The Russia-Ukraine conflict is exacerbating an already unsteady global supply chain that has been rocked repeatedly over the past two years because of pandemic supply challenges. Delays in moving cargo across key parts of Europe have tremendously impacted the already fragile region, and government lockdowns in China because of new coronavirus variant outbreaks have further crippled ports and trucking routes. After several months of potential respite to supply chain woes, issues are mounting once again because of the conflict—albeit at a much more rapid pace.
The war’s impact on raw materials sourced from Ukraine and Russia are having a profound effect the world over already. Oil prices alone have been skyrocketing since the conflict began. Russia and Ukraine lead global production of metals such as aluminum, copper, iron ore and nickel—all of which have already been impacted. Ukraine also supplies roughly half of the world’s neon gas—used to produce semiconductor chips—which will continue to negatively impact automotive output across the globe.
“The long-term answer is for us to be less reliant on overseas production,” says Van Conway, President of The Young Conway Group (www.theyoungconwaygroup.com), a minority-owned, boutique financial advisory and consultancy firm in Detroit. “Even parts for the military and defense. If we have to pay 20 percent more, it will be worth it in the long run.”
Congress passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act in January of 2021, aimed at promoting the research, development and fabrication of semiconductors within the United States. These things, however, take time to develop, fund and make operational. America is clearly not alone in its supply chain struggles, and for all its efforts to find alternate methods of obtaining what consumers want and need, more localized supply is still years out.
Russia and Ukraine also both export enormous amounts of grain—nearly a third of all global wheat exports come from this region—which will continue the impact towards global food supplies. Prices will continue to rise, goods will continue to be difficult to come by and companies will inevitably go out of business. Massive increases in shipping rates have already been felt, and while the global supply chain will likely not break, it will ultimately change.
The longer-term solution—one that accounts and prepares for devastating disasters like pandemics, environmental fallout and governmental conflict—would be to continue the push for more domestic manufacturing. “We have more products coming from overseas than ever before,” explains Conway. “And you can’t do just 90 percent of any of these steps, or else it’ll never get to the end consumer.”