In G2’s 2022 Digital Trends, I discussed the difficulties facing the global supply chain and business strategies to overcome them. I identified international discrepancies in health regulations to fight the COVID-19 pandemic and geopolitical tensions as major obstacles toward achieving a stable supply chain and economy. 

However, just as the effects of the pandemic began to become manageable, another fallout in the supply chain occurred due to the rapidly escalating Russian-Ukrainian crisis. Technology can help automate supply chain operations, offering companies the means to cope with another stressor to the logistics business.  

Military crisis is now a greater threat to the supply chain

The ongoing crisis between Russia and Ukraine has now replaced the COVID-19 pandemic as the single greatest obstacle to equilibrium in the logistics business. These two countries are among the world’s largest producers of agricultural commodities, ore, and oil. Therefore, production disruptions have set the stage for supply deficits.

This conflict will likely hit the European Union the hardest. Russia was the largest supplier of oil and natural gas in 2021 to the European Union, and it is one of Europe’s largest suppliers of agricultural commodities. However, the E.U. released an official statement of restrictive measures taken against Russia, which includes provisions such as banning transactions with the Russian Central Bank and supplying arms and resources to Ukraine. Although there is no outright sanction on oil, the breakdown of diplomacy, nonetheless, puts European nations at significant risk for panic purchasing, soaring costs and consequent decreases in demand, and product shortages. 

With the global supply chain in turmoil, companies must look for ways to develop greater visibility into their logistics operations. It is, thus, crucial for businesses to adopt technological solutions that can help improve every step of the supply chain during the ongoing disruptions. 

Solving supply chain problems with technology 

Companies must consider automating their operations to monitor and track consumer demand, product shortages, and fluctuating commodity prices and availability, as well as to determine how infrastructure damaged by bombings and combat could impact the physical transportation and restocking of goods. 

Traffic to G2’s categories confirms rising interest in supply chain software

Based on the rapidly evolving crisis in Ukraine, we can expect decreases in inventory levels, accelerating commodity prices, volatility in consumer demand, and disruptions to physical infrastructure and shipping routes. Rising traffic to G2’s website when tensions began to accelerate in February confirms these hypotheses and shows that there is an increased interest in solving problems with technology.

According to G2 data from March 14, 2022, we observed record highs in category page views for Demand Planning, Supply Chain Visibility, Transportation Management Systems (TMS), and Commodity Trading, Transaction, and Risk Management (CTRM) software. Notable spikes in views occurred directly before, during, and immediately after the first day of conflict on February 24, 2022.

Demand planning and TMS received the largest spikes in traffic, potentially indicating some of the greatest concerns among G2 buyers are demand fluctuations and the ability to monitor shipments, optimize routes, and maintain functioning fleets in areas with conflict.

Job reshoring and relocation of labor and production 

When discussing 2022 supply chain trends, I had predicted that companies would move labor and production closer to home to avoid geopolitical tensions abroad. At that time, this was best evidenced by the trade wars between the U.S. and China. Consequently, many American manufacturers were moving operations to Mexico and other Central American countries.

We can expect to see an even greater shift now in response to the war, specifically around the issue of oil extraction.

Oil drilling has been a contested issue in the U.S. for a long time, particularly because of the years-long battle over the Dakota Access Pipeline (DAPL). The Biden administration has allowed construction on the DAPL while simultaneously conducting an environmental review to determine whether it should continue. With the risk of oil shortages, soaring gas prices, and consequent anger from the American public, we may not expect any government action against domestic drilling until this war is over. In fact, it is more likely that a stronger push for domestic production of energy sources will occur. 

About 20% of the U.S.’ oil imports come from regions where it has tense international relations, such as Saudi Arabia and Russia. With the growing aversion to risk and the ultimate goal of achieving supply chain stability, many manufacturers will likely see value in shifting toward domestic oil production.

Being proactive is the only course of action

Navigating a deluge of crises has, unfortunately, become the norm for the supply chain since the pandemic began. Although the war in Ukraine poses another threat to economic stability, the increasing demand for automating supply chain tasks and focusing on reshoring and relocating labor will be the north star for businesses. 

Although it has been a particularly rough past two years for supply chain workers, the creativity, determination, and innovation demonstrated during the worst of the pandemic will help push businesses toward adaptability and resilience during the crisis in Ukraine.

Edited by Sinchana Mistry