How the war on Ukraine is a war on world commerce
The war in Ukraine has caused its inhabitants casualties of unimaginable proportions on every level. Likewise for many of the Russian people, who face the effects of sanctions and global isolation. For the rest of us (of course it pales in comparison) this has brought on a feeling of great unease. It’s as if we’ve rolled back time, and along with it, the ideals of a peaceful, cohesive and prosperous society.
Even the secondary casualties – commerce, rising energy costs and food security concerns – place our status quo under threat. For us at Ason Bags, the effects are already felt, and they’ve already shown that they’ll have a lasting effect on how we do business in the 2020s and even the 2030s. Considering the implications, it feels like it’s been underreported. Being in the bag industry, as a manufacturer, I wanted share my thoughts from my recent experiences – a few main themes keep coming up.
Shift in the approach of procurement departments
Pre-pandemic we lived in a complex ecosystem of intricate supply chains, all timed perfectly and optimised for competitive pricing, efficiency and profitability. With these under pressure after the strict Asian lockdowns affected manufacturing capabilities and lead times, we have noticed our current and new customers taking a more collaborative approach with us. In the last weeks have seen a fundamental shift – customers are now actively prioritising ‘supply resilience’. They value reliability over pricing and ultra-refined logistics. For companies to be profitable, actually having stock to sell is now a competitive advantage. Our investment in new hi-tech in-house production and sampling is paying off – keeping as many of the elements of the manufacturing ecosystem under one roof.
The double whammy: the pandemic AND the war in Ukraine. Apologies to those with COVID fatigue but it bears repeating that it disrupted the flow of cargo transport over the last two years. Freight prices quadrupled as carriers were afforded the luxury of applying the ‘opportunity cost’ principle (or if you’re a cynic, predatory pricing). Now with Russian airspace and ground freight limitations, and the stranded ships in ports, plus the rising oil price, the issues are compounded. Until a month ago we were able to offer our customers a third alternative to sea and air freight – rail. But of course the China–Europe line routes through Russia…
Drop in international trade
Russia as a major market for many global brands. The general public sentiment around the invasion means there’s been an overt push for social responsibility and companies have gone beyond sanctions compliance, towards proactively applying sanctions. This affects almost every sector, including our relatively small slice, and it looks unlikely to shift any time soon. Economists previously thought that healthy global commerce was a good reason for even the most marginalised leaders to put aside their differences and nurture peace in the name of good business. Wrong.
Many of the materials our bags are constructed with are made using oil-based products. Raw materials required to make them will become more expensive. Suppliers’ pricing will become more competitive as manufacturers still try to offer competitive pricing to brands which in turn attempt hit pre-set price points in the markets. Some suppliers will simply go out of business. And fewer suppliers mean less competition and therefore higher prices. And so on. The greatest casualty could be the initiatives to lower our impact on the environment – sustainable materials are more costly, and with pricing getting squeezed, the environment looks to become yet another casualty of this outrageous situation.
If you’ve had similar, or different experiences, please add a note in the comments section, and if you’d like to know more about how we at Ason Bags collaborate with companies in manufacturing bags, send me a direct message and we’ll talk more.
Product Director at CUULAH.com and Director at ASON Bags
Over 20 years of experience in the bag and soft goods industry.
Ex-professional cyclist and ultra-distance world record holder, Africa North to South (Cairo to Cape Town)
Founder of SwiftCarbon bicycles.
Co-Founder: Character Through Cycling holistic cycling academy