Joint conference with the OA: Impacts of the Ukraine War on logistics and supply chains

On November 24, the challenges for supply chains and logistics resulting from Russia’s war on Ukraine were in the spotlight at the conference “Turbulent Times: Impacts of the Ukraine War on Supply Chains and Logistics – Retrospective and Outlook,” co-hosted on the KLU Campus in Hamburg by Kühne Logistics University (KLU) and the German Eastern Business Association (Ost-Ausschuss (OA)) as part of the latter’s 70th birthday celebrations.

From the outset, Prof. Christian Barrot, Acting President and Dean of Programs at KLU, warned those in attendance, despite all rational discussion, not to lose sight of the war’s human dimension. However, through the war and after the war, there could now be new opportunities to forge closer ties between Ukraine and Europe in general, and Hamburg in particular. In his welcoming keynote, Peer Witten, a Steering Committee Member at the OA and head of its Logistics and Transport Infrastructure Working Group, discussed the immediate effects of the war on companies and logistics. “Logistics is out of sync,” he said. How to get it back in sync was the key question at the event. “For logistics companies, the first response is to increase warehouse space and change their procurement strategy from supply chain to supply network,” said Witten. “Globalization isn’t over yet.”

Diversity means security of supply

OA Vice Chair Cathrina Claas-Mühlhäuser stressed the need for an intelligent diversification of supplier relations. “The war against Ukraine and its repercussions have shown us our interdependency in a globalized world more vividly than ever before,” said Claas-Mühlhäuser. The massive disruptions in international supply chains, which had already begun with the COVID-19 pandemic, also led to new discussions on globalization and a decoupling of economic areas. “But it’s not about decoupling; it’s about intelligently diversifying our supplier relations,” she claimed. “Diversity means security of supply – no matter whether for energy, raw materials or pre-products.” In her view, the reorientation of global supply chains is creating great opportunities, especially for Central and Eastern Europe, a longstanding partner of the German economy.

In his keynote, Federation of German Industries (BDI) Executive Board Member Wolfgang Niedermark positioned the latest developments in Europe in a broader geopolitical context. “This sea change isn’t just European; it’s on a global scale,” said Niedermark. In this regard, he claimed, the “new globalization” is not just an economic but also a societal phenomenon. “The new phase of globalization is characterized by conflict, not convergence.” Though there are different concepts, they all share a strengthening of federal governments and the containment of international corporations around the world. “Europe’s task here is to improve its competitiveness,” said Niedermark. But a “tsunami of regulations,” as he put it, would be the wrong approach. “We have to get used to the fact that we cannot enforce our values everywhere,” said Niedermark and advocated “responsible coexistence” with difficult partners, and at some point, also with Russia. Diversification does not mean turning away from difficult partners; it means diversification of risk. In this regard, the OA will play a vital role in Eastern Europe and Central Asia.

Logistical gaps in the east

The subsequent panel discussion with academics and logistics experts addressed the immediate and longer-term logistical challenges resulting from Russia’s war on Ukraine and the redirection of supply flows, e.g. to the “middle corridor” via the Caucasus and Caspian Sea. During the talk, the logistical gaps in Eastern Europe soon became apparent. “It’s easier for us to get trains from Odessa to the Ukrainian border than into Europe, due to the lack of infrastructure,” reported Philip Sweens, Speaker of the OA’s Ukraine Working Group and Managing Director of HHLA International, which operates a container terminal in Odessa. “In some cases, the trains were stuck at the border for weeks.” The Ukrainian infrastructure is geared towards connecting to Europe by sea, not by land. In the meantime, however, overland connections have been established to Trieste, Danzig and Hamburg. At the same time, on the transport route from Europe to Asia, the “middle corridor” continues to grow in importance due to the rapid rise in demand for alternative routes. But these routes are expensive and take longer. According to the participants, transit transport across Belarus and Russia still work, because transit goods are not subject to sanctions. In turn, Andreas Kiesewetter von the “DAW Deutsche Amphibolin-Werke von Robert Murjahn” reported on the challenges of the war, and those posed by the loss or Russian, Belarussian and Ukrainian suppliers, from a corporate perspective. “Today we’re investing in bunkers and emergency generators,” said Kiesewetter. “I hope we can soon start investing in production plants again.”

Between nearshoring and inshoring

The second panel discussion focused on nearshoring, reshoring and the opportunities for Central and Eastern Europe. It soon became clear that security of supply was the pivotal topic. For example, Oksana Janssen from VTG AG claimed to have observed the growing importance of nearshoring among her clients, but that such decisions were still only being considered and assessed. “There’s a great deal of disruption,” she said. In fact, many companies are turning back to inshoring. “We’re currently looking into what we could take care of in-house again, because some things can no longer be dependably supplied, even by European clients,” said Frank Müller from STILL. “Switching to in-house offers us security of supply and direct access.” Nevertheless, Central and Eastern Europe could assume an important role. “Eastern Europe and all its expertise are right at our doorstep, and uses the same rules and in some cases even the same currency,” said Olaf Holzgrefe from the Bundesverband Materialwirtschaft, Einkauf und Logistik e.V. In turn, Marina Basso Michael from Hafen Hamburg Marketing stressed how greatly the Port of Hamburg had profited from Eastern Europe. “We were the port of choice for emerging economies.” Now, she claimed, it’s a new deal in logistics and transport, and new routes will become more important.

Witten: “Putting the focus more clearly on Eastern Europe”

In a closing discussion together with OA CEO Michael Harms, Cathrina Claas-Mühlhäuser and Peer Witten explained the OA’s tasks and orientation. “Our goal in Hamburg is to put the focus more clearly on Eastern Europe, together with partners from the Chamber of Commerce, KLU, and companies,” said Witten, the OA member responsible for the Hanseatic city. When it comes to dealing with difficult markets, an aspect touched on by Wolfgang Niedermark, Claas-Mühlhäuser recommended winning them over through economic ties. “The German Eastern Business Association helps companies do what they do best, namely, penetrating new markets,” she said. This yields new contacts. “We’re taking our employees with us into the paradigm of businesses. This network of values changes them and, in turn, their countries.”