{"id":44189,"date":"2024-12-10T15:20:50","date_gmt":"2024-12-10T14:20:50","guid":{"rendered":"https:\/\/synertrade.com\/?p=44189"},"modified":"2024-12-10T15:20:50","modified_gmt":"2024-12-10T14:20:50","slug":"could-future-us-tariffs-impact-procurement-strategies-we-asked-the-experts","status":"publish","type":"post","link":"https:\/\/synertrade.com\/en\/highlights\/2024\/12\/could-future-us-tariffs-impact-procurement-strategies-we-asked-the-experts\/","title":{"rendered":"Could future US tariffs impact procurement strategies? We asked the experts"},"content":{"rendered":"<p>As businesses navigate the ongoing complexities of global trade, procurement teams must brace for the challenges posed by proposed tariffs on goods from Mexico, China, and Canada under the incoming US President\u2019s tariff policies. These tariffs have far-reaching implications for cost structures, supply chain operations, and sourcing strategies, meaning procurement leaders should adopt a proactive approach to minimise disruption and safeguard profitability.<\/p>\n<p>In <a href=\"https:\/\/www.linkedin.com\/feed\/update\/urn:li:activity:7267173007515598850\/\">a recent LinkedIn poll<\/a>, we asked those in the industry what some of the potential effects and key strategies are for leadership to help manage these tariffs effectively:<\/p>\n<p><strong>The impact of tariffs on procurement<\/strong><\/p>\n<p><strong>\u00a0<\/strong>Speaking on the question: <em>What are your suggestions to leadership on how to manage the propped tariffs on goods from Mexico, China and Canada?<\/em> Alan J. Rice, Managing Director at Cach\u00e9 Procurement said \u201cHere is what I would &#8220;hypothetically&#8221; suggest to leadership so that we could stay ahead of this issue. First, immediately start talking with our suppliers in these countries to negotiate better pricing or terms in an effort to soften the blow of potentially higher costs. \u201cWe would also need to explore backup options, like sourcing from other regions or boosting relationships with domestic suppliers. Additionally, we would need to clearly analyse how these tariffs might impact our pricing, margins, and customer demand, which would help us get ahead of these tariffs. And do not forget that we would need to keep our teams, customers, and partners in the loop. Transparent communication about what we\u2019re doing to adapt will show that we\u2019re proactive and committed to weathering this change together. This clearly would be a serious challenge, but it would also be a chance to strengthen our operations and resilience.\u201d<\/p>\n<p><strong>\u00a0<\/strong>While Trump&#8217;s tariff plan imposes significant duties on imports from Mexico, China, and Canada, it aims to reduce trade deficits and encourage domestic manufacturing. For procurement professionals, the tariffs can:<\/p>\n<ul>\n<li>Increase in costs: Tariffs on materials and finished goods will directly raise prices, disrupting margins unless cost mitigation strategies are in place<\/li>\n<li>Interfere with supply chains: Suppliers heavily reliant on tariffed countries may face delays or inflated costs, therefore impacting production timelines<\/li>\n<li>Challenge vendor relationships: Long-term partnerships with suppliers in affected countries may require renegotiation or diversifying<\/li>\n<li>Create market volatility: Uncertainty around trade policies could lead to fluctuating prices and unpredictable lead times.<\/li>\n<\/ul>\n<p>On these points, Philip Ideson &#8211; Founder, the Art of Procurement comments \u201cI know from contacts in the warehousing space that companies are pre-buying and filling up warehouse space, and that was in anticipation of tariffs. That said, this should be no surprise as it has been telegraphed for months. Procurement teams should be scenario planning, and already have strategies in place to move supply chains out of China.\u201d<\/p>\n<p><strong>Strategies to mitigate the impact<\/strong><\/p>\n<p>Leadership teams in procurement must explore a combination of short-term and long-term strategies to address these challenges effectively. We asked those in the industry to vote on what was most important to them, this is what they said:<\/p>\n<ul>\n<li>Evaluate alternative locations <strong>(37%) <\/strong>&#8211; Sourcing from non-tariffed countries can reduce risk, regions unaffected by tariffs include Southeast Asia or Eastern Europe.<\/li>\n<li>Pre-buy inventory ahead of tariff implementation (<strong>9%)<\/strong> &#8211; Stockpiling goods before tariff enforcement can be a cost-saving measure. However, it will be necessary to balance the benefits of cost savings against storage costs and inventory risk.