The Road - Issue #2

Welcome to the second issue of The Road. The first issue was published a week prior to the invasion of Russia on Ukraine and it highlighted a positive outlook for the year. One week made a huge difference…

Since then, it was fairly challenging to decide when to share a new newsletter. Firstly, due to the uncertainty that the current war presented and secondly, how to write about logistics topics when bigger things are at play. 

All us were were hopeful that this year would be a year of ‘normality’ post the pandemic. We have been proven otherwise. The war between Russia and Ukraine created havoc and then China went in the biggest lockdown since the Wuhan outbreak. We are now more than three months into the war and two months into the Shanghai lockdown. These two major events will be having a widespread global economic impact for the months to come.

The Lay of the Land

It is hard to foretell the outcome of the war between Russia and Ukraine. News outlets provide varied accounts of the events and how each sides is fairing. It is a fair prediction that the war will not finish soon and the senseless loss of lives will continue. Sanctions imposed by world economies on Russia and vice versa are disruptive across the board - rising costs of energy, inflation, looming global food crisis, to name the few, and of course logistics.

We see global supply chains as a circulatory system. Its main arteries are clogged: (1) transit between China and Europe through Russia, (2) lockdown in China and (3) a growing shortage of drivers and trucks across Europe. The whole system is already warn out after two years of fighting with Covid. When the goods from China will start flowing to Europe at full speed again, supply chains will be going through a cardiac arrest.

Alternative Routes

When the war broke out, we have established an alternative route for road from China to Europe - the Southern Corridor - through Caspian Sea, Azerbaijan, Georgia and Turkey. We have delivered a number of shipments using this new alternative and this is what we have learnt. 

The biggest surprise was Georgia. A country, that prior to the war was easy to cross, is now congested. The inflow of trucks due to the war and sanctions have slowed down cargo transit - mainly from Russia and Belarus. We have been to Georgia just last week and inspected all the borders and ports to source new routing options to speed up this part of the route. I am happy to say that we have been found alternate roads, borders and ferries. This will allow to for this route to achieve the target transit times, as majority of trucking companies use the main transit road through Georgia and the main two borders between AZ-GE-TR.

Who is the Southern Corridor for? Customers who do not want to transit through Russia and are happy to accept additional cost and time for their goods to arrive in Europe, especially DG goods or oversized shipments not fitting in 40’’ containers.

Uncomfortable Russia

The elephant in the room. Many companies do not want to transit through Russia on rail or road, but they may not have a choice in the coming months. The world economy and supply chains have been welded together over decades and cutting off a part of the transit routes will not be sustainable for the globe. We are already in a negative spiral and each new event is accelerating this downward trajectory. How long can we sustain it?