Scoutbee: Russia/Ukraine’s effects on procurement & supply

Procurement Magazine breaks down Scoutbee’s insights on the war in Ukraine and its effects on global supply chains and procurement in major industries

Placing great pressures on an already strained global supply chain, procurement and supply chain professionals have replaced the challenge of COVID-19 with navigating the complex challenges of geopolitical unrest. 

While Ukraine and Russia’s global imports and exports do not surpass 2%, Scoutbee emphasises: “The war in Ukraine will push fragile supply chains to the brink and cause longer-term disruption and supply shortages for many industries.”

But how will the war affect the procurement and supply chains of five of the world’s leading industries?

Automotive

According to Scoutbee, Russia’s invasion of Ukraine could reduce the global production of new cars and trucks by millions. 

In the short term, it is expected to impact local production, rippling out into the entire automotive industry the longer the conflict continues. This could exacerbate rising inflation and force vehicle prices even higher. 

Other impacts could include the shortage of supplies. “Wire harnesses, which act as a vehicle’s wiring system, these are among the first components to be installed in a new vehicle, and their absence brings assembly lines to a grinding halt,” said Scoutbee.

Chemical

Locally, the impact on the chemical industry has been greatly affected. Germany halted its certification of Nord Stream 2, the EU is looking to cut its dependence on Russia for its gas supplies by 80%, and many leading oil and gas companies have ceased the supplier operations in Russia (companies include: BP, ExxonMobil, and Shell).

Scoutbee said: “As oil and gas are essential to many supply chains, disruptions to such vital resources will have wide-ranging economic repercussions.”

Aviation 

Locally, the likes of Airbus and Boeing (Russia’s main suppliers) have withdrawn from their operations with the country, the two supply more than 600 aircrafts between them. “It is not clear how long it will take until airlines’ supplies of spare parts run out – it could be weeks or months,” said Scoutbee. 

They added: “As with most commercial aircraft today, the majority of Russian airlines’ planes are owned by leasing companies in the west. Most western leasing companies have already written to their Russian clients demanding the return of their planes.”

Consumer electronics

According to Scoutbee, the war in Ukraine is likely to have an impact on global energy markets, as well as affect semiconductor shortages and prices.

“Ukraine and Russia are top suppliers of neon gas, which is used in the lasers for chip manufacturing. Russia is also a major producer of palladium, a rare metal used in computer components, sensors and fuel cells,” said Scoutbee. 

This could have significant implications on the already strained global supply chain for semiconductors. 

Electronics manufacturers also need to procure nickel for the production of batteries. With Russia supplying 20% of the world’s high-grade nickel, this could cause a rise in prices, which are likely to worsen the longer the conflict continues. 

Construction 

With Russia and Ukraine being core suppliers of metal, raw materials, chemical products and machinery, lack of access and production of these materials is likely to significantly impact the global construction industry.

“Prices will increase and markets will need to seek out other sources and alternative supply chains. Moreover, Russia supplies 30% of Europe’s oil and 40% of its natural gas. Materials used in construction containing petro-carbons or in energy-intensive manufacturing will be hit by increased inflation,” said Scoutbee. 

They added: “The higher price of oil and gas is also going to have an effect on the costs of production as well as the transportation of equipment, materials and project parts. Military action could restrict shipping in the Black Sea.” 

Share

Featured Articles

Experts reveal factors contributing to staff turnover

With recent reports of increasing stress among procurement professionals leading to high staff turnover, Loopin experts give advice on curbing the tide

Public procurement and the protection of SMEs

Neville-Rolfe argues it’s time to give smaller companies a bigger slice of the procurement pie as global procurement transforms under various pressures

If AI is an ESG issue, will Procurement have to create it?

Environmental and Social Governance, undoubtably ethical issues, are now firmly placed within procurement's remit - But AI is an ESG issue...

Orozco, Diageo CPO to lead Procurement at Kraft-Heinz NA

Procurement Strategy

Eight steps to navigate the headwinds of cost inflation

Procurement Strategy

Government's Energy Support Scheme to end and create chaos

Procurement Strategy