How the Russia-Ukraine Conflict Affects the Supply Chain

Throughout the past two years, supply chains have muscled through numerous challenges as the COVID-19 pandemic impacted industries all over the world. As Russia invades Ukraine, the world’s supply chains face more opposition. And while the problems are significant, new reports show they may worsen.

According to a Dun & Bradstreet report, 374,000 businesses worldwide use Russian suppliers, while approximately 241,000 businesses use Ukrainian suppliers. Out of all of those businesses, around 91.5% of them are based in the United States.

So how will this ongoing conflict continue to affect our supply chains? Which industries will be hit the hardest? And what can we anticipate going forward? We’ve got all the answers here.

What is the Russia-Ukraine Conflict?

On February 24, 2022, Russia initiated a full-scale military invasion of Ukraine. Since then, the death toll has reached well over 200, explosives have ravaged the country, and millions of Ukrainians have fled to neighboring countries. This growing conflict has spread well beyond Ukraine and thoroughly disrupted the world’s shipping and freight industries. 

Since the start of the invasion, Russian forces have caused shipping routes to be cut off, logistic firms to suspend services, and air freight rates to hit an all-time high. All of this has caused severe impacts on the global market, and many industries are feeling the overwhelming sting of this war.

Biggest impacts on the supply chain

The most affected industries include:

1. Fuel

At this point, we’ve all seen the astronomical prices at our local filling stations. As of March 11, the United State’s national average hit $4.33 per gallon, And in states like California, Hawaii, Nevada, and Oregon, people are paying more than $5 per gallon. These extreme prices have started to impact other parts of the economy as well. For instance, drive share and shipping companies have increased what they charge consumers to counteract fueling costs. Other industries that rely on fuel, like farming and construction, have also had to rethink their budgets, leading to higher prices at the grocery store and layoffs on job sites.

How the Gas Shortage has Affected the Trucking Industry

2. Raw Materials

Ukraine has slowly become one of the largest raw material suppliers in the world. They exported several materials, such as chemical products, minerals, transportation equipment, and other products. Since the invasion, Ukraine has been forced to increase the cost of its exports. This has caused many countries to slow down the manufacturing of electronics, homes, and vehicles. In some cases, companies have had to shut down production. Ukrainian allies have also ceased trade with Russia, thus losing access to large amounts of nickel, platinum, and 10% of the global copper reserves. These elements play essential roles in producing semiconductor chips, automobiles, jet engines, medicine, etc.

3. Shipping & Transportation

Another industry affected by the Russia-Ukraine conflict is shipping and transportation. Freight companies have started rerouting ground, ocean, and air shipping to avoid Russia and minimize fuel costs. This has led to longer transportation times and higher shipping costs for consumers.

For example, imports leaving Asia take approximately four hours longer to reach their destinations since the cargo jets can no longer fly over Russia. These jets use up to 20,000 pounds of fuel per hour of flight. And with fuel being more expensive, freight companies have no choice but to raise prices for consumers.

 4. Automotive

Since the start of the pandemic in 2020, the automotive industry has struggled with production and inventory shortages. Unfortunately, these troubles don’t seem to be subsiding anytime soon. The sudden increase in the price of fuel, steel, aluminum, and nickel has placed further pressure on the already fragile industry. The more expensive materials force automobile and automotive part manufacturers to slow down or cease production until prices stabilize. Meaning consumers will also continue to experience low inventory levels.

What can we expect moving forward?

As the conflict in Ukraine continues, trucking rates and other transportation costs could continue to increase as the price of oil rises. However, the overall outcome of this invasion is filled with a lot of uncertainty. For this reason, supply chains must prepare and improve their operations by “balancing investments in dedicated teams, processes, and technologies that will enable their organizations to implement end-to-end risk management,” says an analyst from Gartner.

More Like This:

How is the Microchip Shortage Affecting Truck Prices in 2022?

Where Did All of the Trucks Go?

How will the Trade War Between China and the U.S. Impact the Trucking Industry?

How is the Microchip Shortage Affecting Truck Prices in 2022?

In 2021, a supply and demand conflict sparked significant issues within the automotive industry. These struggles spilled over into the trucking industry and left many drivers in a state of shock and awe.

