War in Ukraine:
Initial view on Supply Chain Impact
BCG Global Advantage and Operations Practice Areas
Prepared: 10 March 2022

Prepared: 10 March 2022

Introduction to this document

Russia's invasion of Ukraine has led to a serious
humanitarian crisis. BCG condemns this attack
and the violence that is killing, wounding, anddisplacing so many people.

It is the duty of political, societal, and businessleaders to navigate through this crisis. The intent
of this document is to inform discussions on
the supply chain impact of the war in Ukraine.

The top priority in moments like these must be thesafety and security of people. Corporates,
governments, and non-for-profit organizations
should focus on supporting the people in Ukraine,
Russia, Europe, and globally affected (physicallyand mentally).

The situation surrounding Ukraine is dynamic andrapidly evolving - this document reflects
information and analysis as of 10 March 2022.
It is not intended as a prediction of future eventsand is shared only as a resource for BCG and client
conversations.

Copyright © 2022 by Boston Consulting Group. All rights reserved.

The war in Ukraine is above all a politicaland humanitarian crisis…

2

SUPPLY CHAIN IMPACT
Russia and Ukraine account for only a small percentage of global trade. But the war will
have an outsize impact on industrial supply chains that have already been disrupted by
the pandemic. Soaring prices and shortages of steel, nickel, fertilizers, and wheat will
hobble sectors as diverse as electric vehicles, canned beverages, semiconductors, andBCG Executive
Perspectives
IN THIS DOCUMENT

agribusiness. Plant closures have caused shortages of essential components, such as
wire harnesses used in cars. High fuel prices and the disruption of Ukrainian andRussian cargo routes are raising logistical costs for all kinds of traded goods.

Companies are already acting to mitigate these rapidly evolving risks. But with the war

and its geopolitical impact likely to be prolonged, supply-chain resilience must becomea C-suite priority. Companies need to gain clearer visibility into risks throughout theirvalue chains based on multiple scenarios, such as additional sanctions, enduring highenergy costs, and potential cybersecurity attacks. They should consider building
resilience by reconfiguring their global supply chains, revisiting their approach to
stocking intermediate goods, and taking a more proactive approach to managing
suppliers. For the longer term, companies need to develop the capabilities to better
monitor and rapidly respond to disruption.

Prepared: 10 March 2022

War in Ukraine:
Supply Chain Impact

Deep-dive: First view on Supply Chain Impact
Current situation and context
Supply and cost impacts
Supply chains at risk

Copyright © 2022 by Boston Consulting Group. All rights reserved.

AGENDA

Implications for leaders4

Prepared: 10 March 2022

Russia, Ukraine, and Belarus make up a small percentage of global trade but
have an over indexed share of trade in Europe specifically

World

US

EuropeChina% of global trade% of US trade US% of EU trade% of China trade

7.6%
0.3%
1.0%

5.3%
0.3%

3.3%

0.2%
0.4%

0.3%
0.4%

2.7%
Imports

1.1%

1.6%

0.1%
1.0%

Exports

Imports

X Axis
Source: IHS for Jan-Dec 2021

3.3%

6.3%

2.3%

2.4%

3.8%
0.5%

0.3%0.2%

Imports

X AxisRussiaUkraineBelarusExports
X Axis0.4%

0.3%0.1%

2.0%

Exports

Copyright © 2022 by Boston Consulting Group. All rights reserved.

1.2%

Imports

2.9%
Exports
X Axis5

Prepared: 10 March 2022

Overview: Several major sectors impacted, with many supply chains at risk

Supply andcost impacts

Supplychains atrisk

Commodity shortages

Component/productsourcing challenges

Demand shocks

Logistics

Difficulty sourcing and/or
higher prices for key
commodities

Inability to source
manufactured goods andinputs due to plant closure

Slowdown in manufacturing/ inability to import
impacting exporters

Rise of logistics
costs due to capacityand fuel impact

Supply Chains impact varies across sectors. A few examples emerge:• Steel: Supply risks in Europe due to disruptions of intermediate and finished steel products (e.g., pig iron, slabs)• Semiconductors: Short supply especially of advanced chips exacerbated – main impact auto, industrial, electronics• Automotive: Disruption of raw materials and component inputs -- accelerate inventory shortages and rising global prices• Agribusiness: Shortages (e.g. wheat, fertilizer) and increased transport costs likely to drive up commodity and food-goods prices
Short-term: Understand risks & impact, prioritize customers to protect; find alternative sources, rebalance global network

