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ASCM Insights

Russia’s Invasion of Ukraine: The Supply Chain Implications

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While supply chain disruption is nowhere near as tragic as the loss of human life, the effects of Russia’s invasion of Ukraine will be felt across our global networks and must be taken seriously. Indeed, whenever the world experiences a geopolitical event such as this one, there are immediate consequences. Some are easily anticipated; others are much less clear.

First, we are very likely to see significant delays in road and rail routes through Ukraine and its neighboring countries. To avoid volatility on land, shippers may choose the sea. But this mode is already under strain because of the pandemic, notes Marc Boileau, senior vice president at FourKites, in The Loadstar. “For some suppliers, switching to air freight may offer a short-term solution, but this will increase costs significantly,” he adds.

The article also notes that shippers can expect freight and fuel cost hikes, both in war-affected areas and more broadly. Crude prices have already passed $100 a barrel — the first time this has happened in eight years.

In addition, the attacks will reverberate through the global chip industry and intensify current constraints, according to Reuters: “Ukraine is a major producer of neon gas critical for lasers used in chipmaking and supplies more than 90% of U.S. semiconductor-grade neon,” writes Lisa Jucca. “About 35% of palladium, a rare metal also used for semiconductors, is sourced from Russia.”

And of course, many global logistics businesses are pausing operations in Ukraine in order to safeguard their workforces. This will further exacerbate the supply chain challenges.

Gartner’s Koray Köse, senior director analyst, and Sam New, senior principal analyst, believe the critical supply chain issues include limited production capacity; demand volatility; logistics route constraints; shortages and price increases of key materials, including hydrocarbon, critical minerals, metals and energy; and cybersecurity breaches, with high-tech, aerospace and defense, energy, and agriculture being prime targets.

“As of February 15, we have seen the largest-ever cyberattacks on Ukrainian key infrastructures, and those will spill over globally as this situation continues to unfold,” they write. “Supply chain leaders in high-risk industries should brace for an increased number of attacks and prepare accordingly.”

Prepare your networks

The outcomes of this event may still be uncertain, but now is the time to build resilience. Run scenarios, assess your exposure, establish redundancies and identify workable alternatives. Of course, visibility into all supply chain tiers is absolutely essential to each of these efforts.

Achieving visibility requires digital supply chain transformation that integrates communication and automates processes. ASCM’s Digital Capabilities Model is a free and open reference that enables you to effectively envision and build these capabilities, with each mapped to relevant elements in the SCOR Digital Standard. Don’t wait another day to attain all-tier visibility; get started now.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer of the Association for Supply Chain Management (ASCM), the largest organization for supply chain and the global pacesetter of organizational transformation, talent development and supply chain innovation. During his tenure, ASCM has significantly expanded its services to corporations, individuals and communities. Its revenue has more than doubled, and the association successfully completed three mergers in response to both heightened industry awareness and the vast and ongoing global impact driven by supply chains. Previously, Eshkenazi was the managing director of the Operations Consulting Group of American Express Tax and Business Services. He may be contacted at abe@ascm.org.

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