In the face of unprecedented tariff changes, companies must adopt dynamic strategies rather than merely absorbing costs or passing them on to customers. Gartner emphasizes that tariff volatility is a lasting phenomenon, necessitating thoughtful actions. Chief Supply Chain Officers (CSCOs) should prepare for adjustments by considering potential measures from their trading partners, as well as possible escalations and de-escalations.
Gartner proposes five strategic pathways to help companies manage this volatility and even gain a competitive advantage. These strategies often require substantial investments and meticulous planning.
- Evaluate Product Viability
Tariff volatility can push certain products or operations to their limits, forcing CSCOs to evaluate their viability. Decisions must be made to either retire noncompetitive products or renovate them through strategic adjustments. Renovation could involve cost-cutting measures, product redesigns, or leveraging investments and support from government and ecosystem partners to enhance product viability.
- Adapt Products and Adjust Costs
New tariffs could prompt renovations (adjustments) to products that were overdue, as businesses will need to take a hard look at the viability of raising or absorbing costs in a still price-sensitive environment. CSCOs should analyze the possibility of increasing prices or absorbing costs, while considering the market’s price sensitivity. The criticality of the product in the company’s portfolio should be a determining factor in these decisions. This strategy can be an opportunity to upgrade existing offerings.
- Anticipate Fluctuations and Their Effects
Additional volatility should be factored into future demand planning, as early winners and losers from initial tariff policies must both be prepared for potential countermeasures, policy escalations and de-escalations, and competitor responses. Companies that have benefited or suffered from initial tariff measures should anticipate countermeasures, potential escalations and de-escalations, as well as competitors’ reactions. They should not consider the initial results as a new norm and need to integrate increased volatility into future demand planning. Therefore, companies must remain flexible and not be caught off guard by new market changes.
- Explore New Markets and Opportunities
As tariff volatility persists, some companies should consider investing in new projects in markets that are not impacted or that align with new geopolitical incentives. The adaptation of existing facilities to serve local markets can also be considered. Companies should carefully assess the right timing for these changes, taking into account the possibility of political escalations or de-escalations. This strategy allows for risk diversification and exploration of new growth avenues.
- Consolidate and Extend Competitive Advantages
Early winners of announced tariffs should seek opportunities to extend competitive advantages. For example, they could look to expand existing US-based or domestic manufacturing capacity or reposition themselves within the market by lowering their prices to take market share and drive business growth. The involvement of external partners or investors can also strengthen these advantages. Companies should seize opportunities to grow and differentiate themselves from the competition.
Why Are These Strategies Important for Supply Chain Professionals?
These strategies are essential for supply chain professionals as they allow them to transform tariff volatility into a competitive advantage. Instead of passively enduring changes, CSCOs can actively:
- Minimize risks by diversifying markets and adapting products.
- Seize opportunities by investing in new projects or enhancing existing capabilities.
- Strengthen their market position by adjusting prices and gaining market share.
- Develop new skills and increased agility.
Therefore, tariff volatility is not a fatality but an opportunity to reinvent and strengthen the supply chain.
source : ITRNews / translate by Logis-T Africa
