The last few months have been very busy in terms of external factors causing the limitations of Amazon’s supply chains. Some events are happening outside of our control and will have short-term and long-term implications, not only affecting our supply chain but on a national level.
The conflict between Russia and Ukraine
How does the conflict really affect us? The limitations of Amazon’s supply chains are caused by;
Maritime Transportation
As for maritime transportation: Due to the conflict, the Ukrainian port of Odessa has been closed and ships passing through the Black Sea are being diverted to other high-traffic European ports, causing increased pressure on maritime transport. Additionally, more than 10% of the workforce working on ships is of Russian nationality, which affects their quick pay, resulting in less workforce, less ships and routes available, and then a rise in the price of maritime freight may occur. It’s not something we can feel right now, but the longer this conflict lasts, the more likely we will begin to feel it in freight prices and there will be a greater impact on shipping from China to Europe.
Rail Transportation
Regarding the China-Europe rail, it has very limited capacity since its route passes through Russia. Which leads to rail cargo also being sent by sea, adding more load to already scarce containers.
Air Transportation
Air transports are also being diverted to avoid Ukraine, as it is currently an air exclusion zone. Also, some Russian airlines have many restrictions, making the cargo we send by air more expensive and taking longer routes.
Restricted Exports in China
Exports of minerals, agriculture, food and energy are not going to China, causing China to obtain these resources elsewhere at a higher price, causing the cost of goods to rise. Once food prices are higher in China, labor costs will increase, and as a result, so will our cost of goods. It is not something we can notice now, but as this conflict continues, it will exert pressure on our cost of goods.
China’s participation
China has a good relationship with Russia as both countries have similar political interests. Which leads the US to believe that China would be willing to back Russia. If that happens, China will receive heavy sanctions from the US. – which come in the form of tariffs, quotas, etc., which will affect the trade business. The next move China makes could have big implications for world trade, Biden has already called Putin a “war criminal” and if China shows its support then sanctions will be imminent.
Recent closures in China
Recent shutdowns in China, also causes supply chain constraints at Amazon . Shenzhen and Jilin province were closed due to an increase in cholera cases. After they opened, another city, Shenyang, was also closed. China continues to impose the zero Covid-19 policy, determined to completely expel the virus from the country.
This policy demonstrates that China can block any area at any time it wants, causing manufacturers to stop production. In addition, because of the shutdown, workers are not producing, trucks are not delivering goods to ports and containers are not being loaded onto ships. Even if the city in which manufacturing is taking place is not closed, that supplier may source raw materials from a city that is closed, their packaging may come from that area, or the goods may have to pass through that area.
It is important to have buffer stock or plan for additional orders while suppliers are operational in case the area in which our manufacturer is located becomes inaccessible in the future.
SOLUTIONS:
- Improve the relationship with the manufacturer to have their full support.
- Ask the supplier to keep more stock in the warehouse.
- Discuss with the manufacturer the sharing of shipping costs.
- Anticipate the possible increase in shipping prices and the increase in delivery time and, make a decision on the number of orders and shipping times.
- Obtain information on shipping lines.
- Request quotes from several and negotiate shipping rates with the supplier.
Most importantly, support the manufacturers, as they too are going through tough times and are trying their best to take care of us. If things go wrong, they are most likely out of our control, sometimes they are not the best at communicating this, communication with our supplier is key.
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