Ukraine Invasion Supply Chain Challenges

Russia’s Invasion of Ukraine Creates Supply Chain Challenges

The world was already facing significant supply chain challenges prior to the Russian invasion of Ukraine. Since the invasion, many of existing challenges have increased in severity and other new challenges have been created.

The challenge that has been making the most noise in the news is price of oil. Russia is the 3rd largest producer of oil behind the USA and Saudi Arabia. However, the most immediate supply chain related impact is faced by ocean shipping. Ukrainian authorities closed the port of Odessa, which has heightened concerns that the conflict could disrupt important shipping routes carrying much of the world’s wheat supplies and agricultural products.

A.P. Moeller Maersk has stopped accepting bookings to and from Ukraine with not set date to resume bookings.

UPS has suspended all shipping services to and from Ukraine as well as international shipments to Russian addresses.

FedEx and TNT also suspended services to and from Ukraine. Shipments in transit will be temporarily held.

For a short time, it appeared that air freight might be an option. However, increasingly countries have been closing their airspace to Russian flights and in response Russia has done the same.

In the days running up to the invasion, researchers published analyses that outlined scenarios ranging from a full-blown military conflict with disastrous effects to volatility created by economic sanctions.

Furthermore, we’ve already seen a heavy use of cyberwarfare employed by both state and non-state actors in this conflict. Attacks on cloud services could impact the ability for tens of thousands of companies to ineffectively manage their supply chains. An effective cyberattack in response to sanctions could be the most dire of all the potential challenges faced by global supply chains.

As of now, we appear to be somewhere in the middle ground between volatility and increasingly stronger effects that strain supply chains.

A stalemate alone would strain the supply chains of key industries such as high-tech electronics and semiconductors, energy, and rare earth minerals.

If escalations continue, analysts expect to see Black Sea routes as well as east-west road and rail routes to be severely impacted. Supply chains will be strained by disruption and delays. This impact wouldn’t be limited to European routes. Spillover would be felt in Chinese ports and other locations far removed from the conflict area.

As a logistics leader, BGL will continue to monitor the situation in Ukraine to provide the best advice to our customers.

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