Mitigating the Effects of Sanctions on Globalized Supply Chains

Sanctions, restrictions, and geopolitical conflicts can have serious consequences for organizations with complex and globalized supply chains.

Organizations with multi-tiered, globalized supply chains have to contend with increasingly complicated operating environments. For example, Russia’s invasion of Ukraine has stemmed the flow of oil, natural gas and grain, and prompted a host of economic sanctions and export controls, while the Uyghur Forced Labor Prevention Act (UFPLA) rightly requires corporations to intensify supplier and exporter due diligence efforts.

This blog post uses the UFPLA as one contextual example of larger supply chain disruptions. We discuss how end-to-end supply chain visibility creates a common operating picture across the enterprise that can help to ensure ethical sourcing and legal compliance. We address strategies to mitigate the impact on daily operations, future-proof supply chains against evolving geopolitical risks, and enable businesses to better align their sourcing practices with internationally recognized labor and human rights standards.

The Uyghur Forced Labor Prevention Act Strategy

The UFPLA restricts US imports from the Xinjiang Uyghur Autonomous Region (XUAR) of China; this policy is a critical step towards exerting international pressure to end the oppression and exploitation of Uyghur and other ethnic and religious minorities in the region. It will require organizations to investigate their suppliers in order to prove with “clear and convincing evidence” within 30 days that they did not — directly or indirectly — engage with a supplier that uses forced labor, slavery, or coercive practices. If unable to do so, Customs and Border Protection will exercise its authority under customs laws to detain, exclude, seize and/or forfeit those shipments.

The XUAR is responsible for producing 40% of the world’s polysilicon, a quarter of its tomato paste, a fifth of its cotton, alongside a sizable portion of hops, walnuts, beryllium, and other products, according to estimates reported in The New York Times.

Unfortunately, many suppliers who are working within the Xinjiang region will seek to obfuscate their identity. Bad actors have long understood that in order to escape the reach of sanctions, they need to utilize legal means to obscure their true identities; especially so for those tagged as politically exposed persons. Many in this situation use intermediaries to hide their Ultimate Beneficial Ownership, or utilize layers of shell companies. This obfuscation leads to a series of complexities that impact the supply chain, making it difficult for organizations with large, globalized supply chains to place a high confidence score on their manufacturing entities.

The scale of the impact of the UFPLA is not to be underestimated. Indeed, Altana AI estimates that approximately one million companies may be subject to enforcement action, creating billions of dollars of impact on the global economy. Compounding this complexity, individual companies may have tens of thousands of touch-points to trace. For example, the average carmaker has approximately 250 tier-one suppliers, with exposure to 18,000 other companies across its full supply chain, according to McKinsey & Company.

Palantir’s Solution

Palantir’s commitment to privacy and civil liberties endows us culturally and technologically to engineer solutions to emerging global problems in an ethically responsible way. Palantir has a long-established commitment to protecting privacy and civil liberties through our work and within our company culture. Beyond building technology platforms that enable privacy protections, we also are proud to partner with institutions that reinforce human rights considerations, including, for example, our support of law enforcement to uncover human trafficking rings, exploited children, and unravel complex financial crimes In a similar vein, we believe that our software can help companies play a role in fighting the exploitation of the Uyghur communities in the Xinjiang region of China.

In a supply chain context, Palantir Foundry can be deployed in days to empower an organization to integrate data from disparate ERP, WMS, and TMS source systems into a single common operating picture to power full end-to-end visibility into every supplier across the connected value chain. In fact, when a Fortune 100 consumer goods company deployed Foundry to mitigate COVID-19-related disruptions to its supply chain, our software was used to harmonize more than 7 legacy systems into a unified environment within days to improve production and save tens of millions of dollars as a result.

In this connected environment, Foundry empowers the supply chain professional to have full visibility into their entire distribution network, tracing the smallest component materials of their finished products back to the originating field, mine, factory, or warehouse. From this connected vantage point, analysts can expect to more easily identify suppliers whose labor practices seem obscure or opaque, and take steps towards sourcing raw materials elsewhere.

By going deeper into the the data representing originating fields, mines, factories or warehouses, Palantir Foundry supports organizations in unmasking bad actors through state-of-the-art entity resolution, which unwinds the complexities of shell company hierarchies and exposes the risks that supply chains may face. This rigorous audit empowers organizations to comply with government measures such as the UFPLA.

Looking ahead, Palantir Foundry’s AI/ML solutions can enable supply chain professionals to future-proof their supply chains by modeling geopolitical scenarios and their downstream impacts. Users can tweak variables to learn the costs and benefits of switching suppliers, transportation modes, re-shoring, near-shoring, or far-shoring, and create contingency plans in the event of unfolding geopolitical risk.

Palantir’s Impact

With the help of Palantir Foundry, the World Food Programme (WFP) makes the most of every dollar they spend. Our five-year partnership with the WFP empowers the integration and operationalization of data from across the organization into a secure, unified environment. The resulting supply chain efficiencies power real-time decision-making that enables the delivery of life-saving assistance to over 90 million people through the 15 billion rations they distribute across 80 countries, every year. Palantir’s ethos runs parallel to the missions that underpin the important work of the WFP. Together, we operationalize efficiency to deliver meaningful support in the global food crisis.

Conclusion

Palantir was built for times of crisis. Our software helps the military run missions from space, dismantle terrorist networks, and gets COVID-19 vaccines to millions. The compounding supply chain disruptions caused by Russia’s invasion of Ukraine and most recently, the UFPLA, can be mitigated with our software, which is built on our fundamental commitment to protect individual privacy and civil liberties. Our software enables in-depth scenario modeling and accurate COGS (that take into account a rapidly-shifting supply and demand picture) to protect bottom-line revenue.

Discover how Palantir Foundry can help your organization emerge resilient in the face of crisis. Learn more about Foundry for Supply Chain.

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Mitigating the Effects of Sanctions on Globalized Supply Chains was originally published in Palantir Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.