Middle East conflict and Procurement

 

Iran

It is disturbing to see places you know well in the news because of war – in this case Dubai (in particular the airport and Palm).

It helps to bring home that these things are happening to real people not in video game or AI generated content.

I hope this ends soon, and that there are no more casualties.

 

Not by any means the most important thing, but I would like to think about what it means for Procurement.  These days I frequently discuss with my delegates the acronym VUCA – Volatile Uncertain Complex Ambiguous.  Unlike other tools this is just a descriptor rather than a diagnosis, but I think it is useful to help us consider what we might need to do.

In Procurement and Supply Chain we often have to deal with today’s problems, but we do have to try and be ready for future ones.  At the moment the world economy is certainly Volatile.  There is a case that it always is, but I think the past 20 years have been much more volatile than expected in the “End of History” 1990s.  Currently there are many active drivers of political and economic volatility, including both wars and trade wars and the effects of climate change.  Naturally this leads to Uncertainty as it is difficult to know what will happen next – the changing USA tariff situation for example.

The Complexity is something we need to think about.  The obvious impact is likely to be higher fuel prices in the near term, which will lead to higher inflation and therefore reduce the chance for a drop in interest rates.  This may lead to an increased risk of supplier failure.  But this may have some positive impacts, (the Ambiguous element) if the increased risk leads people to continue looking at Resilient rather than Lean supply chains and that leads to more opportunities for local/national/regional businesses.

The Ambiguity is apparent on a global scale – rising oil prices will help Russia to fund their war in Ukraine, but Iran was a key weapons supplier and probably will not be so much in the future.  But China needs oil, and may therefore step in.  Will higher fuel prices support the transition to renewable sources of energy? 

Short term, Procurement needs to move quickly to determine where there are vulnerabilities – and (let’s be clear) opportunities. 

We all think/hope Business As Usual will be around the corner.  But we have been assuming that for 20 years since the Global Financial Crisis. 

Time to get planning.  (and yes I have filled up with fuel today)