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Ukraine-Russia Conflict
How Global Businesses Can Combat the Effects
Leveraging Supply Chain Analytics
Shubhankit Verma
Senior Manager, Supply Chain Practice,
Tredence Inc.
Pradnya Shivsharan
Supply Chain Consultant,
Tredence Inc.
POINT OF VIEW
Advancements in supply chain management have made it possible to predict and
gauge the scale of known disruptions. However, unpredictable events such as natural
disasters or wars can still cause significant supply chain disruption without warning.
One prominent recent example is the Russia-Ukraine war, which has already had a
massive impact on global networks in terms of trade goods distribution.
The war has created transportation
bottlenecks, leading to a shortage of
agricultural products like wheat and metals
such as car parts for vehicles manufactured
by firms around Europe. The resulting impact
is also seen across other industries, from
energy production/distribution sources to
consumer goods like cooking oil.
Here's a quick glimpse into the various
industries disrupted by the war.
1. Agriculture sector
According to the United Nations’ Food and
Agricultural Organization, the following
agricultural goods are most affected:
Sunflower oil - Ukraine is the leading producer
of sunflower oil with 13,626,890 tons produced
per year, followed by Russia. Together, these
two countries account for
How the Ukraine-Russia war
is disrupting the global
supply chain
50% of all sunflower oil production worldwide.
Wheat - Russia and Ukraine contribute
approximately 30% of the global wheat supply.
Barley - Russia and Ukraine are first and
fourth, respectively, in terms of barley
production.
2. Semiconductor industry
Ukraine provides half of the world's neon gas
supply, which is vital to the semiconductor
industry. However, the lack of this key
manufacturing element has considerably
impacted the production capacity of
companies such as ASML, Samsung, Intel, and
TSMC.
3. Energy sector
The global oil and gas industries are
experiencing a shortage of supplies because
major companies like British Petroleum have
a large stake in Russian firms like Rosneft.
This has negative consequences for our
world's energy needs, which are likely
to persist.
© 2022 Tredence. All Rights Reserved.
1
4. Transportation sector
Transportation bottlenecks have led to a surge
in oil and gas prices, making the alternate
logistics routes more expensive. Road carriers
like UPS, FedEx, and DHL have pulled out of the
two countries. Furthermore, Russian airspace
is blocked, and the waterways face port
congestion, with container shortages and
surcharges.
These major industries are facing major
challenges, leading to higher prices,
reduced supply, and notable global impact.
What are the viable alternatives?
1. Agricultural imports
Agricultural requirements can be met by
growing crops locally or importing them from
other nations: Wheat from China, India, and
the United States; barley from Australia and
Canada; and sunflowers from Argentina
and China
2. Semiconductor substitites
Many large comapanies are planning to
become self reliant by having a near-shore
manufacturing units to fulfill their needs for
semi conductors. For example, Intel plans to
build two factories in Ohio, and ASML intends
to set up additional manufacturing units in the
United States. In addition, China can be a
substitute supplier of neon gas for the
semiconductor industry.
3. Energy alternatives
Due to the global energy crisis, many countries
are exploring alternatives. In countries like
France, for example, nuclear power provides a
safe and secure energy supply. Further, oil and
natural gas can be obtained from the United
States and Saudi Arabia, and coal can be
imported from the United States, Indonesia,
India, Australia, and China.
4. Transportation alternatives
Alternate air routes
Under normal circumstances, the most optimal
air route connecting Asia, Europe, and North
America is through Russia. However, different
routes can be used to ensure a relatively
smooth supply of products and services during
challenging times.
They are:
Air travel over the North Pole or the South
Pole through the Middle East
Kazakhstan as a stopover on the
southern route
Airports in Abu Dhabi and Dubai can
accommodate additional air traffic in the
Middle East
China-Europe rail freight - Cargo can be
diverted on the China-Europe rail route
through southern Russia and Siberia.
© 2022 Tredence. All Rights Reserved.
2
Challenges with the
alternatives
All the options described above necessitate
importing from or relying on other countries,
which presents physical barriers, trade
regulations, and time constraints. For example,
the flight duration between the UK and India
and Pakistan will increase in attempt to
circumvent Russia. In addition, rising fuel prices
add to the woes of expensive commute.
Further, the alternatives will not suffice for
transporting perishable goods.
The global economy is experiencing a shift as
Ukraine and Russia engage in this conflict.
Many businesses with supply chains spanning
multiple regions are disrupted or at the risk of
disruption - but it doesn't have to stop them
from continuing operations altogether.
Plan Source Deliver
Production and
Inventory Planning
Supply Risk
Assessment
Transportation
Optimization
Delivery Promise
Optimiztion
© 2022 Tredence. All Rights Reserved.
3
To prevent major business interruptions
following war-related impacts on trading
routes or other key aspects of their
international trade flows, enterprises should
develop strategies backed by analytics
to navigate this shifting landscape
with confidence.
How can analytics help mitigate the impact of war on global
supply chain disruptions?
forecasting for the coming days and weeks is
essential. For example, when a customer
places an order, such algorithms can provide
updated and precise delivery times.
What do you need to execute this?
The following data should be available to
the organization:
Historical lead times
Vendor lead time SLAs
Origin location (self or vendor)
Customer locations
Data that can be generated or extracted
includes:
Natural or man-made disruptions
Port congestion and air-route traffic
Geopolitical tensions
Real transit time with traffic and other
blockages
Though the current scenario does not
necessitate permanent supply chain changes,
a few tactical and time-sensitive updates to
existing systems can ensure that the global
supply chain runs smoothly and effectively.
1. Delivery Promise Optimization
Since air travel is getting increasingly
expensive because of Russia’s airspace
prohibition, faster deliveries to keep customers
happy are costing significantly more than in
the past. As a result, it’s more crucial than ever
to set the right expectations with customers or
charge appropriately to maximize earnings
while maintaining customer satisfaction.
The first step is to assess the impact of these
new constraints on overall delivery time. The
next step is to update the delivery promises
with high accuracy instead of apologizing for
the delayed delivery and expecting the
customer to understand. Finally, leveraging an
AI algorithm to analyze a range of factors
causing the delays in real-time and
© 2022 Tredence. All Rights Reserved.
4
2. Transportation Optimization
Though the existing transportation
management system handles the distribution
of the right mix of road, rail, ocean, and air
transport, it is constrained by years-old
contracts and agreements.
An AI-driven transportation optimization
algorithm can quickly make
recommendations to fix the gaps. It can also
suggest consolidation opportunities to move
finished and unfinished goods in the most
cost-effective and time-effective manner.
What do you need to put this together?
The following data should be available to
the organization:
Current load profile across different
modes of transport
Current rate card
Origin and destination pairs
Carrier capacities
Data that can be generated or extracted:
Demand forecast
Consolidation scenarios
3. Inventory Planning
Stockpiling inventory can help resolve
short-term supply chain disruptions. With a
smart inventory management tool, you can
look into current inventory levels, model its
freshness index, and forecast delays in the
lead time for the merchandise coming from
the global suppliers. Further, you can
re-calibrate the safety stock and cycle stock
levels to balance the cost of holding more
inventory and stock out losses.
Finally, a quick patch of AI-driven optimization
engine over the existing planning tool can help
you make these decisions based on inputs
such as the current global scenario, port
congestion, airway restrictions, global supplies
shortage, and so on.
What do you need to put this together?
The following data should be available to the
organization:
Existing inventory levels
Inventory norms
Sales velocity
Product hierarchy
Data that can be generated or extracted:
Demand forecast
Lead time variability considering any
natural or man-made disruptions
Port congestion and air-route traffic
Geopolitical tensions
4. Production Planning
You can plan your production to maximize
the output of finished goods based on the
availability and expected delay in some
raw materials.
© 2022 Tredence. All Rights Reserved.
5
Data that can be generated or extracted:
Demand forecast
Production plant’s capacity and constraints
Current resource utilization
How to do this?
The following data should be available to the organization:
© 2022 Tredence. All Rights Reserved.
6
Production plan and detailed schedule
Raw material inventory
Supply risk index based on natural or
man-made disruptions
Various manufacturing and consumer goods companies that have managed to stockpile raw
materials and components may need to adjust their production output in anticipation of raw
material shortages. Further, organizations still waiting for raw materials should accommodate their
production schedule to make the most of available time and resources.
5. Control tower for end-to-end supply chain visibility
Since supplies are at higher risk of arriving late or not arriving at all, having good visibility into the
entire supply chain beyond tier 1 suppliers is now crucial.
More than 50K US and Europe-based firms have direct or tier 2 suppliers in Ukraine or Russia.
More than 300K US and Europe-based firms have tier-3 suppliers in Ukraine and Russia.
With this level of dependency on tier 2 and other suppliers, it is important to have a control tower set
up to provide end-to-end visibility, right from the status of sourcing of raw material to the last-mile
delivery of the finished product to the customers. The control tower will not only help with the
descriptive views on how the supply chain KPIs are performing but also provide predictive and
prescriptive insights to tackle the situation and optimize the current scenarios.
© 2022 Tredence. All Rights Reserved.
Conclusion: The power of
analytics and AI is the new
way to stay ahead, not just in
business but also during
global supply chain
disruptions.
Though the current conflict is primarily
between two nations, it has impacted
businesses across the globe, particularly
supply chain organizations. And, because
such conflicts occur without warning, there is
often little time to respond and adjust
business accordingly to minimize impact.
As a result, businesses must turn to tools that
can detect and respond to disruptive trends
early. Such smart recommendation engines
can provide executives with peace of mind
and keep business moving forward when a
disruption occurs.
Tredence is a data science and AI engineering
company focused on solving the last mile
problem in analytics. The ‘last mile’ is defined
as the gap between insight creation and value
realization. Tredence is more than 1,600
employees strong, with offices in Palo Alto,
Chicago, Toronto and Bangalore, with the
largest companies in CPG, retail, hi-tech,
telecom, travel and industrials as clients.
Learn more at www.tredence.com
Or follow us at:
www.linkedin.com/company/tredence/
About Tredence

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Supply chain analytics to combat the effects of Ukraine-Russia-conflict

  • 1. Ukraine-Russia Conflict How Global Businesses Can Combat the Effects Leveraging Supply Chain Analytics Shubhankit Verma Senior Manager, Supply Chain Practice, Tredence Inc. Pradnya Shivsharan Supply Chain Consultant, Tredence Inc. POINT OF VIEW
  • 2. Advancements in supply chain management have made it possible to predict and gauge the scale of known disruptions. However, unpredictable events such as natural disasters or wars can still cause significant supply chain disruption without warning. One prominent recent example is the Russia-Ukraine war, which has already had a massive impact on global networks in terms of trade goods distribution. The war has created transportation bottlenecks, leading to a shortage of agricultural products like wheat and metals such as car parts for vehicles manufactured by firms around Europe. The resulting impact is also seen across other industries, from energy production/distribution sources to consumer goods like cooking oil. Here's a quick glimpse into the various industries disrupted by the war. 1. Agriculture sector According to the United Nations’ Food and Agricultural Organization, the following agricultural goods are most affected: Sunflower oil - Ukraine is the leading producer of sunflower oil with 13,626,890 tons produced per year, followed by Russia. Together, these two countries account for How the Ukraine-Russia war is disrupting the global supply chain 50% of all sunflower oil production worldwide. Wheat - Russia and Ukraine contribute approximately 30% of the global wheat supply. Barley - Russia and Ukraine are first and fourth, respectively, in terms of barley production. 2. Semiconductor industry Ukraine provides half of the world's neon gas supply, which is vital to the semiconductor industry. However, the lack of this key manufacturing element has considerably impacted the production capacity of companies such as ASML, Samsung, Intel, and TSMC. 3. Energy sector The global oil and gas industries are experiencing a shortage of supplies because major companies like British Petroleum have a large stake in Russian firms like Rosneft. This has negative consequences for our world's energy needs, which are likely to persist. © 2022 Tredence. All Rights Reserved. 1
  • 3. 4. Transportation sector Transportation bottlenecks have led to a surge in oil and gas prices, making the alternate logistics routes more expensive. Road carriers like UPS, FedEx, and DHL have pulled out of the two countries. Furthermore, Russian airspace is blocked, and the waterways face port congestion, with container shortages and surcharges. These major industries are facing major challenges, leading to higher prices, reduced supply, and notable global impact. What are the viable alternatives? 1. Agricultural imports Agricultural requirements can be met by growing crops locally or importing them from other nations: Wheat from China, India, and the United States; barley from Australia and Canada; and sunflowers from Argentina and China 2. Semiconductor substitites Many large comapanies are planning to become self reliant by having a near-shore manufacturing units to fulfill their needs for semi conductors. For example, Intel plans to build two factories in Ohio, and ASML intends to set up additional manufacturing units in the United States. In addition, China can be a substitute supplier of neon gas for the semiconductor industry. 3. Energy alternatives Due to the global energy crisis, many countries are exploring alternatives. In countries like France, for example, nuclear power provides a safe and secure energy supply. Further, oil and natural gas can be obtained from the United States and Saudi Arabia, and coal can be imported from the United States, Indonesia, India, Australia, and China. 4. Transportation alternatives Alternate air routes Under normal circumstances, the most optimal air route connecting Asia, Europe, and North America is through Russia. However, different routes can be used to ensure a relatively smooth supply of products and services during challenging times. They are: Air travel over the North Pole or the South Pole through the Middle East Kazakhstan as a stopover on the southern route Airports in Abu Dhabi and Dubai can accommodate additional air traffic in the Middle East China-Europe rail freight - Cargo can be diverted on the China-Europe rail route through southern Russia and Siberia. © 2022 Tredence. All Rights Reserved. 2
  • 4. Challenges with the alternatives All the options described above necessitate importing from or relying on other countries, which presents physical barriers, trade regulations, and time constraints. For example, the flight duration between the UK and India and Pakistan will increase in attempt to circumvent Russia. In addition, rising fuel prices add to the woes of expensive commute. Further, the alternatives will not suffice for transporting perishable goods. The global economy is experiencing a shift as Ukraine and Russia engage in this conflict. Many businesses with supply chains spanning multiple regions are disrupted or at the risk of disruption - but it doesn't have to stop them from continuing operations altogether. Plan Source Deliver Production and Inventory Planning Supply Risk Assessment Transportation Optimization Delivery Promise Optimiztion © 2022 Tredence. All Rights Reserved. 3 To prevent major business interruptions following war-related impacts on trading routes or other key aspects of their international trade flows, enterprises should develop strategies backed by analytics to navigate this shifting landscape with confidence. How can analytics help mitigate the impact of war on global supply chain disruptions?