Implications
for leaders

Mid-to-long term: Build in resilience & anticipate areas of exposure, elevate supply chain risk to C-suite, optimize global
footprint, dual source, re-set supply chain buffers

Source: BCG experience and analyses

6

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Before war in Ukraine, global supply chains were under stress from COVID and geo-political events (e.g., Brexit, tariffs, etc.)Prepared: 10 March 2022

AGENDA

Deep-dive: First view on Supply Chain Impact

Current situation and context
Supply and cost impacts
Supply chains at risk

Copyright © 2022 by Boston Consulting Group. All rights reserved.

War in Ukraine:
Supply Chain Impact

Implications for leaders7

Prepared: 10 March 2022

Raw Materials | Steel, Auto, and Agribusiness most impacted due tocurrent or potential unavailability of supply from Russia and Ukraine

Raw mat'ls with high Russia, Ukraine, Belarus share1

UkraineBelarus

Industries primarily impacted

Sanctions as of 10 March 20224% of global exports
Pig iron (nonalloy)

43

21

44%

21%

12%

7%

Steel

54

2

24%

17%

13%

11%

Energy

19%

16%

14%

7%

Steel

n/a
n/a

Anthracite coalSteel

Mar 8 ban import of Russian coal

Semifinished product of iron or steel

27

Uranium; Plutonium2

35

37%

34%

17%

12%

EnergyPotassium chloride fertilizer

17 17

39%

23%

8%

7%

Agribusiness

Mineral or chemical fertilizers3

25 3

29%

19%

12%

10%

Agribusiness

n/a

26

28%

26%

23%

7%

Automotive

n/a

26%

13%

6%

5%

Agribusinessn/aPalladium

Cereals (wheat & meslin) 14 10

11

n/a

Jan 7 ban imports
from Belarus

Aluminum (non-alloy)

21

39%

19%

9%

5%

Construction

Automotiven/aNickel5

20

49%

36%

4%

3%

Steel

Batteryn/aTitanium6

15 2

39%

32%

7%

6%

Aerospace

Natural gas7

16

65%

14%

3%

3%

EnergyCopyright © 2022 by Boston Consulting Group. All rights reserved.

RussiaTop export markets

n/a
Mar 8 ban import of Russian liq. nat. gas

Deep dive to follow
Note: Trade data from 2019; Based on HS6 level except for Nickel at HS4 level (7501,7502) Filtered for products w/export value >$1B; Where no value for BY or UA; <1% of global exports 1. Analysis based on HS6 codes: 270111, 720110, 284420,
720711,711021, 310520, 750210, 760110, 310420, 271121, 100199; 2. And its compounds 3. Mineral or chemical fertilizers containing nitrogen, phosphorous, potassium; Russia indicated they might halt exports; 4. Excludes impact of indirect sanctions
i.e., on financing, transport, and sanctions on individuals 5. Hs4 level data (7501,7502) 6.Titanium on HS4 level (8108), OEC data 7. In gaseous state Source: USGS, FAO, UN Comtrade, EIA, OEC World, BCG Analysis, Web search8Prepared: 10 March 2022

Nickel | Stainless steel and battery production impacted lack of access to
supply from Russia

Top 5 exporters1

Industry impact
20%

RussiaRussia's top
customers

2nd order

4,100kt SST supply at risk
(75% of EU production)

Food & Bev industry (820kt) withhighest demand hit first; Chemicaland Automotive also exposed~90kt of import needed,taking away from competitors

Increased competition forsecondary supply

Lost supply, difficult to replace
as demand increases

Potential shortages for materials may
delay EV3 industry growth

Changing supplies decrease
production efficiency short term

Poor ESG footprint for substitutes
from other regions (carbon-intensive)

