Proxima: Supply Chain Risks from Geopolitical Conflict

Global procurement and supply chain consultancy, Proxima, has published an analysis on retail supply chains and the threats they face from geopolitical conflict.

As conflict grows, retailers must invest in their procurement processes and build resilient supply chains in order to stay afloat during uncertainty.

To help make the most appropriate change, Proxima analyses millions of data points constantly, looking at commercial analyses, carbon footprints and spend data, all to get the full picture to provide the best solution. 

Driving profitable change

Proxima is a leading procurement and supply chain consulting firm, founded in 1994. 

It is part of the leading management consultancy Bain & Company. 

The company works with some of the most successful businesses in the world in order to help them with their procurement processes, guiding them on the most efficient and cost-effective spending.

Proxima's services include cost optimisation, organisational transformation, supply chain sustainability and decarbonisation. 

Alongside Bain & Company, Proxima delivers intergrated end-to-end procurement, supply chain and supply chain sustainability solutions. 

Proxima is well-versed in a range of companies' supply chains, as it has helped organisations do procurement as well as set up procurement operating models.

As a result, it has a strong understanding of end-to-end supply chains, as well as any factors which may disrupt the chain, or affect the procurement processes.

Proxima states: "Making change happen is more important than ever but also harder than ever. Whether it’s geopolitical disruptions, economic pressures, the imperative to drive to net zero, or even just survival, businesses are grappling with major challenges and want to solve them fast."

Global Sourcing Risk Index

The Global Sourcing Risk Index is a collaborative effort between Proxima and Oxford Economics. 

It analyses the top 20 global economies as well as 10 fast-emerging economies, against eight risk dimensions and 10 key sectors. 

The report also points to the 'emerging threat of cyber risk' as an honourable mention.

According to the Global Peace Index (GPI), 2024 was the fourth consecutive year where global peacefulness deteriorated, pointing towards militarisation as the main factor. 

Geopolitical tensions have been growing dramatically in the last year, with the uncertainty surrounding tariffs, continuing war in the Ukraine, the Israel-Hamas conflict, the rise of AI, the rise of cybersecurity threats and extreme weather from climate change.

All of this is threatening supply chain stability, as trade gets disrupted, either by political tensions, physical barriers or high expenses.

Proxima examines the affect of geopolitical tension on retail supply chains, particularly in Mexico, Turkey and Russia. 

According to the report, these three countries are the riskiest sourcing locations, with legal, operational and reputational exposures for retail sourcing. 

The threat to retail supply chains

• Mexico holds a central role in EU and US supply chains, which creates exposure to cross-border security risks such as cargo theft and heightened security protocols
• Turkey acts as a gateway between the East and West, which puts it at risk of price instability, conflicting geopolitical dynamics and reputational risk
• Many countries are turning away from trade with Russia as a result of its invasion of Ukraine, as well as sanctions creating legal and operational barriers

Rising war-risk premiums across logistics and insurance, increasing lead times as a result of Red Sea diversions and growing pressure to pull stock forward, all creates disruption and instability for retailers.

With sourcing of textiles and footwear, as well as other items, mainly coming from China, Turkey and India, whole markets are at risk of disruption.

By relying on a single country for sourcing, businesses are putting themselves at risk of supply chain breakdown.

Simon Geale, EVP at Proxima, says: "Retail supply chains are being stress tested by overlapping geopolitical, operational and regulatory forces. Procurement leaders now need to balance cost, resilience and speed in every decision and that means taking a portfolio approach to sourcing, logistics and supplier relationships.

"By combining diversified sourcing with flexible transportation strategies and better use of data, procurement teams can make faster, evidence-led choices that protect margin, service and brand reputation, even as external volatility persists."

Now, retailers are implementing resilient strategies in order to prevent risk from instability. 

Many are turning to multi-sourcing and regionalisation in order to diversify supply chains and reduce reliance on a single source. 

Proxima points towards digitalisation as a benefit for procurement processes, as it helps enable more efficient inventory management and traceability solutions, meaning businesses can ensure their suppliers are complying to their regulations.

Through being more flexible with transportation strategies - such as blending air freight and ocean freight - retailers can better manage shipping expectations and monitor lead time in real time.

While retail supply chains are facing major risk with the ongoing geopolitical tensions, they can combat these delays through diversifying procurement processes and reshifting their logistics plans.