Summary: Tariffs have been an ongoing part of American history.
The date: December 16, 1773
The event: 342 chests of imported tea where dumped into a harbor by colonists declaring “Taxation without representation”
The outcome: the catalyst for the start of the War of Independence and the eventual formation of the United States
Protectionism versus open free trade have long been a part of political landscapes. I am not advocating the pros or cons of the utilization of tariffs. However, when imposed, tariffs become a key consideration in global sourcing decisions. Effective ways to proactively handle tariff-related risks are now top of mind for supply chain executives.
Points of Focus: How did companies deal with the recent tariff increases? A recent Reuters article highlights the results of a global survey done by DHL. Two hundred and sixty seven (267) companies were asked what actions they were taking to offset the financial impact of tariffs. Over one-third responded “Nothing”.
However, many companies did respond by expediting their shipments of products into the U.S. or raising prices or lowering discounts. These decisions to help offset the financial impact of tariff increases are based on a “one size fits all” approach.
But a few companies took a very proactive and sustainable approach in developing tariff related strategies; strategies that drove actions that positioned the company to actually thrive in this trade war environment.
One such company is The Home Depot. As highlighted in this article, The Home Depot evaluated every SKU that had a tariff related impact. They then determined the best way to mitigate the impact of the negative financial impact of the tariff increases including aggressively working with their suppliers.
Takeaway: Doing nothing or using a “one size fits all” tariff-related strategy does not provide sustainable performance in maintaining or growing margin contributions. In fact, these types of strategies can lead to significant reductions in profits and ultimately the long-term viability of a company.
Creating strategies that mitigate the impact of potential tariffs or that minimize the impact of imposed tariffs should be part of every supply chain resiliency plan. The companies that take this proactive position will out perform their competitors and will thrive versus just survive.
Which path will your company take?
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All the best,