49%

Canada

17%

EU

16%

4%

13%

3%

Australia

1st order

36%

Stainless steel(~70% of primary nickel)

Pricing2
Price (LME, $/Ton) and % impact on past 4 weeks
39,90540,00030,00022,14520,00010,000
Sept Oct'21 '21

Nov Dec'21 '21Δlast 4 wks+80%
Jan Feb Mar'21 '22 '22

Mar 8: Trading halted as price reached 46,528 (>$100k/t)

Battery(~10% of primary
nickel; ~40% by 2040)

Localized supply chains down tomine-level in high demand

Note: export data for HS4 codes 7501, 7502; Pricing data as of Mar 7 2022 1. For Nickel HS4 codes (7501, 7502) 2. London Metal Exchange – in US$ per metric ton, price increase based on 4 wks avg
trading price 2. Electric Vehicles Source: Roskill; USGS; FAO; UN Comtrade; EIA; Nickel Association; Nickel Institute; Desk research; BCG analysis

9

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% of global exports

Prepared: 10 March 2022

Agribusiness | Disruption of Russian & Ukrainian supply of wheat, corn,and sunflower supply impacting grain and feed markets

Russia and Ukraine exports
UkraineSunflower
meal

61%

Sunflower
oil
Wheat

Top wheatcustomers

Russia

50%

20%
28%

17%

Egypt

Likelihood of missed growing season in Ukraine due to ongoing conflict, exodus of refugees

LebanonSanctions not in place, but Russian export ban possible and Black Sea exports impacted

Turkey12% 17%

Corn

Corn and sunflower seeds not yet sown, unclear if seeded wheat can be nurtured and harvested in
Ukraine — usual fertilizer applications at this time of season have mostly failed

1st order

India

2%

Wheat, sunflower, corn
shortages & higher prices

Pricing
Price (MATIF, €/bu.) and % impact on past 4 weeks1
397

400
350

346

300

Δlast 4 wks

264

250
200

Food

Wheat +49%
Corn +39%

252
Sept
'21

Wheat

Corn

Mar
'22

Pressure on reliant companies tofind other supplies
Higher prices for foods globally(e.g., bread, with prices in Egypt
rising 50% in 2 days after invasion)
Soy and meat prices to rise, as
sunflower meal production (animalfeed) in Ukraine is disrupted

Note: Pricing data as of Mar 7 2022 1. S&P Capital IQ (EUR per MT); 2. As reported by Bloomberg (here) 3. Southern Hemisphere
Source: Bloomberg, New York Times, Barclays Equity Research, ING Economic and Financial Analysis, Financial Times, Middle Eastern Eye, BCG analysis

2nd order
Protectionist food policies, with
Hungary, Turkey and Argentina
already increasing export control2
Copyright © 2022 by Boston Consulting Group. All rights reserved.

% of global exports

Industry impact

Risk of social unrest, in low foodsecurity nations (e.g., Lebanon)
Undernutrition, in Global South3(e.g., Sub-Saharan Africa)
Substitutional goods will see
increased production (2023)

10Prepared: 10 March 2022

Fertilizer | Crop yields at risk due to potential shortage of Russian &Ukrainian fertilizer

Exports

Industry impact

Belarus

UkraineMuriate of potash

20%

Ammonia

22%

Urea
Diammonium
Phosphate (DAP)Top
customers

RussiaRussian Trade Ministry urged halting fertilizer exports as of Mar. 04 2022
Prices have already increased (v. Oct '21): Ammonia (+90%), Urea (+20%), DAP (+15%), & MOP3 (+75%)

Brazil20%

Russian owned companies are key players in fertilizer market, so possibility for further industry
disruptions in other fertilizer components (e.g., nitrates, phosphates, potassium compounds)

EU
India

13%

1st order

Eurasian
Econ.Union1

8%

Reduced global fertilizer supply
leading to higher prices

Bloomberg Fertilizer Price Index2
Price (USD) and % impact on past 4 weeks
1,200
1,000
800
600
400