  • 5. forecasting for the coming days and weeks is essential. For example, when a customer places an order, such algorithms can provide updated and precise delivery times. What do you need to execute this? The following data should be available to the organization: Historical lead times Vendor lead time SLAs Origin location (self or vendor) Customer locations Data that can be generated or extracted includes: Natural or man-made disruptions Port congestion and air-route traffic Geopolitical tensions Real transit time with traffic and other blockages Though the current scenario does not necessitate permanent supply chain changes, a few tactical and time-sensitive updates to existing systems can ensure that the global supply chain runs smoothly and effectively. 1. Delivery Promise Optimization Since air travel is getting increasingly expensive because of Russia’s airspace prohibition, faster deliveries to keep customers happy are costing significantly more than in the past. As a result, it’s more crucial than ever to set the right expectations with customers or charge appropriately to maximize earnings while maintaining customer satisfaction. The first step is to assess the impact of these new constraints on overall delivery time. The next step is to update the delivery promises with high accuracy instead of apologizing for the delayed delivery and expecting the customer to understand. Finally, leveraging an AI algorithm to analyze a range of factors causing the delays in real-time and © 2022 Tredence. All Rights Reserved. 4
  • 6. 2. Transportation Optimization Though the existing transportation management system handles the distribution of the right mix of road, rail, ocean, and air transport, it is constrained by years-old contracts and agreements. An AI-driven transportation optimization algorithm can quickly make recommendations to fix the gaps. It can also suggest consolidation opportunities to move finished and unfinished goods in the most cost-effective and time-effective manner. What do you need to put this together? The following data should be available to the organization: Current load profile across different modes of transport Current rate card Origin and destination pairs Carrier capacities Data that can be generated or extracted: Demand forecast Consolidation scenarios 3. Inventory Planning Stockpiling inventory can help resolve short-term supply chain disruptions. With a smart inventory management tool, you can look into current inventory levels, model its freshness index, and forecast delays in the lead time for the merchandise coming from the global suppliers. Further, you can re-calibrate the safety stock and cycle stock levels to balance the cost of holding more inventory and stock out losses. Finally, a quick patch of AI-driven optimization engine over the existing planning tool can help you make these decisions based on inputs such as the current global scenario, port congestion, airway restrictions, global supplies shortage, and so on. What do you need to put this together? The following data should be available to the organization: Existing inventory levels Inventory norms Sales velocity Product hierarchy Data that can be generated or extracted: Demand forecast Lead time variability considering any natural or man-made disruptions Port congestion and air-route traffic Geopolitical tensions 4. Production Planning You can plan your production to maximize the output of finished goods based on the availability and expected delay in some raw materials. © 2022 Tredence. All Rights Reserved. 5
  • 7. Data that can be generated or extracted: Demand forecast Production plant’s capacity and constraints Current resource utilization How to do this? The following data should be available to the organization: © 2022 Tredence. All Rights Reserved. 6 Production plan and detailed schedule Raw material inventory Supply risk index based on natural or man-made disruptions Various manufacturing and consumer goods companies that have managed to stockpile raw materials and components may need to adjust their production output in anticipation of raw material shortages. Further, organizations still waiting for raw materials should accommodate their production schedule to make the most of available time and resources. 5. Control tower for end-to-end supply chain visibility Since supplies are at higher risk of arriving late or not arriving at all, having good visibility into the entire supply chain beyond tier 1 suppliers is now crucial. More than 50K US and Europe-based firms have direct or tier 2 suppliers in Ukraine or Russia. More than 300K US and Europe-based firms have tier-3 suppliers in Ukraine and Russia. With this level of dependency on tier 2 and other suppliers, it is important to have a control tower set up to provide end-to-end visibility, right from the status of sourcing of raw material to the last-mile delivery of the finished product to the customers. The control tower will not only help with the descriptive views on how the supply chain KPIs are performing but also provide predictive and prescriptive insights to tackle the situation and optimize the current scenarios.
  • 8. © 2022 Tredence. All Rights Reserved. Conclusion: The power of analytics and AI is the new way to stay ahead, not just in business but also during global supply chain disruptions. Though the current conflict is primarily between two nations, it has impacted businesses across the globe, particularly supply chain organizations. And, because such conflicts occur without warning, there is often little time to respond and adjust business accordingly to minimize impact. As a result, businesses must turn to tools that can detect and respond to disruptive trends early. Such smart recommendation engines can provide executives with peace of mind and keep business moving forward when a disruption occurs. Tredence is a data science and AI engineering company focused on solving the last mile problem in analytics. The ‘last mile’ is defined as the gap between insight creation and value realization. Tredence is more than 1,600 employees strong, with offices in Palo Alto, Chicago, Toronto and Bangalore, with the largest companies in CPG, retail, hi-tech, telecom, travel and industrials as clients. Learn more at www.tredence.com Or follow us at: www.linkedin.com/company/tredence/ About Tredence