The production of heavy-duty trucks has not only faced incredibly high demand but has also grappled with the continuous constraints of the supply chain. All of this has led to less than ideal prices and unlucky drivers. However, those that find themselves in a seller’s position may have the upper hand in this scenario.

In this article, we will discuss how the current heavy-duty truck market has been affected by the microchip shortage that began in 2021 and take a look at how it may impact the months to come.

What caused the microchip shortage?

The current microchip shortage results from several issues that started in 2020 and have carried through into today’s market. Along with the shutdowns of many manufacturing plants and shipping facilities worldwide, makers of semiconductor microchips have faced extremely high demand for several industries outside of automotive

When the world went into lockdown, many automakers canceled their orders for the microchips, while those who made computers, televisions, and other electronics requested more than usual. Once the world began opening up again, automakers put in their orders and competed against the electronics industry in hopes of making and releasing their highly-anticipated 2021 and 2022 models. However, the world’s top microchip producers couldn’t meet the increasing demand due to a series of natural disasters that forced many facilities into yet another shutdown. 

To this day, manufacturers and shippers of the semiconductors are still attempting to restore balance and fulfill orders. However, experts aren’t sure when or if producers will pull it all together.

So, how does all of this affect the pricing of heavy-duty trucks?

How is the microchip shortage impacting truck prices?

The semiconductor shortage and supply chain disruptions have caused heavy-duty truck factories to fall short in terms of meeting consumer demands. For instance, in July of 2021, Class 8 manufacturers built a total of 14,920 units, whereas only a year prior, the factories were able to produce 262,100 units.

These struggles with production have caused prices to rise continuously, leaving large fleets out of luck. With the world’s economy flowing and freight rates at the highest they’ve been in years, the demand for medium and heavy-duty trucks has never been higher. Other transportation industries, including container shipping, are also experiencing steady price increases, which only further impacts the price of new trucks.

Supply and demand have also justifiably increased the price of used vehicles this year. This rise in value has given those in possession of used heavy-duty trucks the upper hand. But those searching for additions to their fleet may find themselves at yet another disadvantage. According to ACT Research, the average value of used Class 8 vehicles is 68% higher than they were in the previous year, and the average miles and ages of the vehicles are up to 5% lower. For example, the price of a three-year-old heavy-duty truck with approximately 400,000 miles on it would quickly sell for six figures, according to an ACT researcher. However, a year ago, the exact vehicle would not have sold for more than $70,000. 

With no practical solution in sight, many in the industry anticipate a continuous increase in prices for both new and used Class 8 vehicles as we move through 2022.

More like this:

Q&A: Trucking Expert Talks Inventory Shortage

Where Did All of the Trucks Go?

How to Retain Your Top Drivers During a Shortage

How the Supply Chain Problem will Impact the Holiday Season

Trucking Action Plan: What You Need to Know

On December 16, 2021, the White House announced a comprehensive plan to recruit new truck drivers to help the supply chain recover from the current shortage while improving current working conditions to promote driver retention. This plan, coined the Trucking Action Plan, has been broken down into a series of steps, and the current administration hopes to institute it over the next 90 days.

Many owner operators have been left wondering what this plan is and how it will affect them and the industry they work for. This article will break it all down and explain what drivers can expect to come their way over the next 90 days.

What exactly is the Trucking Action Plan?

Officials describe the Trucking Action Plan as a way to “lay the foundation for a next-generation trucking workforce that will strengthen U.S. competitiveness and support millions of good driving jobs for years to come.” The plan also follows the lead of the recent infrastructure legislation, which passed in November of 2021 and aimed to address current industry concerns.

The current action plan, which will take effect through a series of steps over the next 30-, 60-, and 90- days, offers six key points, including:

  1. Offering trucking industry jobs that appeal to military veterans.
  2. Supporting pilot programs that train and license new drivers to deliver across state lines.
  3. Offering women more professional industry positions.
  4. Instituting more easy-to-install apprenticeship programs.
  5. Funding/providing assistance to states for improving their CDL processes.
  6. Implement sessions with drivers, carriers, and industry unions to discuss concerns and enhance the workforce.

In addition to the current driver shortage and supply chain struggles, the Trucking Action Plan directly responds to a recent poll from the Consumer Brand Association. This poll found that 90% of respondents feel the trucking capacity should be increased in the new year to assist the supply chain demand, and 80% of respondents think their senators should be responsible for fixing current and future trucking industry issues.

