In our last few posts we told you the Trade Wars are coming. The Trump Tariffs are going to continue to come fast and furious, and the rest of the world is not going to take its time retaliating. So get prepared, because everything is going up. And how much it goes up is up to you.
You’re not going to thrive, because no one wins a war, and, furthermore, no one comes out unscathed. With care and planning you can survive, but only if you start now. So what do you need to do?
As we pointed out yesterday, you start by:
1. Understanding your Current Costs in Detail
2. Understand your Tier 2 Supply Chain in Detail
… but you don’t stop there.
3. Start By Identifying Alternative Supply Choices
For each high dollar or strategic category, identify at least two other acceptable choices of supply in two different countries than the country you are sourcing your primary supply from now. This means that you have to go out there, evaluate products, and maybe even award a minority share of the business to alternative suppliers just to make sure you can ramp up or switch supply if you need to.
4. Then Build Alternative Cost Models Around those Alternative Supply Choices
And make them as detailed as the cost models for your current supply choices. Compile all of the appropriate component and raw material costs for those suppliers, the local energy and labour costs, the current import and export tariffs, and fair margins for the supplier in question. And keep them handy.
5. Re-Evaluate on Every Tariff Change
With the models in-hand, whenever tariffs change, you can just plug in the new models. If you subscribe to data feeds, the models can be programmed to be self-updating and you can simply run a report on every tariff change to see how much the changes are costing you and when they get too high, you can switch to an alternate supply choice, that you already identified, where you buy local and sell local and avoid tariffs entirely.
Is this everything? No, but it’s a start.