At the tail end of 2021, supply chains around the world seemed to finally be on the rebound. Manufacturers, shippers, suppliers, retailers, and consumers began to breathe sighs of relief. Many believed that the two-plus years of pandemic-related supply chain woes were finally coming to an end.
However, much of this optimism was curbed on February 24th, 2022, when Russian forces invaded Ukraine.
While the actual combat has remained isolated to Eastern Europe, this ongoing conflict has already begun to place added strain on already wounded global supply chains. Should this turn into a protracted conflict, these disruptions will likely worsen in the coming months.
If organizations want to preserve business continuity and avoid reliving the nightmarish scenarios of mid-2020, then they must familiarize themselves with this conflict and the potential long-term consequences it may create. Additionally, businesses must proactively work to make their supply chains more resilient.
Why Is This Regional Conflict Impacting Global Supply Chains?
Our modern society is more interconnected than ever before. As a result, governments and private organizations have become heavily reliant on exported materials that often originate from far away nations.
While this is a gross oversimplification of global supply chains, it does provide some insight into why a regional conflict is having such a major impact on industries around the globe.
Russia exports significant amounts of several highly sought-after resources, including oil, mineral fuels, and distillation products. While Ukraine’s export habits are discussed far less frequently, the relatively small Eastern European nation does have an abundance of several vital resources.
The conflict has disrupted Ukraine’s ability to export the same volume of goods that it did prior to the invasion. Likewise, Russia has had to divert some resources to sustain domestic infrastructure. In addition, several nations have shied away from doing business with Russia in order to show support for Ukraine.
Which Industries Will Be Impacted?
The Russia-Ukraine conflict has already begun to impact several major global industries. As the conflict continues, these impacts will have a trickle-down effect that will cause even further supply chain disruption.
However, a select few major industries are experiencing the most profound effects of the Russian-Ukraine conflict. These industries include:
Oil and Gas
Russia is a major exporter of oil and natural gas. Unsurprisingly, the conflict has caused oil and natural gas prices to soar. Anytime fuel expenses rise, the cost of other services will follow. Shipping and transportation are especially being impacted, making freight costs volatile.
Food
The Russia-Ukraine conflict is impacting the food industry in several ways. While the fuel costs are affecting this market which will result in further expense, there are key imports that will affect the industry as well.
Russia is a major exporter of fertilizer and Ukraine exports a fair share as well. The fertilizer is essential for growing crops and starting the supply chain issue from the very beginning of the food supply chain. Ukraine also exports oilseeds, fruits, vegetable fats, and animal oils. These materials are essential to the operations of food manufacturers around the globe.
Technology
The Russia-Ukraine conflict will worsen the already severe semiconductor chip shortage. Ukraine supplies nearly half of neon gas globally. Neon gas is vital for the production of semiconductor chips.
While chip manufacturers are already exploring other sources, the price of neon gas is rising rapidly. Those with ample supplies of neon gas are also becoming tight-fisted with their reserves.
Construction
Both Russia and Ukraine export various raw materials used in the construction sector. Examples include wood, wood products, iron, and steel. While steel, iron, and wood make up a relatively small percentage of Ukraine’s total exports, anytime supply decreases, prices rise.
Perhaps more concerning is the potential for a decrease in Russia’s steel export volume. Year after year, Russia ranks among the top five steel exporters globally. A decline in production could lead to major price increases and supply shortages.
Packaging Industry
Supply chain constraints are also causing pain in the packaging industry. The constant rising fuel costs, raw material shortages, and shipping capacities are causing inconsistent and multiple increases in costs and pricing in freight. Shipping costs to receive goods and send products to customers are putting pressure on companies to increase their prices to cover the overhead expenses.
While the industry is also being hit by the growing fuel costs, there are other issues that are affecting the overall supply chain. Machinery and supplies are an integral part of the packaging industry. The industry has already seen several supply chain difficulties following the pandemic, with the Ukraine-Russia conflict issues will only increase.
Usage of films, tapes, folding cartons, and corrugated products are an integral part of any company that is packaging or shipping their own goods. With global trading seeing a strain because of the conflict in Eastern Europe, the US will undoubtedly continue to encounter shortages in raw materials to produce necessary packaging goods.
Shortages are pushing out lead-times and increasing cost, making materials expensive and hard to keep on hand. The bottom line is – if businesses cannot package their products, they cannot ship them to their customers.
How Your Organization Can Prepare / How can Korpack Help
Building lasting relationships with your suppliers can and will help ease your supply chain issues. Korpack offers packaging supply chain services to navigate the challenges and workload without your company having to do the back-end work.
We have expertise in engineering, material selection, supply chain management, and sourcing and have multiple manufacturing plants and redundancies at our disposal with any product category. We are constantly analyzing supply chain risk so you don’t have to, paying special attention to output capacities, lead-time restrictions, and price point advantages.
Korpack specializes in inventory management (VMI), so you are never left without the products that your company needs. Using intelligent algorithms from our ERP system, we make calculated decisions on when to replenish, how much to replenish, and what facility to replenish from. We can make sure that your company has Just-In-Time inventory (JIT) with guaranteed stock at our facility at all times. We worry about lead-times, run quantities, and supply chain issues, so you won’t have to.
With ever-growing issues, now is the best time for a company to gain better visibility into their supply chain. Automating activities will increase efficiency and effectiveness in operations. Korpack offers complimentary automation audits that will allow us to make the right automation recommendations for you, whether that be installing new machinery, upgrading existing machinery, or providing maintenance to current machinery. We also provide access to full analytics into your machinery, allowing you to hone in on operations on a new level and strategize to offset supply chain costs.
If you are exploring ways to combating supply chain issues, including those listed above, you can contact us here and we would be happy to discuss ways we can assist you.
