Impact of Ukraine war on supply chain is proving to be quite destructive for both countries but more so for Ukraine than for Russia. But it’s not just Ukraine or Russia that is being affected, war of this magnitude has a long-lasting and widespread impact. This conflict will most likely disrupt the global supply chain. It already has started to show the effects to some degree.
HOW DO SUPPLY CHAINS WORK?
Corporations involved in global supply chain operations always maintain inventories that ensure to fulfill the customers’ requirements. Accurate and updated inventories indicate seamless supply chains. Maintaining an inventory is essential for controlling day-to-day operations and evaluating future customer needs.
HOW DO WAR/CONFLICTS AFFECT THE GLOBAL SUPPLY CHAIN?
This is how generally supply chains work but during wars and conflicts, the risks and uncertainties involved affect inventory management in a major way. It is almost impossible to continue a supply chain in a conflicted area, other than the obvious threat of life, there are other dangers as well, such as deliveries getting ceased by the forces and there’s nothing you can do about it. And even if you make It out safe with the products, there’s still a high probability of your items getting damaged or lost.
These are the reasons, companies and countries avoid trade-in conflicted areas, and rightfully so!
STATEMENT OF THE SOUTH-KOREAN TRADE MINISTER
Everyone is aware of the ongoing and upcoming chaos, and many have shown serious concerns. One of the major key players of the region South Korea is really vigilant regarding the situation. While talking to CNBC in an interview, South Korea’s Trade Minister, Yeo Han-Koo said “I think first, we are closely monitoring a spike in the energy prices,” he added that around 92% of South Korea’s energy needs are dependent upon its imports.
Furthermore, he concluded that “Some of these supply chains in the manufacturing sector could be also exposed to these potential geopolitical risks”. So, South Korea is taking meticulous steps to ensure stability in the supply chain.
South Korea is the hub of the Semi-conductor industry, and if Russia provides most of the raw material, then it’ll be difficult for them to continue production with the same pricing and the same pace. Finding an alternative can take quite some time, and even that doesn’t ensure the product quality. So the problem on hand remains, because, without South Korea’s production of Semi-conductors, the manufacturing of hardware around the world is in jeopardy.
GLOBAL SUPPLY CHAIN, RISK MITIGATION AND IS THERE AN ENDING NOTE TO ALL THIS?
As the war progresses, the supply chain worldwide gets more and more vulnerable on a daily basis. Along with South Korea, other countries that either import or export from Ukraine are in enormous crisis, as the country is under siege and all the production operations are shut down.
On the other hand, European Union and the United States have also announced heavy sanctions on Russia, which means that fuel prices will skyrocket in the international market, increasing production prices around the globe. Not only that, but Russia is also a huge exporter of Minerals, Stones, Steel, Fertilizers, chemicals, and many other industry-related as well as essential household items. Russia is the largest country on the planet, and It’s rich in resources, so putting sanctions and finding alternatives would be a difficult challenge for the European Countries.
Both countries play a huge role in the global supply chain, and if they stay at war for too long, they could initiate a spark that brings the global resource crisis.