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How war is changing the business world



Ukraine is the latest recipient of decentralization, localization, and supply chain redundancy. You can share up to 10 to 20 articles monthly via the gift article service. To purchase additional rights, you can also buy additional rights.

Many lives have already been affected by the conflict in Ukraine. It is also disrupting business models. Due to Covid-related disruptions and western multinationals leaving Russia and Ukraine, companies are forced to rethink business models.

They face many issues, such as how to pay local Ukrainian workers (in certain cases with cash sent from Poland) or how to get parts from the area they had sourced before the war. It is difficult and slow to find the right answer. German carmakers, who depend on Ukrainian parts, have been the most affected. Their plants are still inactive as they search for a better system.

Even companies that do not have suppliers or operations in conflict zones recognize the importance of shifting from an assumption of free globalization to local production hubs and consumption centers. They see the benefits of more decentralization and system redundancy to avoid future shocks. This means having additional resources to help you. RBA’s CEO Richard Bernstein says the current supply chain disruptions are worse than the 1973-4 and 1979 oil embargoes. This is not a temporary phenomenon but a new norm.

Vertical integration is a strategy large companies employ to manage their supply chain and minimize disruptions. Companies are always looking for ways to locate more production near their customers, regardless of whether or not they are in the same region. Although many small “maker” businesses in New York have benefited from the pandemic due to their local sources, large companies are adopting the technique for greater protection against geopolitical or climate-related shocks.

Plenty, a vertical farming startup, is headed by Arama Kukutai. According to him, supply chains are in crisis and have been for many years. Lots work with Walmart and other companies such as Driscoll to produce vertically-stacked fresh fruit in California. They launched a new east coast strawberry farm that was vertically stacked to avoid transport delays and costs. Kukutai said that such companies seek to decrease their dependence on imports and long supply chains. “Customers should be there when you build.”

This trend has been evident in manufacturing for many years, particularly for privately-owned companies that are more localized and family-owned. They are also less likely to deliver quarterly results.

One of them is New Balance. New Balance’s footwear company announced last week that it would open a factory in Massachusetts to serve the growing demand for “made in America” products. To avoid unexpected shocks, it plans to work with more local suppliers. Joe Preston, the CEO, says being private makes it easier to do more locally. However, he believes that ESG requirements will drive more companies towards this goal in the future. This is largely due to labor issues.

The world isn’t returning to the globalization of the 1990s. The most significant impact on technology will come from the need to change existing business models. Intel has opened a new Ohio chip foundry as part of America’s larger tech decoupling with China, Russia, and other countries via chip export sanctions. It also invests in European regional finery capacities.

I wouldn’t be surprised if dual-use technologies could have more restrictions. They can only be used for commercial or military purposes. TS Lombard recently reported that industries ranging in chips and telecommunications, aerospace, avionics, electronics, lasers, and components might need to shift their supply chains to allow decoupling.

According to the report, cloud-connected smart vehicles can upload real-time data directly into satellites (e.g., Tesla/SpaceX) and be used for surveillance purposes.

This could have major financial market implications, as many tech companies’ growth was based on their ability to seamlessly cross-border. This impact is not limited to one direction. Since the pandemic, 3D printing stocks have seen an increase in popularity. This industry was able to fill the supply chain gaps by producing everything locally, including medical and testing equipment, personal accessories, visualization aids, emergency dwellings, and even visual aids.

Between 2019 and 2020, the market for 3D printing increased by 21 percent. It is predicted to increase by 21% in 2026. One of many companies shifting away from printing disaster shelters and building luxury homes in Austin, Texas. This is a fascinating shift that could reduce inflation given the complexity of homebuilding supply chains and the carbon emissions. Nature 2020 states that 3D printing buildings could reduce labor costs, speed up construction times, and transport easily to areas in greatest need.

Remember that success can still be achieved in times of crisis, even during war or decoupling.

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