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Geopolitical tensions increasing supply chain disruption, says Smart Cube

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Geopolitical and macroeconomic events, such as the Russia Ukraine conflict, tensions between China and Taiwan, and impending economic slowdown, are negatively impacting supply chains across multiple sectors, according to research firm The Smart Cube.

The analytics company added that prices are continuing to rise across numerous industries, mainly due to shortages and restricted access to critical supply routes.

Businesses must adopt a multi-pronged strategy to try and mitigate these disruptions, Rashi Singh, AVP, procurement and supply chain at The Smart Cube, recommended.

He said: “Businesses must evaluate multiple suppliers and identify alternative sources for procuring essential products and services. They should support essential suppliers financially through supply chain and working capital financing.

“Secondly, it’s vital that businesses conduct a comprehensive review of their exposure to Russian, Ukrainian, Taiwanese and Chinese suppliers on raw material procurement. By mapping suppliers on a tiered basis, they can get a clear picture of critical raw materials at risk. Businesses must also continuously monitor the events that could impact the supply chain and liaise with suppliers to identify alternative payment methods to ensure business continuity.”

Detailed assessments to evaluate the required levels of inventory and labour in the short to medium term was also recommended, with businesses ensuring that the required inventories are in place in case of disruptions in supply.

“Businesses need to allocate provisions for high prices of utilities and certain raw materials and anticipate higher borrowing costs amid interest rate hikes,” Singh added.

“As the situation evolves, they should eliminate or freeze all non-essential spending. Equally, they should review financial hedge positions in the light of the volatile currencies and macroeconomic environment.

“Finally, businesses should identify and minimise vulnerabilities in cybersecurity to avoid furthering the disruption to their operations.”

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