Since Russia invaded Ukraine, global supply chains have been hammered by enormous route changes, sky-high fuel prices and carriers imposing extra charges to account for heightened risk. International reliance on Russian oil and gas has businesses around the world unsure how they’ll manage this latest disturbance.
Major shipping firms, Maersk and MSC, have suspended all Russian cargo bookings with the exception of essential items. Four of these firms together account for almost half of all global shipping traffic and their impact can be seen in most countries. Beyond these large companies taking action, multi-national sanctions have been implemented against Russia and individual dockworkers are refusing to unload Russian goods.
These measures paired with soaring fuel costs have ensured that supply chains still coping with the impacts of Covid-19 are now reeling from this conflict. Already, massive changes have developed and the repercussions will be felt far and wide.
No one can say for sure, but we have some very good guesses. For example, most experts agree that this conflict is likely to disrupt global supply chains long term. Some suggest that this will last for at least the next 12 months.
Higher prices for commodities and fuels are also likely to continue. Manufacturing businesses in particular are predicted to have difficulty with their supply chains. Metals used in steel, like nickel, are seeing record high costs along with prices for energy used in the manufacturing process. The defence and automotive industries have started calling for government support to keep production intact.
The UK has just made it illegal for any Russian aircraft to enter UK airspace and plans to further sever ties to Russia are still in place. After a plea from Ukrainian President Zelenskyy, the USA has banned Russian oil and the UK has committed to phasing it out by the end of the year. As the UK continues to limit its support of Russian interests, we will likely see urgent restructuring of industries that relied heavily on Russian imports. This could mean further price hikes over time and increasing tensions between the two nations.
In addition to rising costs, mainland Europe has struggled to commit to moving away from Russian fuels. Many on the continent share well-founded concerns that any bans could cost European countries more than Russia. Currently, 40% of natural gas in the EU comes from Russian sources which means Europe’s reliance on them is significant. The disparity in responses from EU countries and the UK could make already tense relations more brittle if the conflict progresses, leading to an even more complicated supply chain geography.
Though these aren’t certain outcomes, we do know that supply chains will get disrupted again. And again. Between pandemics, wars and climate crises, it stands to reason we should expect the unexpected from here out. But we now have the tools to do it smart.
Read more: Supply chains will never return to normal
The constant turbulence in our world, and in supply chains especially, can make it painful to pivot and difficult to predict when it will be needed. As more moments of instability occur, many businesses will question what other curveballs can occur. For example, what happens if China acts against Taiwan? Are we prepared if other areas of tenuous peace become unsettled?
Although questions like this may feel stressful, it’s important to know that there are ways to build resilience into your business and its logistics. One way we help organisations to create more agile supply chains is by using ‘Digital Twins.’
A digital twin is a detailed simulation of your supply chain that uses real-time data to forecast supply chain dynamics. You can use this to approximate what would happen to your supply chain if something happened to disrupt it. For instance, you may be interested in finding out what would happen if transport from China becomes difficult or if fuel prices continue to rise to a certain level. Forecasting your supply chain’s ability to cope with these changes can better prepare your business for disruption.
Learn more: Supply Chain Resilience for 2022 and Beyond
Even if the fighting stops tomorrow, the next several months will continue to face disruption and supply chains will continue to be hit hard. But knowing the possibilities and making agile plans that can adapt to new scenarios will strengthen your business and lead to greater resiliency during these tumultuous times.
Want to know more about how digital twins can benefit your business? Have a chat with one of our specialists. Get in touch.