Security & Supply Chain: 2014 Crimean Crisis
by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling
As the eyes of the world turn to Russia and the Ukraine through a level of tension reminiscent of the Cold War era, the business world should pay extra close attention to the Crimean crisis especially in regard to impact on supply chains.
This crisis has led to a drop in Russian stock prices and ruble value. The tension in the region is especially problematic because over 90% of Russia’s oil is purchased in Europe and 70% of the oil that flows into Europe from Russia flows through the Ukraine. Also, Crimea is strategically important for its position in the northern Black Sea. Control of the Black Sea is an important issue as it serves as a major trade route between Russian, Turkey, and Eastern Europe. The situation is extremely delicate as violence and sanctions can send shockwaves throughout the global markets.
Boeing serves as a great example of how the crisis can affect business supply chains. The company has a joint venture in Russia with the world’s largest titanium producer as well as a design center in Moscow with over 1,000 engineers. Boeing has billions of dollars tied into Russia. Any acts of aggression by Russia that would trigger U.S. sanctions, will cause serious problems for Boeing.
As tensions escalate in the Crimean, companies need to evaluate supply chain threats, prepare for commodity price fluctuations, and develop strategies to minimize risk. Any businesses with key supply chain interests in Russia or the Ukraine should be on high alert. Businesses impacted by the European energy markets should be concerned as well. More importantly, all companies should know and understand how regional events affect their supply chains.
Supply chain analytics are critical as companies across all industries need to evolve with to adapt marketplaces characterized by globalization. Businesses need to quickly visualize their global supply chains in ways that allow them to gain new insight and better understand relationships between suppliers, distributors, retailer, and end-users.
Most executives and managers across industries recognize the importance of supply chain analytics which are becoming increasingly forward-looking, predictive focusing on optimization, simulation and modeling, and forecasting. Businesses are using supply chain analytics to view their supply chains in real-time and better prepare for events that impact them, such as the Crimean crisis.
More information on supply chain analytics and other innovations that drive supply chains are available in the 2014 MHI Annual Industry Report which can be downloaded at www.mhi.org.