Yuri Shchuklin, logistics market expert, member of Logostics Committee of the European Business Association   

 

Over the nine years of war, Europe has done very much to support Ukraine. Europe has accommodated our refugees, provided huge financial assistance to Ukraine, and gives us weapons.  The time has come to show our gratitude and help our European partners. This is why I have a present for the European Union: some technology and a system over which I have worked for four years. 

I want to address our partners, allies, donors who are now looking for a solution to remove the tension for our shipments at the borders and end the embargo: such a decision does exist and can be applied right now, and you don’t have to spend money for it.

The war has brought confusion to logistic chains and corridors. When our ports were closed, Europe had opened “Lanes Of Solidarity” for Ukraine, it was presumed that our shipments will pass through Europe’s infrastructure to this produce’s stable markets.    However, as time passed by, European infrastructure owners, as well as those of processing enterprises, began using our grain in their production.  This caused local farmers’ protests as they saw a threat in our produce fearing that their produce would be unable to compete and would lose demand.  

There is a technological solution to this situation. I applied efforts to its introduction even before the full-scale war. This solution is in the system, or technology, of responsible planning. Any end-to-end business processes have to be planned. At the moment, these processes are disrupted, being performed, accounted and managed by enterprises autonomously. If all business processes, the entire logistics chain are planned and accounted in one single place, then analysis can be made, and both payable and receivable money flows may be corrected and accounted. You can then harmonise all events and not allow deviations from the plan  

The system allows to manage logistic processes, like every other business process, not by officials, not by managers but by these enterprises’ automated systems. This is an information environment where any stakeholders, state bodies, businesses interact at the level of automated systems which create optimum logistics solutions and control fulfillment of plans. The system has automated blocks performing part of the work and make automated the processes previously done manually, as well as other means: messengers, letters, e-mails, etc. when participants input their data to the system, the data becomes accessible for all the companies involved in the process, for all performers. 

The system allows to distribute the participants’ resources in a way that there is no overloading and you can see in advance where tension may arise in the logistics chain and to react in time: direct the shipment to another location or not to move in the direction where there is no movement.  If the Ukrainian agricultural producers saw last May that there is no movement of their shipments in the designated direction they would not have had spent enormous money because of their railway cars in long queues and would not have suffered overspending later.  

This is an open system which you can join and see your partners’ resources which you need, order them, use them, as well as lend your resources to other participants in the system.  Every player has desires of their own: sell grain, buy grain, sell or buy railway cars, transport cargo, provide services.  This system allows to adjust these desires to each other and to harmonise events in space, time and in every other dimension. In order for it to work, political will is needed first of all. The system is aimed at cooperation between enterprises, countries, governments, and their jurisdictions. This means that when the process goes through several enterprises, countries, governments, interaction between them is required. It is the European Commission, governments of other countries, our government that have to decide whether they need this system. It is also necessary to stimulate the exchange of data between this system and “Ukrzaliznytsya” company as it is a monopolist and the most important logistics artery.  Interaction between “Ukrzaliznytsya” and the system which I suggest is a fundamental requirement which will provide additional efficiency tools to “Ukrzaliznytsya” while providing loss-free use of its services to its customers.   

It is production that creates demand for logistics and cargo movement to markets. This is why a healthy system of economic relations stimulates manufacturers to continue their activity, to produce. It is logical that the governments of Ukraine’s neighbouring countries and the European Commission have reacted with unprecedented protectionist measures: they want to protect their producers.  To argue that the embargo contradicts previous agreements with Ukraine is not a solution. We have to give our European partners rational arguments about why the embargo does not protect their businesses and consumer markets but, adversely, inflicts losses on them.   

