Forwarders must lead with expertise amid Ukraine crisis

As the logistics industry emerges from one of the busiest years in its history, the Russian invasion of Ukraine has crushed hopes for a robust economic recovery, at least in the near term. Now, shippers that have endured no economic stability throughout the pandemic see little hope for an improvement in supply chain predictability as capacity tightens and costs rise. Moreover, sanctions against Russia are already resulting in significant trade restrictions requiring logistical expertise that the freight forwarding community can provide — but only if it is prepared to navigate an uncertain path. [caption id="attachment_93852" align="alignright" width="350"] Brandon Fried, Executive Director of the U.S. Airforwarders Association[/caption] Forwarders spent most of the pandemic working with shippers to navigate the most significant supply chain challenges ever. Most built their financial war chests to increase technology investment to provide increased automation and transparency for customers while growing footprints through mergers and acquisitions. Forwarders today realize that simply moving boxes from city to city is insufficient to stay relevant in the increasingly complex and competitive market. Shippers expect their forwarders to address environmental sustainability, provide innovative solutions to their logistical needs and now be able to deal with the challenges caused by a significant war crisis. Economic warfare It is now clear that the west is sanctioning Russia for attacking Ukraine, and targeting critical aspects of the Russian economy, cutting it off from global commerce. Commercial aviation is a primary target in this economic warfare, and recent incidents have set the Russian aviation industry back by more than 30 years within just a couple of weeks. The United States, European Union, and Canada banned Russian flights from their airspace and airports. Primary aircraft manufacturers including Airbus, Boeing, and Embraer will no longer provide spare parts to Russian airlines. Sanctions will slow the nascent Russian commercial aircraft industry as many planes use engines and parts from western providers. Forwarders and their air cargo customers will also feel the pinch as the war reduces already strained freighter capacity. For example, the crisis grounded Russian air carrier AirBridgeCargo’s 17 747 freighters and its 777. The carrier is a significant player in transporting goods from Asia to Europe through its Russian cargo hubs and is no longer an option for western shippers. Larger planes, including the AN-124, are also grounded, severely constricting oversize cargo capacity. One of the first and most visible casualties of the war was the world’s largest plane, the Antonov AN -225, which was recently destroyed in the fighting. Known as the “Mriya,” the one-of-a-kind, six-engine aircraft could haul more than 200 tons and was a frequent visitor to many cities, including in the United States. In addition, several forwarders routinely chartered the giant aircraft to move oversized cargo. Forwarders grew accustomed to having frank conversations with customers throughout the past two years, and should be ready for more in the weeks ahead. When the pandemic shattered the world’s economies in 2020, our trading systems experienced the worst disruption since World War II. Then in 2021, unprecedented surges in demand for physical goods, primarily driven by e-commerce, stung global supply chains, and maritime container and airfreight shipping rates increased to unsurpassed highs. As a result, rates rose, capacity tightened and service levels plummeted, making the forwarder’s knowledge and expertise more essential than ever. Looking ahead Predicting the future is seldom successful, but the freight forwarding industry should be ready for what lies ahead. If the Ukraine crisis lingers, historically high fuel prices will likely only add to inflationary pressure and erode consumer confidence resulting in less purchasing. However, this reduction may ease congestion at the maritime ports and airports as freight volumes return to normal. The war in Ukraine could also cause businesses to reduce their reliance on global supply chains. This shift would drive companies to focus on supply resilience over just-in-time delivery and a move toward reshoring manufacturing close to or within the country. Cybersecurity should be another significant focus for freight forwarders in the weeks and months ahead. There is a real chance that cyber warfare could cause considerable damage to organizations, whether directly or indirectly, through disruption to customers, vendors and suppliers. The industry continues to experience significant disruption to automation due to ransomware attacks capable of paralyzing companies for prolonged periods. These interruptions erode customer confidence while costing substantial financial resources. Governments are beginning to assist in fighting the menace, but such help is bound to be slow and likely inadequate. Our industry must lead in building its defenses to protect companies, employees and customers now, before it is too late. Forwarders have always been a source of knowledge and guidance, providing a consultative approach in assisting shippers with logistical challenges. However, now is the time to be closer to customers than ever, answering questions and offering practical solutions. The Ukraine crisis and related sanctions will likely create shifts in manufacturing and economic activity, increasing fuel prices and creating a convergence of geopolitical uncertainty. As a result, capacity, regardless of transportation mode, will come under more significant pressure and costs will undoubtedly increase. Hence, forwarders and their customers need to prepare for a rocky road ahead.

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