<\/li>\n<li>Reshore operations and rehire locally (<strong>7%<\/strong>) &#8211; For products with significant tariff exposure, reshoring manufacturing operations may be a viable option. In fact, moving production to domestic locations can avoid tariffs entirely.<\/li>\n<li>Wait and see (<strong>47%<\/strong>) &#8211; In uncertain trade environments, not all decisions need to be immediate. Policy changes can be reviewed closely to avoid overreacting to short-term announcements, which can work best for companies with flexible supply chains and minimal reliance on tariffed goods.<\/li>\n<\/ul>\n<p><strong>Ask the experts<\/strong><\/p>\n<p>Speaking on the results, Daniela Osio, CEO of Kloopify, comments \u201cIt\u2019s a good risk management practice to evaluate alternative locations and options. Knowing your options ensures you are better prepared. Let\u2019s say nothing happens, you now have better visibility into your supply chain and alternative options for WHEN another disruption happens.\u201d Taking this further, Mark Masterson, Vice President of Sales &amp; Business Development at Matchory said \u201cI would argue that a modern and forward-thinking procurement organisation should be constantly evaluating their supply chains and preparing contingencies for a range of eventualities. \u201cIn the past, it may have been too expensive and resource-intensive to continuously scan potential supply markets to &#8216;pre&#8217;-pre-qualify alternative suppliers, but these days this type of resilience measure can be built into the ongoing activities of category and commodity managers. \u201cWhether it is new tariff regimes, new pandemics, new wars or other emerging disruptions, companies can make much quicker and better-informed decisions than ever before. No excuses not to evaluate alternative locations.\u201d<\/p>\n<p>Elisabeth Schlag-Lawrence, Managing Partner at CatalystProcurement is clear on how she views the situation: &#8220;Wait and see&#8221; isn\u2019t a strategy\u2014it\u2019s a risk. Move now, or else at least be prepared.\u201d<\/p>\n<p>Michael Lamoureux, Editor in Chief at Sourcing Innovation adds \u201cIt&#8217;s c) Re-Shore and Re-Hire &amp; d) Wait and See. Some of the proposed tariffs are just posturing to force allies to give into other demands (more defence spending, less tariffs for US products). Others are promises to take revenge on countries that didn&#8217;t play nice the last time around unless they do exactly what is asked this time around. Thus, you don&#8217;t know exactly what will happen. \u201cAll you know is that, since not everyone will meet the demands, some tariffs are coming. That means you can&#8217;t select alternative locations ahead of time. Moreover, you can only hold so much inventory, and can only get so much here now, so pre-buying doesn&#8217;t have any real impact. The only sure fire way to succeed regardless of what happens is to start re-shoring what you can relatively cost-effectively, as that will protect you no matter what. It will take time, but it will pay off in the long run.\u201d<\/p>\n<p>Concluding, Amy Fong, Advisor to Procurement and Supply Chain Leaders at Everest Group shares \u201cAs my current work is focused on services, not goods this administration doesn&#8217;t seem to be aware of the magnitude of nearshore\/offshore work being done in the service industry. If I were still in a supply chain role I think the advice to be modelling options is good, but some industries have been completely offshore for so long that onshoring options are sparse, so it becomes a game of cost-cutting to minimize impact. I&#8217;m in the &#8220;wait and see&#8221; camp though, the only certainty right now is that we are in for a lot of uncertainty for the next few years.\u201d<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As businesses navigate the ongoing complexities of global trade, procurement teams must brace for the challenges posed by proposed tariffs on goods from Mexico, China, and Canada under the incoming US President\u2019s tariff policies. These tariffs have far-reaching implications for cost structures, supply chain operations, and sourcing strategies, meaning procurement leaders should adopt a proactive [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":44190,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-44189","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-highlights"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Could future US tariffs impact procurement strategies? 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