Many respondents also gave suggestions on how to solve the most common issues that the trucking industry faces. They include:

  • Allowing reasonable increases to truck weight limits
  • Creating systems that would send empty trucks to available loads
  • Government funding driver recruitment and training programs
  • Offering flexible hours and service requirements to drivers
  • Government funding for the production of new heavy-duty trucks

What changes can we expect to see in the new year?

In the new year, truck drivers and fleet owners can anticipate quite a few changes in the industry. The main changes will affect the recruitment process for new drivers, but owners/operators can also expect significant changes to the workforce, hoping that driver retention will improve.

Recruitment of More Women and Veterans

During the Trucking Action Plan announcement, White House officials discussed that they intend to focus on the potential labor pool of over 70,000 military veterans when it comes to driver recruitment. Currently, veterans equate to more than 20% of the transportation industry. However, the White House plans to increase that number by working with the Veterans Employment and Training Service (VETS), the Department of Veterans Affairs (VA), and other veterans’ service organizations to match military veterans and their spouses with jobs in the trucking industry. A separate task force will also encourage more women to start careers in the trucking industry. 

Reformed Training Programs

Regarding training for these trucking positions, the DOL is working to establish Registered Apprenticeship programs that would allow new drivers to earn compensation as they go through training. The Department of Transportation (DOT) is also working to improve the CDL process by reducing the time between drivers passing their tests and receiving their licenses. On top of that, the DOT hopes to provide grants to states who improve their licensing process by updating their IT infrastructures. For now, the Federal Motor Carriers Safety Administration (FMCSA) will provide over $30 million to help states expedite their CDL process and send all states a “toolkit” on how to complete specific expedite actions. The White House also announced a new pilot program that will allow truck drivers under 21 years of age to drive on interstate highways.

Improved Driver Experience 

On top of recruiting new drivers, the Trucking Action Plan will aim to support the existing drivers by improving the quality of the jobs within the industry. Currently, America’s truck drivers move over 70% of the nation’s goods, but these same drivers lose up to 40% of their drive time due to delays, which means less income. To lessen these losses, the DOL and DOT plan to construct a compensation study to better understand how long drivers are on the road versus how long they spend waiting on loading and unloading processes. These transportation agencies will also begin regular listening sessions with drivers to use the collected feedback to push regulatory action and improve the overall quality of the various trucking industry positions.

Last updated: 12-21-21

Want more information like this? Check out these articles:

What Truckers Need to Know About the Vaccine Mandate

How Does Prop. 22 Affect App-Based Drivers?

How the Supply Chain Problem Will Affect the Holiday Season

How the Supply Chain Problem Will Affect the Holiday Season

Recently, multiple U.S. ports, which move around 70% of all U.S. trade, have reported record-breaking backlogs that have caused widespread shipping delays across the country. Responsible for approximately half of all U.S. imports, the Southern California ports suffer the most, with over 60 filled cargo ships currently waiting to ship goods. However, other smaller ports throughout the country are also feeling the weight of this issue, including the Port of Savannah, which has over 20 cargo ships waiting to ship.

With the holiday season rapidly approaching, many wonder how this supply chain problem will affect the spirit of the season and if anything can be done to limit the overall impact of this predicament.

What We Can Learn From Amazon Prime Day

What’s causing the supply chain problem?

In comparison to 2017 and 2019, the world’s most influential ports experienced above-average wait times and doubled the amount of time for container turnaround in 2021. For example, at the Southern California ports, it took a single ship approximately 6.4 days to dock and unload, as opposed to the standard average of 3.6 days, nearly five days longer than multiple ports, including a 24/7 port in Asia. Recently, these wait times have increased even more, with some ships waiting as many as three weeks. 

So, what’s responsible for this uptick in times and averages? The Managing Director of Global Energy Strategy and Digital Intelligence Strategy at the RBC Capital Markets found that most container ships carry around 30% more goods than before due to the intense rise in e-commerce. Another cause is the current employment shortage that is crippling many industries worldwide. Both Long Beach and Los Angeles ports found that they rely on approximately 28% fewer employees at their unloading docks. Pair this dip in employment with the increased freight movements, and you get a supply chain gridlock.