Agribusiness

Record high

985
898

Sept Oct'21 '21

Nov Dec'21 '21Jan'21

Δlast 4 wks+10%

Pressure on companies reliant
on Russian & Belarussian
fertilizers to promptly findalternative supplies; however, few
substitutes exist
Weakened Crop Yields in 2022-23
from under-fertilization and sowing
fewer seeds

2nd order
Prices of soaps, animal feeds &household cleaners will rise, as
N/P/K4 are also part of cost baseFertilizer trade-flow rebalancing:compounds flow to "friendly"
countries to Russia
MENA5, Americas, & Canada to
explore or expand local options
and alternative sources of Nitrogen& Phosphorous (used in fertilizer)

Feb Mar'22 '22

1. Eurasian Economic Union – Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia 2. Bloomberg Green Markets Fertilizer index 3. Muriate of Potash 4. Nitrogen, Phosphorous, Potassium 5. Middle Eastand North Africa Source: Bloomberg, New York Times, Barclays Equity Research, ING Economic and Financial Analysis, Financial Times, Middle Eastern Eye, BCG analysis

11

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% of global exports

Prepared: 10 March 2022

Component sourcing & demand shocks | Supply and demand ripple effects
created by companies stopping or limiting Russian & Ukrainian operations
Companies across industries stopping or limiting operations forcomponent shortages or to protect personnel…
Foreign OEMs (e.g., Hyundai1, VW2, Ford3) halting car production,
import/ export and servicing in Russian operations
Leoni AG4, Kromberg & Schubert5 and other global tier 1 & 2 suppliers
closed Ukrainian plants (manufacturing in wire harnesses)
Food andbeverages

Consumer goods companies (e.g., Heineken6, Carlsberg7, Unilever8,
Pernod Ricard9) suspended exports to Russia and/or Russian production
Consumer goods companies (e.g., AB InBeV10, Coca-Cola11) shutdown
beverage production in Ukraine

Chemicals/
PharmaBASF12 halted investment in new business and operations in Russia,
except for production related to humanitarian efforts
Biosphere13 cut production of personal care products & biodegradable
plastics in Ukraine

Aerospace

Airbus14 suspended support services & supply of spare parts to Russian
airlines; Boeing15 stopped procuring titanium from Russia

Negative demand shock on
manufacturing inputs exported to
1 Russia/Ukraine. Will cause lost sales
for some suppliers and create sourcing
opportunities for manufacturers
outside of Russia/Ukraine
Lack of supply of key components
and products for companies importing
2 from Russia/Ukraine, impacting thoseimporters' ability to satisfy theircustomers' demand

Boeing15 temporarily closed Kyiv office employing ~1000 engineers
1. KBS World (03/09) 2. WSJ (03/03) 3. Reuters (03/01) 4. WSJ (02/27) 5. Reuters (03/03) 6. NL Times (03/05) 7. Reuters (03/04) 8. Reuters (03/08) 9. The Times (03/07) 10. Fortune 11. Reuters (02/24) 12. Nasdaq (03/03)“Effective immediately, BASF will only conduct business in Russia and Belarus that fulfils existing obligations in accordance with applicable laws, regulations and international rules.”, 13. Forbes (03/06) 14. BBC (03/02)
15. Reuters (03/07) Source: Press, web search, company announcements, BCG Analysis

12

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Auto…with two main effects for global
supply chains

Prepared: 10 March 2022

Logistics | Global freight routes further distressed leading to reduced
capacity and increased costs across industries

SEA FREIGHT: Moderate impact on
capacity, significant risk from fuel

ROAD & RAIL: China-EU railroad stopped& EU truck drivers shortages heightened

Flight bans and sanctions to cause capacity
loss in EU-Asia lane (21% of cargo) exacerbating
capacity crunch. Portion will cancel vs re-route

Congestion expected at northern EU ports
to process 200 rerouted ships waiting to crossthe Kerch Strait2

Disrupted China-EU railway - linking 24
countries & 264 cities, and intended alternative
to global sea and air freight4

Super-connector airlines in the Middle East
may serve as a substitute1

Maersk, ONE, MSC, Hapag-Lloyd havesuspended shipments to Russia & Ukraine2

Rail lines through Russia closed: Asian
exporters need to find new routes to EU5

Jet fuel prices up 27% month over month1,
likely to drive cargo rates up further

Bunker (marine fuel) up 84% vs. last year3,
bunker is ~45% of vessel op costs; however,rates currently detached from container rates

Ukrainian truck drivers returning to the
Ukraine exacerbating EU driver shortage(e.g., 30%+ drivers in Poland from Ukraine6)

Copyright © 2022 by Boston Consulting Group. All rights reserved.

