The Block to Supply Chain Recovery: The Impact of Putin’s War

supply chain recovery

The global supply chain has been hit with numerous and varied issues over the span of the last few years. Just when we were just looking to move out of the age of Covid, many countries that were yet to recover from the strain of the pandemic, have been hit with a new problem, as Russian troops started to invade Ukraine. These issues look to impact numerous countries, all in different ways – the UK included. 

Not only will global materials and products be limited, but they may also be delayed or completely inaccessible via the standard supply chain route. Many factories across the two countries have halted operations due to the war, causing a mass decrease in production of certain goods. Companies globally have been hit with warnings that transport routes will be closed off, if not already, and this expands to airspace and aviation in equal measure. We have seen major companies, such as FedEx and UPS, suspend international operations in both involved countries, Ukraine and Russia, while many countries are looking to strengthen the control of their trading processes. Ukraine’s shipyards and main ports are devoid of incoming orders or deliveries, with many carriers rerouting these to alternate destinations. 

This article takes a look at the challenges for supply chain recovery.

Exacerbating global shortages of vehicles and semiconductor computer chips

There are mounting concerns for the shortage of goods globally, in addition to essential components in the production of other goods – such as platinum, aluminium, sunflower oil and steel. The lack of these materials runs the risk of exacerbating global shortages of vehicles and semiconductor computer chips, which had not made a full recovery post-pandemic and following a string of factory closures as a result of energy quotas late last year. 

Another product that has major worries surrounding it by experts, is the predicted shortage of essential raw materials for computer chips, which would have widespread impact across multiple sectors globally. Both countries involved, Russia and Ukraine, have been two of the major sources of neon gas, which can be used to feed lasers that print circuitry onto the computer chips. They also supply palladium, which is a metal employed in later manufacturing processes.

Impact on all citizens – retailers and consumers alike 

Gas, petrol, fuel and diesel prices all have continued to be hiked up, with outrage and annoyance visible by all citizens and motorists in recent weeks. It has been announced in just recent weeks that fuel prices have hit record highs, and this problem is not isolated to the UK and can be seen mirrored across the pond in Ireland, as well as mainland Europe. Families globally are now faced with the new challenge of a higher cost of living, with government ministers being asked to intervene and reduce this mounting costs if at all possible. 

Food and agriculture also looks to be a sector that will impact the lives of retailers and everyday consumers. As ports continue to close, those along the Black Sea have been shut off – resulting in the blockage of the world’s fifth largest wheat exporter. As a result, this area looks to also send prices soaring. It is believed that grain exports from Ukraine and Russia account for 12% of the world’s caloric intake. The results of this disruption will ripple across the UK and Europe but look to greatly damage those from less fortunate countries as this crisis continues. While the UK and other Western countries will see a gradual and slight increase in products such as bread and flour, populations who rely primarily on wheat products will be notably impacted.  

The limited supply of highly demanded goods will lead to a sharp rise in shipping costs, leaving many retailers no choice but to further boost up their prices to offset these increasing costs. Even prior to the events of the last few weeks, it had been predicted that shipping costs would rise by 30% this year and this is a further spanner thrown into a complex set of works. What goods that there are will be expensive to transport is the bottom line. 

Introduction of a long list of sanctions imposed by the West

Unfortunately, this looks to be just the beginning of the troubles that many businesses and consumers will face. There is no sign of the end on either side of the coin – Russia does not look to be backing down and this may only be the introduction of a long list of sanctions imposed by the West. What has become clear is our reliance in the past on essential goods such as wheat, gas and metals – and while Putin may have sought out to cause damage to Ukraine, his actions have left a ripple effect globally for the supply chain, retailers and consumers. 

For UK retailers and consumers, who not only had to manage the COVID-19 crisis and its impact on driver shortages and more widespread issues, but the dual challenge of Brexit now must look to best combat against the supply shortages and cost increases that seem inevitable, even in this unpredictable period.