Create an Agile Supply Chain Despite New Tariffs

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Create an Agile Supply Chain Despite New Tariffs

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Among the list of constant stressors for supply chain leadership, tariffs sit towards the top of the list. Last year, companies identified rising tariffs and trade barriers as their top challenge. With the most recent tariffs outlined by the current U.S. administration, it’s clear to see why. 

The most recent plan, announced on June 2, includes a 50% tariff on steel and aluminum. The impact of these new tariffs will be felt by many industries, including grocery, automotive, and appliances, industries that already feel the strain of supply chain disruptions. 

In the immediate, companies are stockpiling products, moving warehouses, and updating production schedules to keep costs as low as possible. However, this only addresses the immediate. A long-term solution requires more comprehensive, proactive solutions.  

Building a more agile supply chain is necessary for companies across all industries. And with all the tariffs changing how supply chains produce and ship their products, now is the best time to start. Here are four necessary changes for building an agile supply chain that can succeed despite new tariffs and trade barriers. 

1. Information is your friend

Of all the resources available, quality data opens the most comprehensive and varied opportunities for supply chain leaders. Investing in solutions that allow for data transparency, rather than just visibility, helps companies prepare for the domino effect new tariffs will have on their products.

For example, companies that can see beyond just their first-tier suppliers, and dive into second- or third-tier suppliers will have a much more accurate understanding of what disruptions may occur due to tariffs, plus what their options are, should those disruptions occur. A risk analysis that draws on outdated, or incomplete, data cannot help companies be as efficient as possible at delivering their product and keeping margins down.

The data and information must also be accessible throughout the supply chain. Teams from supply planning all the way to warehouse management and transportation must share the same data. Legacy systems that keep data siloed create additional barriers to moving quickly and adjusting efficiently.

 

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2. Prioritize resilient strategies for all products

Tariffs can change the supply chain overnight. The estimated costs and available supply of a single product can fluctuate so much that the plan the company created for that month is rendered obsolete. Though there can be some warning, often the exact language and consequences of new tariffs cannot be known until they are in effect.

As such, companies need to build resilient, proactive strategies based on the most common scenarios that will occur. Build models using historical data that show what might happen if tariffs were raised on supplies or finished goods. Consider how long you can hold goods inside a warehouse and still remain efficient and profitable. Model what could happen if raised prices affect your customer base. All of these what-if scenarios can show you the kinds of disruptions to plan for, and how to best navigate the changes.

But they should not be static plans. Leave room for changes and updates to minimize the impact across the different departments of the supply chain. Keeping a single plan, with a narrow focus on how your company will react won’t work in our current market. Resilience, nuance and collaboration are the way forward.

3. Diversify your plans

Speaking of collaboration, while creating plans to overcome trade obstacles and tariffs, brainstorm strategies that consider every part of the supply chain. Transportation is not an immediate consideration when the topic of tariffs comes up. But it is directly connected to potential solutions.

Nearshoring became a key priority during Covid to protect against added costs associated with transportation, among other reasons. Companies that only considered how to solve the labor challenges brought on by the pandemic, may have missed other cost-saving opportunities throughout the supply chain.

Tariffs certainly will impact costs most directly, which likely cannot be avoided. However, companies can look for efficiencies in other areas that may offset what is inevitable in trade. Identifying changes that improve operations of your entire supply chain will pay off both in the short-term and for the foreseeable future.

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4. Lean on a sustainable workforce

Finally, companies must focus on how to create a sustainable, agile workforce. The priority in many warehouses today is finishing a task within a particular time frame. Often, the cost of speed is efficiency. Trucks are only half filled, pallets aren’t stacked in the best way and other small sacrifices that ultimately add up to additional costs.

This isn’t human error; everyone works the best way they know how. But artificial intelligence (AI) solutions offer the entire workforce a better way, without requiring extra effort from individuals. What’s more, when companies integrate robotics into their warehouses, the efficiency can grow exponentially, without risking burnout from current employees.

No single change will be the magic answer to overcoming the costs and disruptions associated with new tariff wars. However, implementing what you can now, and maintaining a focus on agility will ensure all companies can succeed during this challenging time.