Those working through the supply chain crisis suggest that the only way to reverse the issue is for consumers to reduce the number of purchases they’re making significantly. However, industry professionals fear that the exact opposite will occur as the holiday shopping season commences.

Why Owner/Operators Should Run Hard This Holiday Season

How will this impact the holiday season?

With a highly-anticipated increase in in-store and online shopping just around the corner, companies are preparing themselves by stocking up in hopes of avoiding any significant inventory depletions. But with supply chains suffering, most, if not all, industries are expected to be impacted globally. For instance, the US Toy Association, which represents a total of 950 toy firms and sells around $3 billion in toys each year, is anticipating a significant setback in product delivery due to California’s clogged port system. 

Outside of the country’s ocean-side ports, many states and their companies struggle with congestion surrounding trucks and freight rails. However, thanks to solid, annual contracts with dedicated shippers, larger retailers won’t need to worry as much as smaller companies. So, how are companies, big and small, preparing for the holiday shopping season?

How Truckers Can Prepare for the Holiday Season Amid COVID-19

What can we do to prepare?

Acknowledging that the current situation shaking supply chains is not easily fixable, the President of the United States is working with America’s ports, shipping facilities, and companies alike to prepare for what is expected to be a long holiday season. The President announced that the Port of Los Angeles will commence 24/7 operations, unlocking an additional 60 hours of work. Major shipping companies, such as Walmart, Target, Samsung, Home Depot, FedEx, and UPS, will also increase working hours as we move into the winter seasons. The Biden administration enacted this plan to increase productivity and product movement and relieve the bottle-necked supply chains. When it comes to truck drivers and trucking companies, the administration encourages increased productivity, the ability to unionize, and wages. Biden followed this statement by ensuring federal support would be supported if needed, but he urged companies to step up and help this initiative.

Moving forward, the administration hopes to review the “just-in-time inventory” standards and “invest in greater resilience to resist the kind of supply chain shocks we’ve seen year after year, whether it’s weather, climate change, or cyber-attacks.” Biden also encouraged U.S. companies to limit their reliance on foreign countries and supply chains and instead bring this vital production to America. 


Long-Term Effects of the Pandemic on the Transportation Industry

Q&A: Trucking Expert Talks Inventory Shortage

What began as whispers of a potential vehicle shortage quickly became a leading source of concern for fleet owners and operators. This looming threat of operations being forced to shut down over inevitable repairs and mishaps or a lack of vehicles to move freight is troubling in these times of high demand. And with so much uncertainty regarding the issue, many in the industry are left with unanswered questions and concerns.

To answer the main questions surrounding the inventory shortage, we sat down with Charles Smith, Regional Business Development and Marketing Manager for Mission Financial Services. As an auto finance institution operating across the country, Mission Financial has provided Smith a unique opportunity to see behind the curtain on many of the industry’s pressing topics.

Exclusive Interview with Charles Smith

Q: What has been the most significant hardship for Mission Financial Services during the shortage, and how have you dealt with it?

A: The biggest hardship here at Mission Financial is the lack of applications being funded.

With the current situation, dealers just don’t have the inventory to meet the demand of the customer, which trickles down to financial institutions that are used to funding deals on a regular basis. One way we’ve dealt with this is to keep knocking on doors and letting my customers know that Mission Financial is still here for them.

Charles Smith, Mission Financial

Q: What has been the most considerable hardship for the dealers and/or others in the industry?

A: The biggest hardship for my dealers would be the lack of inventory. Now, the supply can’t keep with the demand. Not only is the trucking industry feeling the heat, but other industries are as well.

Q: Was COVID-19 the only cause of the vehicle shortage?

A: Yes, COVID-19 was the driving force of the shortage. When the pandemic hit China, the production of automotive microchips experienced a major decline, because that is where they are produced. Without these chips, manufacturers can’t produce new units, which is why we are where we are today. What we are currently experiencing is the result of a global domino effect.

Q: When and how do you think it will end?

A: Unfortunately, at the moment, I see no end in sight. According to recent market analysis, it may be another year before we can see some relief from this devastating virus. However, some of my dealers remain optimistic that we could feel some ease by the second quarter of 2022.

