Global Supply Chain Issues: Russian Seaport System

Indah Cargo Bandung

In our several class discussions I became very interested in the supply chain boot camp. Therefore, the topic I have decided to focus on is global supply chain issues. One of the problems I became interested in is seaport infrastructure in Russia’s supply chain. After the collapse of the Soviet Union, Russia went through a very tough time in terms of economical, social and political instability. Such instability and lack of development has touched almost every aspect of the economy. One of such aspect is a seaport system. Much of the system has been in a frozen phase for almost 20 years. However, Russian economical, political and social systems have begun slowly developing stability, growth and confidence in the future due to successful governmental policies, increasing oil prices and other factors. As a result, Russian port system is not able to adjust to the fast growing appetites of Russian consumers and businesses. The growing demand for imported goods has overwhelmed the capabilities of the Russian seaport companies. Therefore, much of the imported cargoes and goods are transshipped through Hamburg, Germany and then loaded on the trucks and trains to be transported to Russia. A good visible example can be 30-miles queues of trucks on Russian-Finnish border waiting to cross the border to deliver the cargoes to Russia.

Russian government has established special economic zones with certain tax and administrative incentives around majority of seaports to attract foreign and local investors. Therefore, many world renowned logistics companies such as Dubai’s DP World and Hong Kong’s Hutchison are considering making large investments to acquire local port companies and increase capacities of Russian ports. Russian is a very lucrative market right now for the foreign companies to enter because of the increasing confidence in the future based on constant improvements in socio-economic policies.

This issue is a very important one in the Russian supply chain because local companies are losing billions of dollars to logistics cost associated with such underdeveloped sea transportation infrastructure. Therefore, the companies are not very price competitive because even with cheap human capital resource the infrastructure is so underdeveloped that it generates very significant cost and other types of problems for the local manufacturers, retailers and other intermediaries in various industries. The costs associated with such inefficient logistics are so significant that they can have an impact on the economical performance of the country in the future.

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