Tariffs Can Drag Down Your Supply Chain, Unless You’re Prepared
With the United States implementing at least some new tariffs on goods from a number of important export countries, attention across the logistics world is turning, once again, to developing resilient supply chains.
The good news is that this is not a new problem. If anything, a myriad of disruptions over the course of the past five years has made the industry as a whole more nimble in responding to an ever-widening variety of disruptions.
Tariffs ultimately impose additional costs on goods imported to the United States and can be a big-time disruptor for supply chains. If your retail/ecommerce business relies on foreign-made raw materials and finished products, it could mean having little choice but to pass along the higher costs to your customers.
Most of us are already acutely aware of this reality, and have built in workarounds that can help bring these costs down, avoiding passing along too much of the burden to the end customer. If a company hasn’t already done so, these latest tariffs will force them to rethink supplier relationships, perhaps shifting manufacturing to non-tariffed counties, or even reshoring production back to the United States.
Tariffs can further congest already congested ports, causing additional transportation delays as companies scramble to adjust shipping strategies.
Proactive Logistics Wins Every Time
The bottom line to overcoming any potential disruption in the supply chain is to have proactive and strategic solutions in place, providing the business with the ease that it will need to navigate when the disruption hits. With this in mind, it’s imperative for success that logistics pros adopt a well-balanced combination of strategic sourcing, optimized transportation, enhanced technological solutions, and expert partnerships.
Diversify Suppliers and Manufacturing
While it can be exceedingly difficult and even impossible to adjust suppliers and manufacturing to non-tariffed countries on the fly, it’s one of the most important aspects of a resilient supply chain strategy. For those companies that have not taken the time to plan proactive strategies, now is the time.
Explore alternative manufacturing hubs that can reduce dependency on a single country. Importantly, tariffs will and should push more companies to explore nearshoring and reshoring production operations closer to consumer markets in the United States, without reliance on countries subjected to new tariffs.
Optimize Transportation and Shipping Routes
The cost of freight often increases when tariffs cause supply shifts, making the case for a robust transportation strategy to also be a top area for potential cost savings. Those that are most successful at navigating tariff-induced supply chain disruptions are those that have a strategy that includes alternate freight options and shipping routes.
Having options like this can help identify more cost efficient modes of getting raw materials and manufactured goods from point A to point B, providing a logical way to keep the cost for the customer balanced.
Technology, Technology, Technology!
Disruptions in recent years have accelerated the adoption of technology that’s designed to streamline everything from diversifying suppliers and manufacturing to transportation optimization to inventory management.
Software like warehouse management systems (WMS) and transportation management systems (TMS) have proven to be a game-changer. For example, a TMS enhances real-time tracking, enabling easy rerouting of shipments to less costly options. The WMS can help to track and assure balanced inventory, minimize storage costs while ensuring a steady supply.
AI-driven forecasting can give companies the ability to adjust procurement and distribution strategies based on shifting tariff policies and market demand.
3PL Partnerships: Essential to Success
Partnering with a third-party logistics (3PL) provider is a no-brainer in this age of constant disruption and scaling retail and ecommerce business. 3PLs can help remove much of the proactive and strategic burden discussed here, so an ecommerce company for example can focus on the business and customer relationship, while their 3PL partner leads the effort to navigate disruptions and keep costs in check.
Such a partnership can also give access to the 3PL’s long-term contracts with suppliers and carriers, which typically have locked in good rates in advance.
As new tariffs are put into place, it’s likely to have an impact on supply chains, creating even more costs on top of those brought by the tariff itself. The moral of this story is the importance of being proactive and strategic, having a plan in place that allows companies to more easily navigate disruptions like tariffs when they come up.
Leveraging technology and partnerships to help make this happen is becoming the standard for countless ecommerce businesses, as maintaining customer loyalty and keeping costs from trickling down to their wallets must always be the objective.
Brendan Heegan is the founder and CEO of Boxzooka; he has more than 20 years of experience in transportation and 3PL distribution. He began at Airborne Express, directed international trade at DHL Express, and founded Boxzooka in 2014 to address complex logistics challenges for online and retail sellers with technology solutions.