Q: Any advice for drivers, fleet owners, and other industry members?

A: To my drivers out there: keep your equipment well maintained so you can keep moving freight until you get the new rig you’ve probably already ordered. Plus, with spot rates at an all-time high, there’s a lot of money to be made out there. Just keep on truckin’ because we need you.

Related Content:

How to retain your top drivers during a shortage

Used truck prices continue to skyrocket

Where Did All of the Trucks Go?

Inventory Shortage Continues to Disrupt the Auto Industry

The COVID-19 pandemic has affected numerous industries and led to several issues, including a vehicle shortage that has rocked the automotive industry. To combat financial loss due to global shutdowns, dealers pushed incentives and financing offers to encourage buyers. Once government stimulus checks were distributed, consumers were more than happy to invest in new and used rigs. While this feeding frenzy helped dealers keep their heads above water during the stay-at-home orders, they didn’t anticipate a global microchip shortage that would cause significant production delays upon reopening. 

With this supply not keeping pace with demand, and manufacturers prioritizing smaller vehicles for individual buyers, commercial fleet operators are left feeling the sting from this shortage. So, what can we expect moving forward? Let’s find out. 

-> Used Truck Prices Continue to Skyrocket

What’s causing the vehicle shortage?

There are a few things responsible for the current state of the automotive industry. For starters, the microchips used in many vehicle components are manufactured overseas, with Taiwan contributing 63%, South Korea at 18%, and China at 6%. With the world being globally affected by the pandemic, many manufacturing plants ceased production until cases slowed down. Natural disasters have also impacted the domestic inventory. In February of 2021, Texas was forced to halt production and close a Samsung plant due to severe freezing.

Aside from the microchip insufficiency, dealers have also played a role in this vehicle shortage. At the start of the pandemic, many sellers struggled to move inventory due to quarantine restrictions and stay-at-home orders. Instead of losing their businesses, they chose to offer extreme incentives and too-good-to-be-true financing plans. Unfortunately, they kept these deals running for a little too long, and their inventory was cleared out or severely depleted. And before the stock was able to circulate back into the lots, the semiconductor shortage hit and took down new vehicle production with it. So, where do we go from here?

-> How the Gas Shortage has Affected the Trucking Industry

How is the auto industry responding?

As we navigate the lingering effects of the COVID-19 pandemic, manufacturers and the U.S. government are working to solve this shortage issue. Below, we will break down their plans.

  • Automaker Action Plan: Currently, automakers are working to fulfill dealers’ needs and buyers’ wants by continuing to build out vehicles and forgoing the components that require the semiconductor microchip. Manufacturers are also allocating what they have in the way of microchips to high-demand vehicles and adjusting the availability of certain automobile features, packages, and options. While this action plan offers some much-needed relief, it is not enough to solve commercial fleet operators’ problems. 
  • Government Action Plan: Fortunately, the U.S. government recognized the geopolitical nature of this scarcity and acted early in resolving the issue. With the majority of the microchips being produced in China and Korea, our government needed to invest in domestic semiconductor production to regain the upper hand in inventory levels, which is precisely what they did. The U.S. Senate passed a $190 billion legislation package to compete with foreign tech, with $54 billion allocated to domestic manufacturing of semiconductors and telecommunication equipment. While the bill still needs to survive the House of Representatives, President Biden has voiced his support for the bill.

When will fleet inventory return to normal?

Within the first half of 2021, auto sales have mostly recovered despite the technology shortage. Unfortunately, the sales of commercial vehicles have not responded in the same manner. So far, only 14% of vehicles were sold to fleet consumers. Now, automakers are having to prioritize microchip distribution to recuperate inventory levels. Many are allocating supplies to higher-end models and leaving commercial operators at the mercy of a waiting list.

Moving forward, it’s unlikely that we will ever surpass the industry’s previous standards or return to normal inventory levels. According to industry insiders, the microchip shortage could last another four months, and while recovery efforts are vast, they’re not enough to meet the ever-increasing demand. However, companies and manufacturers are predicting supply improvements by the first quarter of 2022. While there is no sure way of knowing the exact numbers, operators should be prepared to face this shortage until 2023. 

-> Owner Operator’s Guide to Financing During a Pandemic

Contact Us
close slider