Understanding geopolitical tensions and their impact on global supply chains and logistics

In recent years, global supply chains have been under increasing strain, affected by a series of disruptive events that have reshaped the landscape of international trade and logistics. For decades, globalization drove interconnectivity, but growing geopolitical tensions have introduced new risks and uncertainties that challenge business operations. 

Key events, from the Russia-Ukraine conflict to evolving relations between the United States (US) and China, have intensified geopolitical instability, impacting supply chains on multiple fronts. As a result, businesses worldwide face a complex environment where strategic planning, adaptability and secure logistics partnerships have become more essential than ever.

What are the global tensions impacting supply chains today?

The global landscape has shifted rapidly, with geopolitical risks reshaping supply chains. Traditionally, supply chains thrived under stable international relations, but today, numerous issues and challenges complicate global logistics, trade and transport. Here are some examples of the current supply chain disruptions¹:

1. Russia-Ukraine conflict 

The Russia-Ukraine conflict has led to long-lasting changes in trade routes and fuel prices. European countries have reduced their dependence on Russian energy, and energy prices have fluctuated significantly since the conflict began. To address energy issues, some nations are working toward alternative energy sources and diversifying suppliers, which could catalyze decarbonization. In the US, for instance, the Inflation Reduction Act provides incentives for renewable energy, driving investments in sustainable projects to reduce dependence on fossil fuels. 

2. Anti-globalization movement

Rising nationalism and protectionist policies have also impacted the flow of goods and services. Anti-globalization movements, coupled with supply chain weaknesses exposed by COVID-19, have influenced some nations to rethink cross-border reliance and prioritize local production. Protectionism affects not only supply costs but also relationships with international suppliers. Businesses that depend heavily on global sourcing are finding it critical to explore diverse, flexible supply options to withstand disruptions.

3. Cyber attacks

The need for cybersecurity has added another layer of complexity, with the digitalization of global supply chains increasing vulnerability to cyberattacks. Incidents such as the ransomware attack on the US’ Colonial Pipeline illustrate the critical risks in infrastructure security. Cyber threats now extend beyond data breaches, involving targeted attacks to disrupt operations and cause financial and logistical damage. Heightened cybersecurity measures, alongside geopolitical strategy, are becoming core to resilient supply chain operations.

4. Tariffs and other impact of economic policies

Economic policies, particularly tariffs, play a significant role in reshaping supply chain management and sourcing strategies. Trade relations between the US and China continue to influence product pricing and sourcing options, as US tariffs on Chinese imports often lead businesses to seek alternative suppliers or adjust prices for consumers. Beyond tariffs, recent conflicts like the Russia-Ukraine and Israel-Hamas wars have introduced broader challenges, including regional instability, that impact both energy and food security. The resulting inflationary pressures have driven up costs across global supply chains, affecting everything from raw materials to transport.

Many nations in the Asia-Pacific are also implementing cooperative strategies to secure access to essential resources, such as critical minerals necessary for energy and industrial applications. By focusing on trade relations with allied countries, these nations aim to strengthen supply stability and resilience against unpredictable disruptions.

A case in point: The Red Sea crisis 

Conflicts and security threats around the Red Sea and Bab el Mandeb Strait impact one of the world’s most important maritime routes. This route links the Indian Ocean with the Mediterranean via the Suez Canal, making it essential for global trade and energy transport. Unfortunately, recent attacks by Houthi forces have raised security challenges, disrupting supply chains and increasing operational costs for businesses reliant on maritime trade².

The Bab el Mandeb Strait is a chokepoint where a significant portion of global cargo, including around 4.5 million barrels of oil daily, passes, according to estimates by the International Maritime Organization³. However, instability in the region has led to vessel re-routing, which increases fuel costs and shipping times. The heightened risk of attacks means many maritime companies are avoiding the Red Sea, impacting logistics and causing congestion in alternative ports. Freight rates have surged following the crisis, and with large vessels taking longer, there is reduced availability and higher demand, leading to nearly fivefold increases in spot freight rates along Asia-Europe routes. According to the United Nations Conference on Trade and Development (UNCTAD), trade volumes have seen a 42% decline in recent months due to these logistical constraints, highlighting the Red Sea crisis’ disruptive effect on global supply chains⁴.

