Are we experiencing the biggest shift in supply chains since the era of globalization began? From the US-China trade wars to the Covid-19 pandemic, there has been an existing strain on the supply chain. Now as Russia’s war on Ukraine escalates, the strain on global supply chains has intensified. Understanding how global manufacturers responded to the disturbance of their supply chain is a crucial part in helping businesses structure their responses.
Russia’s war against Ukraine has heavily impacted supply chains around the world. According to Jennifer Bisceglie, Founder, and CEO of Interos, a supply chain risk management company nearly “300,000 companies in the U.S. and Europe have suppliers in Russia and Ukraine, putting their national economies at risk. That’s how interconnected our world is today” (Segal). In fact, some say that the manufacturing sector will be impacted the most by this supply chain disruption. Simon Gealt, the Executive Vice President and Chief Officer at supply chain consulting firm Proxima says, “It’s things like the neons and metals that are going to have an enormous effect on the production of semiconductors and automobiles” (Segal). Companies will now focus on monitoring their supply chains in order to get ahead of the next crisis. This changing landscape will lead to new strategies for alternative sourcing. Therefore, some do argue that we are now experiencing the biggest shift in supply chains since the era of globalization began.
How will manufacturing companies respond?
Many manufacturing companies are now moving quickly to create visibility and clearance in their supply chains. Given the rapid changes in customer demand, businesses must now analyze and prepare their supply sources in advance of potential disruptions. “It’s not just a concern for big companies, but it is a concern for everyone. Now even small mid-size companies all have exposure either directly or through their suppliers,” says Lou Sokolovskiy, CEO and Founder of Opus Connect. Understanding the full supply chain and customer base, not one degree away but at least five degrees away is very important. For example, various portfolio companies may look into sourcing their parts from vendors in regions with slower demand. This will allow for a greater supply in active factories. In a 2020 survey by Mckinsey “just over three-quarters of respondents said that they planned to improve resilience through physical changes to their supply-chain footprints. By this year, an overwhelming majority (92 percent) said that they had done so” (Trautwein).
It is going to be critical for companies to work on alternative sourcing strategies, especially as tensions increase between Russia and Ukraine. Overall, manufacturers must think of new innovative ways to optimize production, distribution, and logistics in order to avoid supply chain issues.
- Alicke, Knut, et al. “How Covid-19 Is Reshaping Supply Chains.” McKinsey & Company, McKinsey & Company, 23 Feb. 2022, https://www.mckinsey.com/business-functions/operations/our-insights/how-covid-19-is-reshaping-supply-chains.
- Miguel, Alejandro Beltran de, et al. “Private Equity and the New Reality of Coronavirus.” McKinsey & Company, McKinsey & Company, 16 Sept. 2020, https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/private-equity-and-the-new-reality-of-coronavirus.
- Segal, Edward. “Supply Chain Crisis Worsens as Russia’s War against Ukraine Continues.” Forbes, Forbes Magazine, 2 Apr. 2022, https://www.forbes.com/sites/edwardsegal/2022/04/02/supply-chain-crisis-worsens-as-russias-war-against-ukraine-continues/?sh=27983c4e6e49.