Why wars means Logistics Costs increases

May 28, 2024 by
Why wars means Logistics Costs increases
ABI-VNM - Abivin Vietnam, Phạm Nam Long
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The study of logistics often focuses on reducing cost and optimizing efficiency. However, in the context of warfare, logistics costs increase. Logistics costs are not merely the expenses of supplying soldiers with food and bullets; war logistics also refers to the strategic cost of moving resources from one place to another. In any military operation, speed is a major factor of success, whether it’s responding to an emergency or launching an attack. Reducing response time by streamlining supply chains reduces costs in terms of money and lives. The faster a military can receive supplies from a manufacturer or distributor and get them into the hands of soldiers who need them, the better their chances for success. Here are some examples why wars means logistics costs increases:

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What is Logistics?

The process of planning and executing efficient transportation and storage of commodities from point of origin to point of consumption is known as logistics. Logistics' purpose is to satisfy client needs in a timely and cost-effective manner. Originally, logistics was responsible for moving military personnel, equipment and goods. While logistics is as important as ever in the military, the term today is more commonly used in the movement of commercial commodities within the supply chain.


Logistics costs increases during wars

1. Increased transportation costs

Because conflict tends to raise ocean freight rates across the board, the impact on transportation costs will be significant. Due to the pandemic, European importers are already paying record high ocean freight charges. Ocean rates to Europe are now rising once more. Odessa, Ukraine's Black Sea port, has been closed. Ukraine-bound cargo has been diverted to other ports. Cargo destined for Russia is still going, but as the scenario unfolds, it may be delayed or diverted. Because trains from China to Europe frequently pass via Russia, rail may not remain a safe or affordable alternative to ocean shipping. In response for Western efforts, war might spread from Ukraine to countries, or Russia could halt or stop rail freight. 1.5 million maritime containers of freight were carried west by rail from China to Europe last year. Any disruption to the rail system would have a significant influence on European ocean costs and capacity. Traveling by air provides fewer alternatives for people and things. Russian planes are not allowed to fly in Ukrainian airspace, and Russian planes are not allowed to fly in EU airspace. 

2. Increased cost of packaging

The cost of packaging is often overlooked, but it can have a significant impact on the total logistics costs, especially during a war. If a company’s primary goal is to reduce logistics costs, then it may retool its packaging or transportation methods to reduce the quantity of packaging material. However, if a company is concerned primarily with the safety of its goods, then it may choose to use more packaging because it needs to ensure the products will arrive safely. The cost of packaging also goes up as the product becomes more valuable. A $50 pair of tennis shoes can be packaged in a cardboard box for $0.50. A $500,000 diamond necklace, on the other hand, may be packaged in a custom-made, multi-million-dollar display case. The cost of packaging becomes less of a logistics issue and more of an issue of managing product value.

3. Warehousing and inventory costs increase

Warehousing and inventory costs increase during a war for a couple of reasons. First, an increase in demand means an increase in supply time and an increase in logistics costs. A warehouse that normally stocks shelves once a week will now have to do so once a day. The more goods that need to be stocked, the more workers and time is needed to do the job. All of these factors increase the costs associated with running the warehouse. Inventory levels also become a factor during a war. Because of the increased demand, companies will buy more of each item. However, they’ll also have fewer items in stock. When a company has less inventory, it has to order more often. This constant ordering, combined with the heavy demand, can lead to an increase in the overall inventory costs.

Conclusion

When a country is at war, it is under stress and the normal logistics issues are magnified. All supplies must be moved to the front quickly and efficiently. In addition, there are additional operations to maintain the troops in the field, such as air transport. All of these efforts mean increased expenses of all types, including the cost of fuel, materials and labor. In addition, when a country is at war, there may be less access to suppliers outside the country, creating shortages of critical supplies. If the country is a supplier, it may face restrictions on exporting materials needed by its allies. In short, there is less equilibrium in the market, and costs increase accordingly.

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