Solutions for supply chain resilience

With such global disruptions, businesses must implement proactive measures to ensure resilience in supply chain management. Here are four key strategies to consider:

1. Embrace technology for better planning and efficiency

Technology plays a key role in supply chain resilience, allowing businesses to adapt quickly to disruptions. While adopting digital solutions requires upfront investment, the return on investment (ROI) often justifies it. A 2023 survey by 451 Research found that over 30% of supply chain companies prioritize digital transformation for revenue growth and cost savings⁵.

Advanced analytics and artificial intelligence, for example, provide businesses with more accurate demand forecasting, helping them optimize inventory and avoid stockouts. For commercial transportation, digital projects like fuel efficiency initiatives not only cut costs but also create a financial buffer that can sustain operations through tough times. By increasing efficiency and building cash reserves, businesses can better respond to unexpected supply chain challenges.

2. Diversify your supplier base

Relying heavily on a single supplier can be risky, especially in times of geopolitical or economic instability. To reduce this dependency, you can engage multiple suppliers for critical materials or components. By diversifying your supplier network, you will ensure a steady flow of materials, even if one region or provider faces delays. This supply chain strategy not only mitigates risks but also allows businesses to stay agile, making it easier to navigate changes in the global landscape.

3. Maintain buffer inventory and capacity

Holding a buffer stock of essential items can be a powerful safety measure. This involves keeping an inventory cushion and having extra production capacity on standby. In the event of a sudden demand spike or unexpected shortage, this buffer allows businesses to fulfill orders without disruption. Although maintaining extra inventory involves costs, it provides a valuable safety net that ensures customer satisfaction and operational continuity.

4. Develop alternative logistics routes

Since geopolitical tensions, natural disasters and other disruptions can impact traditional transport routes, you can ensure business continuity with contingency plans. To maintain product flow, you can work with logistics partners to establish backup routes and consider partnerships with multiple carriers. For instance, diversifying routes around key chokepoints like the Suez Canal can reduce the risk of severe delays during crises. By preparing alternative logistics pathways, businesses can adapt quickly and keep products moving even when primary routes are compromised.

Why a reliable logistics partner matters

In today’s unpredictable trade and supply chain environment, a dependable logistics partner can make all the difference in overseas shipping. DHL Express, a 5PL logistics provider with its air shipping network, helps businesses navigate geopolitical tensions and sudden disruptions with flexibility. When faced with challenges, DHL adapts quickly by adjusting routes, informing shippers in advance, and putting contingency plans in place to keep deliveries on track.

DHL Express has also invested significantly in Asia-Pacific infrastructure to enhance reliability for its customers. Between 2020 and 2022, DHL Express spent €750 million to strengthen its network across key markets⁶. The Central Asia Hub in Hong Kong, for example, now offers 70% more handling capacity and over 50% more warehouse space, making it the largest investment by DHL Express in the region. Likewise, the Incheon Gateway expansion in South Korea is boosting regional and intra-Asia trade flows, helping businesses maintain consistent access to essential markets.

To improve delivery times⁷, DHL Express has also added a dedicated flight between Sydney and Hong Kong, offering five weekly flights with over 500 tons of payload capacity. DHL Express has also added a new direct flight from Hong Kong to Jakarta to facilitate same-day delivery for North Asia shipments to Jakarta. Additionally, the new Hong Kong West Service Center, built with a HK$1.5 billion investment, is a state-of-the-art facility that increases DHL Express’ sorting capacity by 90%, allowing it to handle over 50,000 shipments daily. These investments highlight Hong Kong’s crucial role as a gateway for global trade, ensuring businesses can depend on DHL Express’ network to reach their markets reliably, no matter the circumstances.

Partner with a trusted import and export logistics provider by opening a DHL Express business account and ensure your shipments stay on track, no matter the circumstances.