Fresh Strains on Global Supply Chain amid Ukraine crisis
Businesses worldwide are set to feel the effects of Russia’s invasion of Ukraine, adding more strain onto the already struggling global supply chain.
Already buckling under the pressures of the Covid-19 pandemic, the global supply chain is now facing new challenges with the domino effect of global dependencies on businesses in the Ukraine already being felt.
In a new report, Moody's Analytics economist Tim Uy wrote: "The greatest risk facing global supply chains has shifted from the pandemic to the Russia-Ukraine military conflict and the geopolitical and economic uncertainties it has created.”
Moody's warned that the Russia-Ukraine crisis will “only exacerbate the situation for companies in many industries,” especially those reliant on energy resources.
A report by Dun & Bradstreet revealed 241,000 businesses rely on Ukrainian suppliers and 93% are based in the U.S., whilst 374,000 businesses worldwide rely on Russian suppliers and 90% of these businesses are based in the US.
“Businesses around the globe continue to grapple with inflation brought on by the pandemic as well as commodity price increases brought on by disruptions to the supply chain.
“Amidst this ongoing volatility are the new consequences arising from the Russia-Ukraine crisis that could leave the world facing extended reductions to energy supply, severe sanctions that will likely impact food security as well as rare metal supplies needed to sustain production of key technologies.
The report added, ““All of this, coupled with a significant humanitarian crisis makes the unrest even more complicated.”
Dun & Bradstreet outlined the immediate implications for companies and organizations:
The potential to widely exacerbate Europe’s energy crisis.
The ripple effect of U.S., UK, and EU sanctions on Russian companies will further cripple an already weakened global supply chain.
Disruption of trade routes, freight costs, inaccessibility of critical raw materials could derail economic growth and add to inflationary pressure.
The company revealed which industries will feel the implications of Russia’s war against Ukraine.
Natural Gas – Around 41% of Europe’s natural gas supplies comes from Russia.
Crude Oil – Approximately 34% of Europe’s crude oil imports come from Russia.
Industrial Metals – Russia and Ukraine are the leaders of global production of metals such as aluminum, nickel, copper, and iron ore, and are the main supplier of metals for Europe.
Agri-Commodities - Russia and Ukraine account for more than 25% of the world’s trade in wheat, about 20% of corn sales, and 80% of sunflower oil exports.
So what can be done for struggling businesses?
Dun & Bradstreet’s report said that, “With the sanctions and diminished access to commodities at hand and supply chain disruption to consider, business leaders would do well to pursue a better understanding—leading to better management— of their supply chains.
“In the near-term, companies can rely on their alternative suppliers to fill resource gaps in their supply chain.”
As always, the TyTek team will keep you advised and appraised of your order with us. If you have any questions, please don’t hesitate to contact us.