Those who suffered as a result of the closing of the EU market, are, first and foremost, traditional processors of our grain. Because of the closing of countries around Ukraine, the ways to buyers from Western Europe and Baltic countries have been cut off. Previously they used Ukraine’s grain for feeding livestock.  As a result, prices for meat will grow and European consumers will suffer. Because the Ukrainian produce will remain locked within our borders, the situation for Ukrainian agrarians will be even worse than last year, when logistics prices have grown by five or six times. Now, when there’s the season for sowing corn, agrarians do not know at all whether they should do it or not. Irrespective of prices for logistics, they just do not have where to take the corn. In contrast to other cultures, corn cannot be stored for longer than a year. Irreversible biological processes start in corn and it loses quality. If, as a result of the embargo, the traditional Ukrainian production stops (first of all, of corn, wheat and of a number of niche cultures) prices for these cultures will grow, and this will be felt by everyone. Those who initiated the closure of borders against our produce will not be able to replace our produce.   

Europeans have closed the borders in order to have a pause to arrive at a rational solution. Today, they don’t see the volumes of shipments which go through to third countries and those that are taken for processing by local businesses. While allegedly protecting their market from the dumping of Ukrainian produce, they do not see how much money they lose because of closure of the borders.  However, if they saw how much money the Ukrainian transit brings them they would have changed their opinion. Fundamentally, Europe stands only to gain from the turnover of big volumes of Ukrainian grain, the biggest profits going to processing enterprises, reloading facilities, roads, ports. Ukrainians are paying big money for shipment and reloading services, and PKP Polish railways, as well as LHS and other railways, are receiving additional income. Today, our partners have no argument and no numerical proof that our flows provide opportunities to earn money by servicing our cargo.   

Within the system that I am offering, this will be seen in every specific case. European countries will be driven not by their farmers’ panic but by objective numbers. The system of transparent responsible planning of cargo shipments may be adjusted to meet the requirements of any sector, be it Ukrainian or European, with any parametres and checks and balances that would not allow for something like what has happened now with the grain embargo. The system will allow to see in advance what goes where, what is the load saturation, what are the volumes, and will also provide opportunities for balancing the commodities flows so that there is no surplus of particular cultures or shipments that violate national consumer markets. This toll will allow businesses to develop, to conclude agreements and plan their work without stepping on “the red lines”.  

Ukrainian producers also have interests of their own. Ukraine does not want to lose its European and world markets. Although some say that those 10 percent of the European market are not worth of such attention, now we cannot afford losing anything.  The matter is that hard currency for the country’s budget now is earned only by agricultural produce as metallurgy and all other export sectors have fallen, and we have to protect our producers. This system allows to do this as Europeans will see that we are not a threat to them.  

Of course, I know the arguments of opponents to my technology. I have been hearing them for the last year. For some traders whose planning horizon is up to two days and whose habitual practice is “contracting from the wheels” and trading at short-term positions, this is the essence of their business. The more confusion there is, the more speculators profit.  

Imagine that you want to go to another city and go to the cashier’s desk but you are being told that there are no tickets. You are not informed of the departure time or of the arrival time, and you get to know the price only when you are already at the platform.  At that there are fewer available seats than there are eager passengers. The price, naturally, will rise. This is what happened last summer.  

The logistics system presently founded on the interests of the monopolist, "Ukrzaliznytsya”, provides for the flourishing life of speculators and eliminates small and medium-sized agrarian enterprises. The new technology and system will also balance the work of “Ukrzaliznytsya” and help it to smoothly enter European integration processes while decreasing officials’ influence on the cost of logistics.   

This is why I give this system and technology to the European Commission for free, as well as make it operational. This system will allow to see real capacities of “Ukraine-EU” lane while giving Ukrainian and European producers opportunities to acquire cargo. We will be able to plan exports without causing panic, traffic jams or unnecessary spending. The system won’t allow an unreasonable or corrupted official to interfere.  This system will show Europeans that Ukraine is an honest and useful partner and that cooperation only brings gain and income to European countries.   

I want to make my contribution to Ukraine’s European integration. While I was not able to do this in my capacity of an advisor to the Head of Board of “Ukrzaliznytsya”, I will do this as an individual entrepreneur. I want to change the world for the better.