In the constantly changing landscape of supply chain challenges, tariffs consistently pose a significant concern for leadership. As the year unfolds, the effects of newly implemented tariffs are already becoming apparent. On the positive side, companies such as a small manufacturer of advanced plastic components used across various sectors, such as medical, industrial, automotive and consumer products has experienced increased interest from clients eager to purchase American-made goods. Conversely, disruptions are also evident; for instance, another company, which manufactures large machines for constructing concrete curbs, highway barriers and sidewalks, faces logistical challenges. They are urgently seeking solutions to expedite the shipment of two such machines to Canada in the coming weeks.
Here we discuss how industrial manufacturers can prepare for tariffs and the disruptions they may cause.
Where do industrial companies focus to prepare for tariffs?
Tariffs are designed to protect domestic industries, but they also pose challenges for industrial manufacturers, including higher costs, supply chain disruptions and market volatility.
Managing those changes requires three key steps:
- Understanding the changes
- Forming new business strategies to mitigate any impact
- Embracing core technologies to enable those strategies to work
Adapting to increased costs:
Many manufacturers depend on imported raw materials, such as steel, aluminum and specialty components. Tariffs on these imports raise material costs, squeezing profit margins unless businesses pass these costs on to consumers. To mitigate this impact, manufacturers may need to source materials domestically and develop new suppliers — often leading to higher costs with added logistical complexities.
Managing supply chain disruptions:
Tariffs can create supply chain bottlenecks, delaying the arrival of critical components. To counteract this, companies may need to rethink their supply chain strategies, considering reshoring production or diversifying suppliers to reduce dependency on any single source.
Navigating market competitiveness:
While tariffs may provide temporary advantages for U.S.-based manufacturers by making foreign alternatives more expensive, they can also reduce the competitiveness of American goods in global markets. Retaliatory tariffs from other nations could increase export costs, limiting international demand for U.S. products.
Rebuilding the domestic market:
To counter the effects of retaliatory tariffs, domestic markets will need to evolve. Changes in demand, procurement strategies and distribution networks as well as possible changes in domestic production will be necessary to adapt to shifting economic conditions.
Managing market volatility:
Tariff announcements often lead to fluctuations in currency values and stock prices, particularly in industries reliant on steel and aluminum. These market swings create uncertainty, requiring manufacturers to stay agile and responsive to changing economic conditions.
How industrial companies prepare for tariffs induced supply chain disruptions
Rethinking planning: what-if scenario analysis
To navigate evolving market conditions, businesses must leverage scenario analysis to assess cost, margin impact and alternative suppliers. Key areas of focus include:
- Network optimization scenarios — utilizing Blue Yonder Supply Chain Strategist for scenario planning and enhanced decision-making
- Managing variability in the new network — implementing Blue Yonder Integrated Demand and Supply Planning for adaptability and cross functional planning
- Multi-tier management —Leveraging visibility and collaboration via the Blue Yonder Network to enable supply chain resilience
- Evolving distribution planning — enhancing distribution efficiencies through Blue Yonder TMS, WMS and Blue Yonder Network
Domestic market development
Building a robust supplier ecosystem will be crucial, with a strong emphasis on rapid supplier and carrier onboarding. Key actions include:
- Supplier base management — ensuring smooth operations with multi-tier visibility and collaboration across the entire network with the Blue Yonder Network
- Optimizing shipment costs — utilizing load building, load planning and order consolidation optimization for cost efficiency
Government advocacy and strategic engagement
To maintain competitiveness, proactive engagement with policymakers will be essential in mitigating challenges. Notable examples include:
- U.S. Steel’s proposed acquisition by Nippon Steel, highlighting the importance of government policies in shaping industry dynamics
- The National Association of Manufacturers (NAM) advocating for tax credits or subsidies for industries impacted by tariffs
Modern manufacturers face an ever-evolving landscape where efficiency and agility are crucial for maintaining a competitive edge. Stay ahead of the curve by exploring how Blue Yonder can optimize your supply chain in the face of tariffs and other challenges. Contact us today to learn more.