AIR FREIGHT: Rates approaching record
highs (120% above pre-COVID)1

Over-the-road trucking costs rising from fuel1. IATA: Europe-Asia, Asia-North America most heavily hit by airspace closure, Based on CTKs (cargo ton kilometers) over the past 12 months; 2. Business Insider: Russia's War on Ukraine Could Triple Ocean Shipping Rates
Say Experts, 3. Freightwaves: Ship fuel spikes to historic $1,000/ton mark as war fallout worsens, 4 South China Morning Post: China-Europe rail trade set for infrastructure upgrade, with container traffic up 30 per cent,
5. CSCMP's Supply Chain Quarterly: Logistics pros warn of business impact from Russia-Ukraine war, 6. Fortune: Russia invasion: Ukrainian emigrants leaving safety and heading to war Source: Web search; BCG analysis

13Prepared: 10 March 2022

War in Ukraine:
Supply Chain Impact

Deep-dive: First view on Supply Chain Impact
Current situation and context
Supply and cost impacts

Supply chains at risk

Copyright © 2022 by Boston Consulting Group. All rights reserved.

AGENDA

Implications for leaders14

Prepared: 10 March 2022

Steel | Supply risks – especially among European re-rollers – due todisruption of intermediate and finished steel products
Risk Summary
Access tocommodities

Russia & Ukraine supply much of world's
intermediate / finished steel products
Netweight

HBI1

Global Trade
EU Imports

28%

Pig
iron

Global Trade
EU Imports
USA Imports

35%
25%
58%
15%
35%
43%

11Mt
3Mt

68%

14Mt
2Mt
4Mt

Semis & finished

Plate

Global Trade37%

EU Imports

58%

6%
Global Trade 7%
EU Imports

N/A

N/A

ROW

Iron Metallics

Slabs

Access to mfg
components

21% 17%

16%
37%

23Mt
6Mt

Russia is lowest cost producer globally - likely
to divert its exports to Asia

High

Pig
Iron
Moderate

US producers using Electric Arc Furnaces
impacted by shortage of metallics (HBI1, pigiron) used in high-quality production

Slabs
HBI1

Low

Wind turbine towers and pipe/tube for oil& gas are examples with cost & lead time impact

Plate

Low

27Mt
5Mt

EU re-rollers will be particularly impacted
by supply shortage due to slab relianceModerateHigh

Already record high steel prices (scrap, metcoal, power) and could further rise due to crisis

Difficulty in finding alternatives

1. Hot Briquetted Iron, has production benefits when used in Electric Arc Furnace (EAF) 2. Estimated using extra-regional trade as a proxy
Note: Trade data from 2020; Based on HS6 level Source: UN Comtrade, BCG Analysis, Web search

15

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UkraineDemandShocks

Producers & industrial goods sector in Europe / US likely impacted

Russian & Ukrainian% of global supply2

RussiaCost forcommodities

Prepared: 10 March 2022

Semiconductors | Already short global supply further exacerbated by raw
material shortages will continue to impact auto and consumer electronics
Risk Summary
Access tocommodities

DemandSupply

120
110
100
90
80
70

Actuals

Forecast

CY182019
CY192020
CY20 2021
CY21 2022
CY22

Access to mfg
components

N/A

N/A

High

C4F6

Neon
gas

Kryptongas

Moderate

If crisis continues, lower gas availability(especially Neon) could further deepen chipshortage and thereby reduce availability
Sectors using advanced chips (e.g., cell
phones, computers, etc.) impacted mostAuto, industrial and other sectors also
impacted, as shortage on gases reduce
semiconductor production yields

