Competitive Trade Policies and Control over Supply Chains!
In the midst of ongoing trade tensions, supply chain leaders find themselves in a challenging yet crucial position. As the cost of goods is likely to rise due to tariffs, long-term decisions still need to be made despite the uncertainties of the trade war.
The tight capacity of the trucking industry in the U.S., coupled with increasing demand on over-the-road transportation, is a growing concern. To weather this storm, supply chain leaders must focus on critical responsibilities such as sourcing, cost assessment, and supply-demand management, all of which are affected by the global trade balance and uncertainty.
To respond effectively, supply chain leaders should adopt strategic actions. Firstly, diversify supply chains to reduce dependence on high-tariff countries. This could mean shifting manufacturing away from China to countries like Mexico or Vietnam, while monitoring tariff exposures across regions.
Secondly, invest in trade intelligence tools and improve regulatory compliance to make informed sourcing and routing decisions. This will help minimize tariff impact and avoid penalties such as those from transshipping tariffs.
Thirdly, implement a structured tariff response framework. A 30-60-90 day plan, for instance, could start with immediate cost mapping and damage control, followed by developing adaptable and cost-efficient supply networks to handle ongoing trade volatility.
Fourthly, leverage force majeure and cost-sharing clauses in supplier contracts to manage tariff-related cost increases.
Fifthly, closely monitor the evolving U.S. tariff regime, including new tiered rates based on trade balances with partners. Adjust sourcing and operational strategies accordingly, such as considering relocating or transferring operations to countries with lower tariffs or better trade agreements.
Harley-Davidson, for example, has already moved manufacturing out of the U.S. to overseas facilities to service the European market due to the significant increase in costs from tariffs.
Supply availability may become a real issue due to the potential inability of domestic industries to increase their share of the market and labor shortages. Supply Chain leaders should conduct a revised cost analysis for all impacted raw materials, sources, and network nodes. They should also focus on risk mitigation and ensuring continuity of supply from qualified, secure sources.
Contingency planning is crucial in the current trade situation, as it upends the stable base of many companies' Supply Chains. Supply Chain leaders should identify Suppliers or network nodes that are at risk, including 2nd tier and 3rd tier Suppliers, and assess whether dual sourcing is possible.
The supply chain landscape has evolved, and it is a critical driver of business success in an interconnected global economy. Global supply chain disruptions can cost businesses billions in lost revenue, underscoring the need for resilient and efficient Supply Chains. Customs clearance software can streamline and automate customs processes, helping companies comply with regulations and minimize border delays.
In the face of the trade war, supply chain leaders must move from reactive firefighting to building resilient, flexible, and compliant supply chains that navigate complex trade dynamics and tariff fluctuations while seeking opportunities in reshuffled global manufacturing landscapes.
- In the global trade industry, supply chain leaders are grappling with the impact of ongoing trade tensions, necessitating strategic decisions in their supply chain management, despite the uncertainties brought by the trade war.
- Amidst increasing demand and tight trucking capacity, supply chain leaders must prioritize sourcing, cost assessment, and supply-demand management to mitigate the effects of global trade imbalance and unwelcome uncertainties.
- To address these challenges, supply chain leaders should consider diversifying their supply chains, investing in trade intelligence tools, implementing tariff response frameworks, leveraging force majeure and cost-sharing clauses, and closely monitoring the evolving U.S. tariff regime.
- These proactive measures will aid in handling ongoing trade volatility, minimizing tariff impact, managing tariff-related cost increases, and adjusting sourcing and operational strategies accordingly.
- As an example, Harley-Davidson has already moved manufacturing to service foreign markets due to the significant cost increases from tariffs, demonstrating the need for such strategic actions in the face of trade tensions.
