Russia’s invasion of Ukraine and the ongoing war that has followed threaten to disrupt the supply chains of multiple industries across continents. The disruptions are putting at risk supplies of essential components for products that rely on raw materials, logistics, oil, and transportation. Added to the earlier challenges arising from the pandemic together with inflation and increasing shipment costs, these all pose a greater risk of increasing already skyrocketing global commodity prices. We asked international experts about how the war will further affect global supply chains. Check out their answers below.
Key Takeaways:
- Industry experts predict longstanding effects on global supply chains that will exacerbate global inflation.
- With Ukraine under siege and suffering heavy infrastructural damage, its grain, fertilizer, and neon gas exports are being hampered. This has already resulted in higher prices on international markets and is likely to impact the production of goods further down the supply chain.
- The ongoing war in Ukraine is threatening global supplies of essential components for a number of goods that rely on raw materials, logistics, oil, and transportation.
- Experts suggest mapping existing networks to identify bottlenecks, build capacity to manufacture locally, and promote the use of digital fabrication and networked production wherever possible in order to future-proof the supply chains.
How exactly will the Russia-Ukraine war affect global supply chains?
“The impact of the Russia-Ukraine war appears to have spread to global supply chains and affected economies in Eastern Europe and beyond. The concept of ‘mutual commercial relations and mutual dependence reduce the risk of conflict such as war’, which is almost a doctrine in international trade, will probably be reconsidered in the coming period because the emergence of advanced economies’ excessive and unilateral dependence on their trade with Russia and, to a lesser extent, Ukraine, seems to require a reconsideration of the rules of the global game. Russia and Ukraine are major players in the energy, food, and other commodities markets. The war has caused fuel prices to soar to an eight-year high. The increase in delayed shipments due to the sanctions is creating huge congestion. Because of the sanctions, traditional routes between Russia and Europe are impossible to use. The search for new logistical routes and the disruption to port operations in the Black Sea will cause higher rates and longer delivery terms. The restrictions on the sea and air routes make Russia more dependent on the Trans-Siberian Railroad and road connections with China. However, China’s support for sanctions still remains a question mark.”
“The invasion of Ukraine has already severely impacted supply chains in two main ways: reduced exports from Ukraine, and the price of goods impacted by sanctions from Russia. With Ukraine under siege and suffering heavy infrastructural damage, its ability to export grains, fertilisers, and neon gas is obviously hampered. This has already resulted in higher food and agricultural prices and is likely to impact the production of technical goods further down the supply chain. For example, two Ukrainian companies – Ingas (Mariupol) and Cryoin (Odessa) – have suspended their operations during the invasion, essentially stymying 50% of the world’s semiconductor-grade neon which will impact the delivery of chips used in technical goods once stockpiles run dry. Sanctions are also impacting the supply chain, particularly the price of oil and gas. We are already seeing an energy crisis emerging for British households, as well as inflated prices at the pump for fuel globally. This price hike will impact the price of transportation and the costs associated with shipping and delivery will continue to grow. This has prompted some industry leaders, such as Michelin, Volkswagen, and BMW, to stop manufacturing in Europe. These supply disruptions are very worrying, but they have also pushed policymakers to seriously consider the potential of localizing supply chains. The best way to future-proof our supply chains is to map our networks to identify bottlenecks, build capacity to manufacture locally, and promote the use of digital fabrication and networked production wherever possible. The confluence of global conflict and the pandemic have already prompted Dutch, US, and French governments to make policy decisions that might favour onshoring and building national capacity.” (Claire Louise Travers, Humanitarian logistician and Researcher at the Humanitarian Logistics Association, Co-founder of the Local Procurement Learning Partnership)
See also: How does the Russian invasion of Ukraine change shipping and freight rates? | Experts’ Opinions
Check out more than 150 job opportunities in the Logistics sector here.