Xenon
gas
Low

Gases are critical consumable for semiconductor production – e.g., Neon required
for manufacturing of advanced chips

High

Difficulty in finding alternatives

Situation likely transient, as new gas
production scheduled to be available over next
6-12 months (in Germany, Singapore, Japan)

1. Historical and projected sales; forecasts derived from projected demand evolution of selected end-industries. 2. Historical and projected production; 3. BCG IC Model Forecast
Note: Drop in semiconductor demand due to sanctions will not provide a meaningful demand reduction, as Russia represent a small share of global semiconductor demand
Source: BCG IC Model Forecast, BCG analysis, Factiva, Expert inputs

16

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130

Moderate

140

Stocks likely
sufficient to buffer
next 2-3 months

Low

Demand1 and supply2 for semiconductors(pre-Ukraine crisis view3) ; Index base = Quarterly 2018 average

DemandShocksOnce existing stocks of required gases are depleted, a continued shortageof semiconductors expected until alternate suppliers foundRussian & Ukrainian % of global supply

Large demand-supply imbalancealready before the Ukraine crisis

Cost forcommodities

Prepared: 10 March 2022

Auto | Challenges in sourcing multiple impacted components in near-term,
creating risk of exacerbating existing supply shortfalls
Risk Summary
Access tocommodities

Palladium

Platinum

EffectManufacturers ofwire harnesses
and other autoparts (Leoni, 1
Sumitomo2 etc.)
closed plants

German and
Korean OEMs3
have stopped
production due tolack of cables

NickelIron ore

OEMs have halted
car production
despite large
capacity

Wires/
CablesLow

Selected examples

Moderate

Difficulty in finding alternatives

High

With only 5% of
local production
exported, impact
will be local &limitedDemandShocksAccess to mfg
Mfg
components… with other challenges thathave potential to reduce output
Rising palladium & platinum prices:limit OEM production of ICE cars (due tocatalytic converter application) meeting ESG
regulations, potential to stimulate EV adoption
Transient impact from neon disruption:
Microchip manufacturers securing new
supplies; gas producers installing new plants
Shortages of wires/cables likely transient:Companies rerouting production/supply fromtier 1 & 2 suppliers in Ukraine
Nickel shortages will increase cost of EV
batteries in the short-term, but impact
unlikely to be long-term as newly developed
Nickel-free batteries will help mitigate theshortage risk

Note: Ukraine also producer of other auto parts such as seat covers, injections molding parts, but contribution to global production negligible. CIS : Commonwealth of Independent States; %of global supply in MT for raw materials and in M$ for Wires/cables; Low: < 5%, Moderate: 5-10%, High: >25%, Moderate 1. WSJ (02/27) 2. Barrons 3. IHS Markit
Source: S&P Capital IQ, ITC TradeMap, HIS Markit, Automotive News, EPS News, BCG analysis

17

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Moderate

High

Neon

Low

Russian & Ukrainian % of global supply

Risks to key inputs with limited alternatives already impacting vehicle
manufacturing …

Cost forcommodities

Prepared: 10 March 2022

Agribusiness | Constrained supply of fertilizer will impact crop
productions and increase prices for a variety of food goods
Risk Summary
Access tocommodities

MOP1
Fertilizers

Moderate

Sunflower
meal / oil

DAP/N1
Fertilizers

Wheat

Low

Moderate

Difficulty in finding alternatives

High

Price Mar 9, 2022 vs EOY 20212
Soybeans Primarily animal feed that+27%

substitutes for sunflower meal

Most food goods to see higher prices as supply
tightens adding to already high food inflation

Milk

+22%

Animal products already
impacted by higher feed cost

Unclear impact on agriculture inputs(machinery and equipment)

Palm Oil

Cooking/frying oil impacted by
reduced sunflower oil supply

Will exacerbate existing supply issues incl. theSouth American drought & shipping congestion

Access to mfg
components

Price rise of wider commodities
due to second-order impact

Higher animal product prices through '23 due
to higher feed cost

Food insecurity to increase especially in Global
South, Middle East, & North Africa

