In today’s perpetual cycle of uncertainty, supply chain risk mitigation is more important than ever. With constant change comes risk, much of which is unpredictable. This is especially true in the contemporary supply chain. Most recently, the conflict in Ukraine poses a significant supply chain risk across the board.
Russia is the world’s No. 3 exporter of oil, and it’s the No. 2 exporter of natural gas. According to an article from The Atlantic, The Coming Energy Shock, “It would not take much of an additional squeeze to drive the price past the all-time-record average of $4.11 set in 2008. Higher fuel prices will feed through to higher prices for almost everything else.” This translates into higher fuel for carriers and therefore higher prices on transportation costs.
Other raw materials will also be affected, specifically nickel ore, steel, wheat and corn. Because Russia and Ukraine are among the top five exporters of these raw materials, we can expect that supply will be decreased and therefore prices will increase on goods that consume these raw materials like automotive, machinery and food products.
Commercial shipping lines and air cargo carriers are temporarily stopping service into and out of Russia and Ukraine causing backups at European ports and airports.
In addition, Luxembourg-based Cargolux announced it would implement a war surcharge on all cargo having origin or destination in Asia, effective March 7.
UPS, FedEx and DHL have also halted deliveries to and from Russia and Ukraine. In addition, FedEx has suspended its Money-Back Guarantee to European countries. All carriers are stating it is not safe for them to deliver to these areas at this time and they will return to service when it is safe to do so.
Cyberattacks on The Rise
In addition, freight forwarder Expeditors International suffered a cyberattack in February. According to a March 2 SEC filing, “In keeping with its business continuity plans, the Company is making progress in returning to normal operations.” However, “While the Company has partially resumed operations and expects to bring additional systems online, at this time the Company is unable to estimate when it will resume full operations. The Company expects that the impact of the prior shutdown and the ongoing impacts of the cyberattack will have a material adverse impact on its business, revenues, expenses, results of operations, cash flows and reputation.”
At the recent JOC TPM conference, preeminent ocean freight analyst Lars Jensen of Vespucci Maritime said a major Russian cyberattack on ports and terminals worldwide in retaliation to sanctions is one of the biggest risks currently.
What Can You Do?
To weather these times of uncertainty, your best line of defense is to have a business continuity plan in place. Key components of this plan include risk assessments, identification of vulnerabilities, risk mitigation strategies and a regular cadence of testing and reviewing of the plan.
It’s important to note that the foundation of a successful Business Continuity Plan is data visibility and data security. These two are equally critical to a transportation management strategy optimized to meet operational, financial and customer experience goals of the business. Investment in effective data visibility and data security technology can be capital-intensive. One solution is partnering with a company with a robust infrastructure in these two areas benefitting not only your goal of business risk mitigation but also enabling you to keep your supply chain moving as smoothly and profitably as possible.