Over 250,000 US companies, and over 160,000 European companies, have direct or indirect suppliers in Russia and Ukraine. War in the region was always going to have a dramatic effect on global supply chains, and there are three areas where this is already evident – or likely to manifest.
- Energy: Russia was the second-largest global exporter of oil and has been supplying over 30% of Europe’s gas. The US has already banned Russian oil imports, and some form of reductive measures may well be introduced in Europe.
- Food: Russia is the world’s largest exporter of wheat, whilst Ukraine is a major exporter of corn, barley and rye.
- High-value materials: Ukraine is one of the major suppliers of neon gas, used in microchip manufacturing, and sources of Uranium. Between them, Russia and Ukraine are major sources of Titanium, Manganese, Iron Ore, Aluminium, Nickel, Copper and Platinum. Many of these materials are crucial for electronics manufacturing, including Lithium-Ion batteries.
Almost every supply chain will be affected by shortages in one or more of these areas. More broadly, we can expect disruption of logistics networks and increased transport costs. Cyber-attacks will likely increase on both sides of the “new iron curtain”, and there is an increased risk of chemical or nuclear contamination in the region.
What can supply chain practitioners do?
Without question, we can expect increasingly difficult times ahead. We don’t know how long this crisis will go on for, or how much deeper it could go. Many supply chain professionals are dealing with new challenges, and some are finding themselves fulfilling a critical humanitarian function. They’re not just keeping businesses and economies moving; they’re orchestrating the safe passage of vital resources to people in dire need.
Most supply chain professionals will be feeling an acute sense of responsibility, and some will be questioning their abilities to achieve goals and operate successfully within this new context. However – and purely speaking in supply chain terms – war is a disruptive event, so their training and experience in handling unexpected disasters can be drawn on. And anyone in the industry for the last two years will have plenty of this.
My advice for any professional in this situation is to create an action plan including the following points:
- Prepare for more expensive, and disrupted, logistics. Try to build in redundancy and protect access to supply – redouble efforts towards fuller loads and backloads
- Plan for increased fuel costs. Explore alternative supply channels and different energy sources
- Access deeper data on your second/third-tier suppliers to discover the full extent of problems in your supply chains
- Build up safety stocks, where it is not already too late!
- Search for, and approve, new sources of supply outside the most at-risk zones or areas you no longer wish to trade with
- Where alternative sources do not exist, encourage suppliers of other items to take these on and consider helping them with the cost of doing so
- Develop a broad range of scenarios of how this crisis could evolve, and for how long, and develop a range of plans which you can flex depending on how the situation develops
- Make sure your scenarios include “domino effects” where several of the worst-case things happen at once
By taking the above steps, supply chains professionals can help their organizations rise to the challenges ahead. However, there is always more that can be done to address the ongoing humanitarian crisis. A 100% volunteer, not-for-profit group of procurement professionals have already come together to help those most impacted most. If you would like to lend your expertise to a phenomenally worthwhile cause – you can find more details here: https://procure4peace.org/.