The MIT Center for Transportation and Logistics (CTL) convened participants from industry, non-profits, and academia to discuss the effect of the war in Ukraine on global supply chains during the June 2022 Supply Chain Exchange Monthly research briefing, which also served as The MIT Global SCALE Network quarterly webinar. Researchers from across the MIT Global SCALE Network discussed the impact of the war on different areas, including the humanitarian consequences, regional implications in Europe, China & Latin America, and the effects on the food supply chain.
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Key Supply Chain Takeaways From the War in Ukraine
Russia’s brutal invasion of Ukraine started a conflict that has disrupted supply chains at the global, regional, and local levels, and compounded the operational problems caused by the Covid-19 pandemic and other large-scale challenges.
The MIT Global SCALE Network organized a webinar that featured three member centers, the MIT Center for Transportation & Logistics (MIT CTL), the Luxembourg Center for Logistics and Supply Chain Management (LCL), and the Ningbo China Institute for Supply Chain Innovation (NISCI), to explore the supply chain lessons learned from the early stages of the conflict.
Food supply chains were hard-hit by the conflict. Chris Mejía, Founder and Director of the MIT Food and Retail Operations Lab at MIT CTL, explained that Russia and Ukraine are leading producers of food crops such as wheat and barley. War-related disruptions have fueled famines, hindered aid programs, and interrupted supplies of fertilizers. Debilitating the global food system – which produces about 11 billion tons of food annually – also lowers productivity in affected areas.
The war has reconfigured sourcing practices and strategies in the region. Joachim Arts, Associate Professor, LCL, said many companies could no longer source certain products or materials in Russia or Ukraine. Consequently, industries suffered disruptions that rippled through their global supply chains. Shifting sourcing patterns also lengthened shipment lead times in the region.
Broken rail connections
Pascal Wolff, Assistant Professor at NISCI, described how rail transportation between China and Europe came to a virtual standstill when the war broke out. As a result, efficient, low-cost rail transportation to and from hinterland locations in China were no longer available. Some auto companies based their sales cycles on the rail transit times, and had to adapt quickly. In contrast, Chinese freight forwarders, largely unaffected by sanctions on Russia, promoted rail.
Lessons for the Future
We can learn much from the conflict. For example, alternative sources of fertilizer such as Morocco need to be identified. The war has prompted companies to learn how to better coordinate shipments and allocate scarce resources in the region. Some enterprises have redesigned regional manufacturing networks in response to the war. Lessons like these could help companies gird against future conflicts