{"id":10181,"date":"2022-04-14T08:00:35","date_gmt":"2022-04-14T06:00:35","guid":{"rendered":"https:\/\/ca.syspro.com\/blog\/?p=10181"},"modified":"2022-04-21T13:09:19","modified_gmt":"2022-04-21T11:09:19","slug":"the-impact-of-regional-instabilities-on-the-global-supply-chain-and-how-erp-can-help","status":"publish","type":"post","link":"https:\/\/ca.syspro.com\/blog\/cloud-erp\/the-impact-of-regional-instabilities-on-the-global-supply-chain-and-how-erp-can-help\/","title":{"rendered":"The impact of regional instabilities on the Global Supply Chain and how ERP can help"},"content":{"rendered":"

Even before the pandemic, global supply chain<\/a> were fragile thanks to factors such as the US-China trade war, less efficient shipping routes and a huge drive to cut costs by consolidating loads. Just as manufacturers and distributors were starting to climb out of the \u2018COVID hole\u2019, they\u2019ve been knocked back in. Now, the greatest risk they face has shifted to the regional instabilities due to military conflict and the geopolitical and economic uncertainties it has created. This latest development will exacerbate the situation for companies in many industries, particularly those which are heavily reliant on energy resources.<\/p>\n

The war and imposed sanctions will create a knock-on effect across the supply chain<\/a>, and businesses will be impacted by material shortages, material cost increases, demand volatility, logistics and capacity constraints as well as cybersecurity breaches. Even companies without a direct supplier connection in Russia or Ukraine will experience debilitating disruption across industries from energy to agriculture.<\/p>\n

Unpacking expected disruptions across the supply chain for manufacturers and distributors<\/strong><\/h2>\n

European countries which import Russian oil and natural gas are going to be hard hit. On top of that, uncertainty over the conflict will lead to higher oil and natural gas prices worldwide, even if additional supply outside of Russia comes online. This will benefit oil-exporting countries and be detrimental to oil importers.<\/p>\n

Rising oil prices will also have a cascading impact on supply chains in areas such as higher line-haul trucking rates and other transportation costs. Already, oil prices have reached their highest levels since 2014 and are expected to continue to rise. Russia is the world\u2019s third-largest oil producer and the second-largest foreign oil supplier to the US.<\/p>\n

The transportation industry will also bear the brunt, as it has the highest energy intensity of all major industries. Shipping costs skyrocketed over 300% in 2021 as borders and ports were closed around the world in response to the pandemic, and these will continue to be elevated.<\/p>\n

Transportation and logistics are key to a wide range of industries from processed food to advanced industrial manufacturing and particularly affect those that rely on inputs from many different parts of the world. Where energy extraction is upstream, and freight and transportation midstream, the impact of the military conflict will also be felt in industries where oil and gas are refined and used to make rubber, preservatives, plastics, containers and many other products that play an important role in the agricultural and medical fields.<\/p>\n

Severe shortages of hydrocarbon, critical minerals, metals and energy are expected. Prices for those items will probably spike thanks to shortages as well as irrational buying and protectionism. This will in turn impact manufacturing operations up- and downstream as much as raw material mining.<\/p>\n

Supply chain survival strategies that manufacturers and distributors can leverage<\/strong><\/h2>\n

The situation sounds serious, and it is, yet there are steps manufacturers and distributors can take to survive \u2013 and even prosper \u2013 in the face of these exceptional challenges. In the long-term, supply chain leaders must increase resilience by balancing investments in dedicated teams, processes and technologies that will enable their organizations to implement end-to-end risk management.<\/p>\n

In the crucial short term, however, companies can navigate the risks by improving their visibility beyond their immediate suppliers and stocking up on key materials. The need for full visibility along the supply chain is critical as it enables manufacturers and distributors to adapt and adjust as effectively as possible, providing desperately needed certainty to their production planning processes<\/a>. Optimum visibility levels can be achieved through technologies such as Enterprise Resource Planning (ERP)<\/a>, which integrates solutions such as Material Requirements Planning solutions, supply chain portals and data analytics.<\/p>\n

Here are a few more strategies to help with managing the supply chain and improving risk management techniques:<\/p>\n