Worried About the Threat of a Trade War? Anticipate Supply Chain Disruptions and Mitigate Risks with these Helpful Tips

When President Trump announced punitive tariffs on $50 billion worth of Chinese goods and imposed steep tariffs on steel (25%) and aluminum (10%) imports from Canada, Mexico, and the European Union, it caused quite a concern among the supply chain industry that retaliatory tariffs could spark a full blown trade war.

According to Barron’s real-time analysis on June 15, stocks are taking a beating over rising concerns of an impending trade war, but the economy is holding up just fine.  In another report released on May 1 by America’s Institute of Supply Management, analysts confirm that price increases and shortages are already squeezing some local firms.  Analysts at The Economist report that the industries that could be affected the most are ones like aerospace and agriculture that both sell a lot in China and that do not have many alternative markets.

So what can businesses do to maintain profit margins, gain competitive edge, and prevent supply chain disruptions in this time of economic uncertainty?

Gain Visibility into Your Supply Chain

Lack of visibility into the supply chain is one of the biggest issues that American businesses face.  According to a survey conducted by Gatepoint Research, only 19% of Fortune 1000 companies claim to have complete end-to-end visibility into their supply chain.  Without visibility into every detail of your supply chain, it is difficult, if not impossible, to accurately weigh cost options and implement the best solutions for improving efficiency.

Take Control

By taking control of your global supply chain, you will not only mitigate the impact of changing tariffs but it will also enable you to gain competitive edge and better serve your customers.  The following is a list of suggestions to control your supply chain.

  • Instead of relying on a small group of international partners and suppliers, widen your partnership and supplier bases to include those with multi-national footprints to ensure there are no interruptions in your supply chain
  • Measure and monitor supplier performance to ensure efficient deliveries
  • Continuously monitor your shipments so that you know where they are at any given point in transit to enable you to plan for possible delays and reroutes
  • Set and follow proper and pertinent operating procedures
  • Collaborate with logistics companies, who have extensive partnerships in the regions in which you operate, to get the best negotiated rates and to guarantee capacity for shipping your products
  • Re-evaluate tariff classifications on your products to determine if they might be properly classifiable in another subheading of the HTS code
  • Work with a Customs House Broker to clear your imported or exported merchandise in order to avoid costly supply chain disruptions due to demurrage, detention, and port storage fees. Customs brokers will ensure that your goods meet all the mandated requirements, laws, and regulations and will confirm that all required documentation, fees, and taxes have been properly filled.
  • Ensure inventory levels are appropriate to meet demand and that there is no excess

Remain Flexible

In order to keep costs under control, it is crucial to remain flexible.  If it is too costly to import from one supplier abroad or if you need to source quickly, it is important that you have other fully-costed options readily available.  Also, do not be reliant on specific routes for your shipments; with a little preplanning, you can save money if you keep your options open to other modes of transport, such as ocean vs. air, or by choosing different routings.

Develop and Implement a Business Continuity Plan

Companies today face an unprecedented number of risks which could cause a disruption to their operations, such as severe weather, acquisitions and closures, and shipping delays.  Avoiding and mitigating these risks by developing a business continuity strategy is key to the survival of any organization as well as one of the most critical components of any recovery strategy.

Conduct a “What If” Analysis

What-if analyses allow organizations to evaluate supply chain risks and constraints and to develop alternative strategies and policies to maximize their revenue and profit performance while delivering on service level commitments.