Ukraine, power and supply chain risk

What happens when a really strategic supplier does something that is against your interests? Perhaps they start supplying your rival with their latest technology, or set up in competition with you in certain markets?

That’s when the balance of power really gets exposed and crystallised. If you hold the power, you can make them change their stance by threats about losing your business. But if your dependence on the supplier is greater than theirs on you, there’s every chance they are going to say ‘take it or leave it’ if you make those threats.

That looks something like the position Europe finds itself in with Russia in terms of the problems in the Ukraine. Germany and other countries depend on Russian gas. England depends on Russian money, billionaires and dodgy oligarchs for its City of London financial commissions, large tips in fancy restaurants and funding football clubs. So don’t expect Europe to take a hard line with Russia. It’s a simple case of power, in a not so simple geo-political supply chain, as it were.

That’s all macro-level strategy. At the level of organisations and procurement executives, this certainly brings political risk management back into focus – remember we featured the recent Dun & Bradstreet report here?  It is frightening how quickly we can move from seeing a country as a pretty stable and quite westernised trading partner, to a region on the brink of war.

So what should procurement and supply chain executives be doing about the current situation? Well, knowing what exposure you have is an obvious first step, and the state of supply chain understanding in some organisations means that many probably don’t even know that there are risks.

My colleagues in the US, Jason Busch and Taras Berezowsky (who works on the Metal Miner website most of the time) have put together an excellent piece here titled “The Supply Chain, Ukraine, and Russia: Procurement and Supply Risk Considerations”, looking at the various issues and responses that might be considered in terms of events in the Ukraine. It is thoroughly recommended to anyone with exposure in that region – here is a brief extract with just one of their points, but do read the whole article here.

“Understand your commodity and lower-tier supply risk exposure to Eastern Europe, Russia, and nearby countries. Invest the time to develop supply chain maps for key products and categories to understand exposure, which would likely be from lower tier suppliers. Products from providers such as Resilinc, HICX, and Sourcemap can help organizations visualize the supply chain”.

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First Voice

  1. PlanBee:

    So if the Ruskies pull out of Britain (London), house prices come down to a level where British nationals can afford them, bankers bonuses are reduced and Chelsea FC go bust. What’s not to like

    And we’d be taking the moral high ground as an extra bonus

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