Corn

DemandShocks

+48%
Rice

+6%

1. MOP = Muriate of Potassium, DAP = Diammonium Phosphate, N = Nitrogen 2. Business Insider Commodities Tracker; end of day March 9, 2022
Source: Bloomberg, New York Times, Barclays Equity Research, ING Economic and Financial Analysis, Financial Times, Middle Eastern Eye, BCG analysis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

High

Crop production will decrease through '23 from
Ukraine supply loss & fertilizer supply constraints

Low

Russia, Belarus, Ukraine % of global supply

Supply constraints will lead to higher industry costs and shortages

Cost forcommodities

Grain impacted by high fertilizer
cost & reduced grain supply

18

Prepared: 10 March 2022

AGENDA

Deep-dive: First view on Supply Chain Impact
Current situation and context
Supply and cost impacts
Copyright © 2022 by Boston Consulting Group. All rights reserved.

War in Ukraine:
Supply Chain Impact

Supply chains at risk

Implications for leaders

19

Prepared: 10 March 2022

Companies taking immediate, short-term actions to mitigate rapidly evolving
supply chain risks…

How companies are responding today

Redesign global
networkResetbuffers

Proactive suppliermanagementRESPOND RAPIDLY TO DISRUPTION
Orchestrate
beyond company

E2E riskmanagement

Aptiv

Nippon SteelNokian Tyres

Pre-emptively moved
production of certain
high-volume parts outof Ukraine in Jan 20221

Considering sources in
Brazil & Australia for 14%
of iron-ore pellets sourced
from Russia/ Ukraine3

Have intensified riskmgmt scenario
planning to include
availability planning5

Simulation &scenarios

BoeingNestleCoca-Cola

Built globally sourced
inventory of titanium towind down relationshipwith Russia2

Executing business
continuity procedures in
Ukraine to ensure supply
to consumers4

Performed scenario
planning to prepare forpotential supply chain
disruption6

1. Reuters: Auto parts maker Aptiv recently shifted high-volume Ukraine-CEO 2. Simple Flying: Boeing Isn't Worried About A Lack Of Russian Titanium 3. Mining Technology: Russia-Ukraine
crisis hits ArcelorMittal and Nippon Steel 4. Reuters: Nestle says operations running normally in Ukraine, continuity plans in place 5. Reuters: Nokian Tyres moves some production andstock out of Russia 6. Reuters: London-listed Coca-Cola HBC readies Russia contingencies as profits rise Source: Web search; BCG analysis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

RECONFIGURE SUPPLY CHAIN

20

Prepared: 10 March 2022

… and should build capabilities over the medium and long-term
to build resilience for future disruptions

How companies can build supply chain resilience in the medium to long term

Redesign global
networkResetbuffers

Proactive suppliermanagement

Segment stock levels ofintermediate goods and carrybased on risk and criticality
not only demand

Redesign manufacturing andsourcing network to reduce
single-sourced items, orsourcing from one region

Source: Web search; BCG analysis

Invest in key suppliers, form
"open book" partnerships

RESPOND RAPIDLY TO DISRUPTION
Orchestrate
beyond company

Create partnerships inindustry or buyer groups toadvocate for supplier
resilience & transparency

E2E riskmanagement

Simulation &scenarios

Establish network
level "digital twins"
to scenarios

Copyright © 2022 by Boston Consulting Group. All rights reserved.

RECONFIGURE SUPPLY CHAIN

Link cyber risk of suppliers to own SC risk
mitigation efforts
Explore multi-echelon SC transparency,
to better map upstream risk

21

Prepared: 10 March 2022

This is a rapidly evolving situation, and other emerging global risks willchange how companies – and their supply chains – need to respondThus far, markets & companies have responded mainly to the immediate and direct results of the war
The impact of the war on commodities, companies, and industries will evolve over time, and may have more
complex second order effects that leaders will need to navigate

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Some examples of these potential effects which can complicate the picture include:• Risk of recession and resulting softening of demand• Longer duration or wider spread of conflict• Escalation of sanctions and/or export bans
• Enduring elevated energy costs – as a cost input
As the conditions change, the risks to supply chains and required responses from companies tomitigate those risks will also continue to evolve

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