Russia’s invasion of Ukraine is having far-reaching effects on international trade and supply chains spanning many countries and continents, sparking shortages and rising prices across the Eastern European supply chain. Marc Meyer, CCO at Transmetrics, takes a look at how AI can help
The supply chain crisis is not new: Countries have been experiencing backlogs since before the pandemic. But with sanctions and route closures, the conflict between Russia and Ukraine has spiralled the effects out of control.
Families are starving, and those in hunger extend far further than the ones in battle: International Food Policy predicts only a quarter of the $24m tonnes of wheat relied on heavily by much of the Middle Eastern population will leave Ukraine this year. Without a chance to field next year’s crops, those dependent on this resource need to find a more permanent solution quickly. Turkey, which processes the product into flour and distributes it to Africa, already a vulnerable continent, suffers extensive agricultural disruptions as a result. And that’s just one example.
It takes years and money to move business in-house or in-country. Although somewhat costly, resourcing to local partners and nearby countries is a solution. Still, with the constant changing of routes by businesses across Europe alone, data needs to be managed extremely carefully.
Let’s look at how artificial intelligence (AI) can help businesses manage their data strategically to support the Eastern European supply chain in times of conflict.
Knock-on effects on utility costs
From wheat to fuel – when resources are limited, the prices rise. And the costs are absorbed like a chain reaction. Government subsidising gas and oil represents a feasible temporary solution for some Western countries, but this is not a long-term strategy, nor is it an option for some Eastern countries unable to prop up. The EU has €200bn available in loans that member countries can request until August 2023; however, is getting into more debt the answer?
The price of transporting goods is having a knock-on effect on utility costs and volumes available with limited journeys affordable. Bulgaria already saw a massive 30% jump in fuel prices in January – raising them again shouldn’t be an option, yet it happened. Local suppliers pay more to transport goods in the area, and customers’ product prices rise to compensate.
In addition, during a labour shortage, truckers are hit even harder as many drivers who stayed after the pandemic are now heading back home to support families in Ukraine, and their corporations don’t know if they’ll come back safely. Tens of thousands of truck drivers have reported quitting their jobs in Poland alone to return to protect their loved ones.
The EU is in a standoff to protect their own and protect each other – resourcing to neighbouring countries might come with higher costs per item, but they can save on journey lengths, fuel required and time taken to receive the supply.
Logistics companies must optimise capacity
Logistics companies have no choice but to optimise: those trucks that go out need to be fully loaded. They need to know the direction precisely and have their goods packed for seamless drop-off en route.
AI can optimise routes A to B to C to D, know the demand and drop points, and use asset positioning to pack efficiently and cost-effectively, maximising the space of every container, ship, aircraft and truck. Businesses can use this to handle their own.
Let’s say you ship fertilisers from Russia to Germany. Instead, you source your products from more local Hungary and help absorb their rising energy prices. You feed the AI with collection points, volumes and vehicles available, and within seconds it analyses multiple scenarios and dishes out the optimal route. Add traffic data, routes accessible and disruptions, and you can ensure you maximise every journey and operate every vehicle at total capacity even if you are working with fewer trips and drivers.
While the quickest route (around the disruptions) needs to be utilised, companies know they are still sending their fleet on hour-plus diversions to avoid the Black Sea, Ukraine and Russia borders, to name a few of the hurdles. However, the next best option is better than the third. But what happens when all companies try to take the second-best opportunity?
Standardising data will simplify supply chains
Although still an optional procedure, the trend of imposing global logistics standards is growing in adoption and need.
Standardising data across industries, countries and continents will simplify supply chains long-term. If all stakeholders share data on demand, routes occupied, blockages, who has available capacity and what’s departing today or tomorrow, in real-time, with AI, you’re looking at global planning optimisation.
Established in 2019, the Digital Container Shipping Association’s (DCSA) mission is to move the industry forward in terms of customer experience, efficiency, collaboration, innovation and respect for the environment. Yet its ideas are more than idealistic. The Russia-Ukraine conflict highlights the importance of uniting forces to prevent clashing route occupation and resourcing from new suppliers in short timeframes.
DCSA created international standards across the Internet of Things (IoT) gateway connectivity interfaces, remote container monitoring, port call data and bay plans. The result: to enable global, industry-wide interoperability, vessel locations, port planning and capacity availability, respectively. And when handling large volumes of data, AI platforms that can read all the required information at once are what will make this process manageable.
According to the international business organisation, promoting common, internationally recognised trade standards and digitising the UK trading system alone could bring about £225bn in efficiency savings. Launched in April, the International Chamber of Commerce (ICC) UK has coordinated the world’s first digital hub, accelerating the digitalisation of trade and lowering access barriers to trade for small to medium-sized enterprise (SME) exporters in the UK and Europe.
Collaboration and efficiency. What else? With fewer wasted journeys and space, the transportation industry reduces its carbon emissions and on a continental scale, this impact is significant. But we’re a long way from there. For now, crisis management is the priority: businesses need to drill down on making their own practices efficient and when it comes to quick non-biased management of data, AI is a tremendous support.
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