The Ukraine Conflict: A Supply Chain Storm Watch

April 06, 2022

The Ukraine Conflict: A Supply Chain Storm Watch

Spring weather patterns can produce wave after wave of dangerous storm cells, threatening everyone in their path with heavy rains, gusty winds, hail and even tornadoes. Wise people stock batteries, prepare blankets and have an action plan for moving to a place of safety should a tornado warning be issued. Others ignore the alarms, go about their business and just wait for the storm to blow over. 

In a previous article, we outlined how COVID-19 became a perfect supply chain storm, which affected suppliers, manufacturers and consumers alike. Now, before the world has recovered and rebuilt from that shock, we are faced with another tempest in the form of Russia’s invasion of Ukraine.

Watch or Warning?

Aside from the appalling human suffering caused by the incursion, manufacturers are faced with another incident outside their control which has the potential to cut off their supply of raw materials and drive prices higher. The potential for disaster is real. 

According to BRINK Daily Insights, “Gas and oil, coal, iron, platinum, raw aluminum, sawn wood and copper are among Russia’s top exports.

Reuters adds additional statistics: 

  • Russia is the world’s third largest producer of gold (10% of global production)
  • Russia’s VSMPO-Avisma supplies titanium to Boeing and Airbus
  • Russia produces 76 million tons of steel (nearly 4% of the global total)
  • Russia and Ukraine are major wheat suppliers, accounting for 29% of global exports
  • Ukraine is also one of the world’s top four corn exporters
  • The two countries also account for about 80% of global exports of sunflower oil

Calm Before the Storm?

The worst effects of this latest whirlwind have yet to be felt. Should fabricators assume the best and go about our business and wait for it all to blow over? Is this a disruption watch (conditions are favorable for supply chain disruptions) or a warning (disruptions are imminent)? There are indications it may be the latter. 

Consider this. Inflation is already a concern as consumer prices are already rising due to previous supply chain disruptions and increased demand for products.

Rising fuel prices are also a major headache. According to an Inc. article, an Atlanta plant owner said several employees told him that they were using one week’s paycheck per month to get to work. He’s concerned that high prices at the pump may persuade some workers to look for new jobs closer to their homes.

Uncertainty

Will the issue be resolved in a short amount of time, or is it just another domino to fall in the eventual collapse of the globalized supply chain? And closer to home, what can fabrication shops do to protect their profits, their businesses and their employees? Many have already tightened their belts because of the two-year COVID crisis. What more can they do? Suggestions range from the modest to the complex. 

Stock Up

The first inclination might be to stockpile raw materials. According to BRINK Daily Insights, “Many finely tuned just-in-time and lean systems will be replaced or supplemented with business models incorporating buffer inventories and safety stocks. In many scenarios, just-in-time will become replaced by just-in-case.”

Power Down

An article in Stamping Journal suggests the simple, yet practical step of reducing energy demands in our shops:

  • Maintain and lubricate machines to ensure they are as energy efficient as possible
  • Use the right lubricants to prevent excess friction and heat 
  • Inspect lines and equipment for leaks
  • Power down equipment whenever possible.
  • Manage process-related heating costs by maintaining equipment for efficiency
  • Schedule production to take place outside of peak-rate periods

Be Prepared

Here at Laser Precision we are monitoring the current supply chain situation carefully. We are fully prepared with plans to “move to a place of safety” if conditions warrant but do not see any developments that would require drastic action at this time. We are fully aware that that could change. We are ready. 

Meanwhile, our sales are higher than ever, our raw material supplies are good, and we’re maintaining our on-time delivery standards with measures that have been in place since the pandemic. 

Our advice to other fabrication shops? Keep a watchful eye and maintain constant communication with your customers, suppliers and workforce. They will be the deciding factors as to whether additional remedial measures need to be taken.