The supply chain and global conflict: Strategies for success

Strategic advice

Ways to lessen your supply disruptions

Businesses have become increasingly creative with their supply chain solutions, such as re-sourcing and rerouting materials and addressing labor shortages on lines and in fleets. Still, as Forbes reported recently, “If the pandemic crippled the global supply chain, the war in Ukraine knocked it to its knees.”1

To thrive in today’s economy, businesses—as always—must continue to adapt. A good place to begin: Build a foundational knowledge of how international issues intertwine, so you can better find answers to help move your business forward.

The supply-chain reaction to global conflict

When we think of wars and other conflicts, the humanitarian impact to the people directly involved is always top of mind. Until recently, what was not so evident was the far-reaching effects on businesses and livelihoods. Here’s a quick overview of how conflicts and events can cause a ripple effect.

Materials and labor

Before the war in Ukraine, Russia had supplied 40% of Europe’s natural gas and nearly a third of its oil reserves.2 Those high percentages meant that the European Union was vulnerable to an energy crisis triggered by the conflict. Prior to the Russian invasion, Ukraine provided 40% of the World Food Program’s wheat supply.3

Shortages that began during the pandemic include semiconductors, metals (nickel, copper, platinum, aluminum, steel), and essential fertilizers—much of which are produced or refined in Russia or China.

Since 2020, more than 3 million Americans have left the U.S. workforce,4 and many countries feeding into our supply chain are struggling with labor shortages as well. Chronic understaffing slows or stops deliveries, the processing of raw materials, and the manufacture of parts.

Manufacturing and production

Lack of resources has led to delays in manufacturing, construction, retail, and technology sectors.5 For example, the semiconductor shortage has caused lags in production of the numerous products in which they’re required, including mobile phones, digital cameras, televisions, washing machines, refrigerators, computers, LED lightbulbs, and vehicles.

Shipping and deliveries

Internal turmoil in South Sudan has led to the closure of its main port on the Red Sea, which had handled 90% of the country’s international trade.6 At one time, about 500,000 shipping containers passed through this port every year. Today, shipping containers are routed through Egypt—but for how long? Egypt also suffers from political instability.7 Together, the Red Sea supply chain accounts for 10% of all global trade.6

Ground transportation has taken a hit, too. As new strains of the novel coronavirus emerge, regions are still experiencing unpredictable lockdowns. This has stranded truck drivers in China, for example.8 Future strains and other global health issues such as monkeypox make this a challenge that’s likely to continue.

Inflation

The rising costs of materials and products around the globe have made previously trusted suppliers more and more expensive. While supply chain disruptions fuel inflation, national and regional financial policies cannot temper rising costs fast enough to ease the burden on many business owners.

A holistic approach to protecting your supply chain

Businesses are adapting to work through global supply chain issues. Here are some strategic solutions we’ve been seeing across the wide array of industries we support.

Form storage partnerships.

Strategic alliances—that includes planning, sourcing, purchasing, and even storing products as a group—can reduce supply chain pressure. One example is shared warehousing, also called multi-client or public warehousing, where equipment, warehouse management technologies, racking, and labor are shared among several tenants. This can be a big help to companies with peak seasons, as resources can be shifted to another tenant during off seasons. With labor, this means warehouse staff can stay employed throughout the year.9

Plan ahead to order ahead.

Order materials in bulk, as much as you can and as early as you can. Consult your financial team on cash flow and strategic financing—ideally before you need to make bigger buys. Having a line of credit or other credit vehicles in place can help you beat out competitors when more resources suddenly become available. Loop in your operations team and ask them to weigh in on issues like increasing warehouse space.

Continue with remote work.

You can help improve your staff retention and reduce office-based costs by allowing work-from-home to continue. Have your teams check in with remote workers regularly and give managers guidance on how they can help minimize remote work burnout.

Embrace the bundle.

Businesses may need to increase prices because of supply chain disruptions or scarcity. To ease friction with customers, consider creating bundles that add value by pairing higher-priced items with lower-priced ones. This can also allow you to introduce new or less-popular products to existing clients, ultimately increasing their use of—and loyalty to—your brand.

Avoid conflict-area goods.

Businesses can choose to source locally and from conflict-free regions. This may cost more in the short term, depending on your industry and business needs, but could be worth it in terms of supply stability. To investigate sourcing conflict-free materials, explore nonprofit and region-specific Chamber of Commerce websites.

Support bigger solutions.

Governments are using forward-thinking approaches to help businesses navigate these waters. For example, in July 2022, Congress passed the CHIPS Act of 2022. Its goal is to strengthen domestic semiconductor manufacturing, design, and research, while reinforcing the domestic chip supply chain.10 Get involved by connecting with industry trade groups and talk with legislators and business leaders to explore bigger solutions to shared challenges.

Expand delivery methods.

Delivery and curbside pickup have helped retailers and restaurants retain and increase their client bases, and other industries are following suit. If you haven’t done so already, look at how, when, and where you deliver for your customers—and how you can optimize resources. Likewise, be proactive in communicating delivery methods, alternative suggestions, and wait times to your customers. Being upfront about potential delays can help put customers at ease.

Tap into your experts.

Change can be stressful for your employees, and initial resistance is a normal reaction. Taking a proactive approach and involving your internal experts early not only builds teamwork, but it can also generate creative and strategic approaches to supply chain challenges.

“It’s never too late to encourage involvement, even if gathering input and feedback from employees before changes are introduced is your ideal,” says Ros Guerrie, M.Ed., an educational leadership programs manager at the Truist Leadership Institute. “Employee insight can help you uncover potential challenges as changes are implemented—and make the outcome even better.”

Looking for more ideas on realigning operations?

For more trends and opportunities to realign business operations, download our Purple Papersm: “Imagine tomorrow. Build it today.”