/Business Growth 19.0%
Cybersecurity 17.9% Contrinuous Improvement/Lean 17.6% Manufacturing
Government Procurement Guidelines 13.3%
Export Licensing (ITAR/EAR) 13.3%
Supply Chain Organization 12.9%
Quality Management and Control 11.7%
Government Program ITAR: International Traffic Vendor/Material Sourcing 10.7% in Arms Regulations EAR: Export Technology Acceleration 10.0% Administration Regulations
Design for Manufacturability 8.8%
0% 5% 10% 15% 20% 25%
% of Respondents Q13, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 109 Organizational Challenges Top 15 Organizational Challenges
Healthcare 144 55 43 Domestic Competition 118 52 66 Labor Availability/Costs 124 49 47 Worker/Skills Retention 108 58 28 Aging Workforce 105 45 23 Foreign Competition 90 51 23 Taxes 65 74 18 Aging Equipment, Facilities, or Infrastructure 73 47 24 Reduction in USG Demand 68 51 8 Government Regulatory Burden 59 61 5 Qualifications/Certifications 60 50 11
Organizational Challenge Cybersecurity 43 60 13 Government Purchasing Volatility 49 38 25 Environmental Regulations/Remediation 43 61 4 Export Controls/ITAR & EAR 46 44 11 0 50 100 150 200 250 300 # of Respondents
Other Ranked Concern Unranked Concern Primary Concern Q14 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 110
BIS/OTE Contact Information
Brad Botwin Erika Maynard Director, Industrial Studies Special Projects Manager (202) 482-4060 (202) 482-5572 [email protected] [email protected]
Trade and Industry Analyst: Moriah Phillips Research Fellow: Jean Thompson
Alexander Werner Marina Gayed Research Fellow Research Fellow (202) 482-4615 (202) 482-7980 [email protected] [email protected] Intern Support: Andrea Garcia, Caela Mandigo, Christopher Whittle, Emily Festa, Fahmiya Ismail, Ian Kearns, Lily Shultz, Ormond Derrick, Sagar Sharma, William Helfrich
U.S. Department of Commerce, Bureau of Industry and Security HCHB 1093, 1401 Constitution Avenue, Northwest Washington, D.C. 20230 http://www.bis.doc.gov/DIB
Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED