The changing form of conflict and its impact on the global supply chain

Last year, I wrote an article on hybrid threats and the future of supply chain management. This article addressed the growing threats, the emergence of cybersecurity, and the use of asymmetric warfare tactics in disrupting the global economy.

Over the weekend, it was reported that Saudi Arabia’s oil infrastructure was attacked with the use of drones. The explosion disrupted their production by about 5m barrels per day, which is nearly half of the kingdom’s 9.7m barrels, and 5% of global production. As a result, Brent oil sparked to about 20%, and China Futures as well on the supply disruption and the oil price is about 20% to above 71 dollars per barrel.

This prompted the President of the United States, Donald Trump to authorize the use of the oil reserves to stabilize the market. The attack increased the price of oil and caused unnecessary havoc in the market. 

There has been a lot of speculation on who is behind this but Iranian backed Houthi in Yemen has claimed responsibility. However, what is most important is the fact that we are beginning to see different hybrid threats, and the use of the same methods and tactics we’ve seen in asymmetric warfare. These methods are not only disrupting the supply chain but also affecting the markets and consumers at large.

The conflicts cause megatrends, where because of instability in the different areas, and changes in the social dynamics, political dynamics are also affected. This, in turn, affects supply chain dynamics across the world.  The attack on globalization, the rise in populism, and nationalism have posed a different threat to the movement of goods and services across international borders.

The current China and US trade war is also a potent example of how economic tools can affect the supply chain. I might be grossly mistaken, but this is the first time I’ve seen that without boots on the ground, economic tools have changed conflict rhetoric.

The tariffs used in China and the US trade war have reached more people than any combat-related war could have. I’d explain why. If the US military is engaging another nation, the people who will be affected are the defense industry, the military, their immediate family and people supporting them. However, China and the US trade war has shown that you can use economic tools to war against a country and increase the number of people who’d be affected.

Can you imagine that a product, used by the majority of Americans is not shipped into the country because of a conflict? The product’s price will increase, and people’s pockets will be affected. This is why using economic tools for war is becoming more effective than boots on the ground. It is a new way to reach citizens without firing a bullet. The traditional way of fighting is becoming outdated.  As governments realize this method, many more of them will leverage it to get what they want.

Supply chain managers must understand that the times have changed and uncertainty levels are high. Social dynamics are affecting our political dynamics, and this is affecting the movement of goods and services. Globally, supply chain managers are now tasked to provide value to their company amidst all this chaos. They have to wade through different conflicts and provide value. How can they make this work, you may ask? By observing the geopolitical dispensation, and ensuring a free flow of goods and services across borders.