Source · Select Committees · Scottish Affairs Committee
Recommendation 76
76
Accepted
Professor Keith Hartley of the University of York told us that there was a limited...
Conclusion
Professor Keith Hartley of the University of York told us that there was a limited understanding of shipbuilding supply chains: The problem we face in the Scottish shipbuilding industry is that, although we know the major primes like BAE and have a limited amount of information on their supply chains […] These supply chains are very complex, and Governments do not understand them and do not have any knowledge about them. They have knowledge about the first tier suppliers to the primes, but beyond that they really do not understand and have little knowledge.123 Knowledge gaps in this area make it more difficult to assess risks. For example, if a prime contractor sources components from a sole supplier, there is a risk of significant disruption if that supplier goes out of business. The MOD has recognised the importance of building more resilient supply chains in its new Defence Supply Chain Strategy, published in November 2022, which places a new emphasis on resilience in response to challenges like the COVID-19 pandemic and the conflict in Ukraine.124 Improving understanding of supply chains could also bring opportunities. For example, as industry knowledge about regional supply chains grows it could encourage greater collaboration between neighbouring businesses.125
Government Response Summary
The MOD operates initiatives to improve understanding of supply chains, including the Supply Chain Resilience Programme and a new Defence Condition (DEFCON) requiring contractors to provide supply chain maps.
Government Response
Accepted
HM Government
Accepted
Our critical supply chains, including those used within shipbuilding, depend on a diverse range of global trading partners to ensure a continuing flow of essential items and to avoid shortages. As the Committee has noted, the MOD operates a series of initiatives to improve our understanding of our supply chains, as well as identify and address any vulnerabilities. These include an extensive MOD-wide Supply Chain Resilience Programme, which aims to prioritise the mapping of our most critical supply chains, such as those used within the Type 26 Frigate programme, to ensure any impact on the delivery of Defence outputs is minimised. The MOD have also sought to improve the quality of the mapping data received from our suppliers by introducing a new Defence Condition (DEFCON) in all new contracts over a certain value threshold. This requires contractors provide the Department with their supply chain maps down to Tier 4 of the supply chain. The Department are also working with our industry partners to understand, map and, where appropriate mitigate common critical components and materials. This activity supports the assessment of risks and potential strategic mitigations in the end-to-end supply chain for these defence technologies.