Can the global supply chains be immune to geopolitics?
Team Veye | 29-May-2022
The COVID-19 pandemic had resulted in massive shortages, disruptions, and price inflation. The two major contributing factors were, labour shortages leading to reduced production capacities all over the world and distortions to typical demand due to changes in customer shopping behaviour.
The extensive networks of resources, money, information, and people that companies usually rely upon to deliver goods or services to consumers were already jumbled up. The ripple effect leads to bottlenecks in almost all sectors.
While the Pandemic had only temporarily affected the global supply chain, the war in Ukraine completely crippled it. The prolonged Ukraine-Russia war, besides creating uncertainty, has generated barriers in the market, disrupting the movement of many commodities.
The crisis and the subsequent sanctions against Russia have put further pressure on the global supply chains and caused an increase in energy prices. More than a million containers that were to travel to Europe from China by train on a route that goes through Russia had to replan to make it by sea.
The dependence of the west on Russia for its oil and natural gas and reliance on both Russia and Ukraine for key agricultural commodities makes it more vulnerable.
Russia also is a major exporter of some of the world’s most important commodities besides being a significant source of many of the 35 critical minerals that the US Department of the Interior (DOI) deems vital to the nation’s economic and national security interests.
Supply chain disruption is a major factor driving prices higher around the globe, as demand for goods was outpacing supplies. The shortages and the heavy demand together, have caused skyrocketing freight costs.
The supply chain issues are no longer a one-off event. Global business leaders will have to resort to measures leading to more resiliency in the system.
The economic environment has now become more challenging. Companies will no longer be able to separate business from geopolitics and the global supply chain will take longer to come to earlier levels.
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