Glenn Koepke: ‘Global supply chains could be in for a major overhaul’

A year since the start of Russia’s invasion of Ukraine, supply chains in both countries are being adversely affected – especially in and around the war zone, where safe transport is the biggest concern for every link in the supply chain ecosystem. Glenn Koepke, GM Network Collaboration at supply chain visibility platform FourKites, considers it unlikely that any stability can be regained in the coming year. With the global spotlight now on China and the US as well as Russia and Ukraine, he believes supply chains could be facing a major overhaul.

While shipments to Russia and Ukraine dropped significantly in 2022, recent import volume figures show that Russia’s supply chain is deteriorating dramatically, while Ukraine’s is steadily improving. In fact, Russia’s year-on-year import volume fell by 96.2%, while Ukraine’s rose by 14.3% during the same period. Nevertheless, both countries are still importing products to meet their needs and trade is still taking place.

Glenn Koepke: “As a result of the war, most international companies have ceased operations and investments in the region – a massive disruption to the ecosystem that was in place and a huge void that future generations will need to rebuild post-war. I can recall deploying TMS systems for international companies that had factories and distribution centres in both Russia and Ukraine, and teamwork was highly effective. Sadly, the idea of one team will be very difficult for future generations.”

Lasting impact on trade flows

The road and rail freight trade flows between western Europe and Belarus and Russia will have a long-term impact on global supply chains given the sanctions, safety and political impacts of that trade, according to Koepke: “Historically, Russia would allow so many non-Russian licensed drivers in, based on annual permit numbers. That is no longer a need, and it will likely take decades for international companies to want to pursue and recover business and lost investments in the region.”

In addition to trade flows being affected, Koepke predicts that the routing of vessels will also change in the Black Sea. “The risk and long-term implications will obviously coincide with the territories that are held, but logistically speaking the Black Sea is a major strategic corridor for both import and export freight. For Ukraine, the Black Sea is also a critical link to be connected to the global economy and not be dependent on neighbouring countries and trade partners to access the global waterways.”

China/US trade war

From a supply chain perspective, Glenn Koepke says the worst-case scenario is that China and the US become embroiled in a trade war. “Given China’s production volume and export volume to the rest of the world, this would cause production lines, pricing and product availability to enter a world we have never seen. Ultimately, supply chains have to remain global due to the dependencies networks have established over decades. Changing this overnight just isn’t feasible at a global scale.”

The changing macroeconomic environment has also changed how shippers approach transporting goods in and around the war zone. According to Koepke, safety, risk and exposure are the primary drivers of transport and it is less about demand, capacity and inflation. “Although Russia and Ukraine produce specific products and are net exporters in certain commodities, at an overall global level supply chains have remained resilient, found alternatives and can sustain themselves in the long term without impact.”