Mitigating Supply Chain Impacts from Tariffs: It's More Than a Sourcing Game

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Imagine waking up tomorrow to every item you purchase increasing in cost by 25%.  That cup of coffee is instantly $5 instead of $4. Rent now shoots up from $2000 to $2500. Yet when you look at your paycheck, you see the same number you saw the week before. Instant disruption is now causing you to scramble to make ends meet. 

This is what many supply chains are experiencing in the midst of elevated tariffs. At LeanCor, we've been receiving inquiries from supply chain leaders looking for ways to extract these costs from other areas of the supply chain to make up for them.

We've seen companies adopt three common strategies to mitigate supply chain impacts from tariffs with varying levels of success:

  1. Re-shoring back to the U.S. or shifting production to adjacent countries like Vietnam. This can include creating complex production strategies where product is partially manufactured in China, sent offshore for work, and imported from an alternative country of origin.  Granted, this strategy has it’s own levels of complexity and legal implications that make it too difficult for most countries.
  2. Collaborating with suppliers to divide and share responsibility of the tariff impact. 
  3. Petitioning the government for exemptions, arguing that the impact of the tariffs will be negative on the US economy.

But one strategy that excites LeanCor is an emerging interest among shippers to look deeper at supply chain performance - particularly in the transportation function.

As a 3PL, LeanCor’s often finds that a 5% to 15% improvement in transportation cost reduction can be achieved through a focused effort on managed transportation services, especially in today’s freight market.

Additionally, we've seen up to 50% cost reduction in networks that focus on a detailed packaging and logistics strategy. Consider a packaging strategy that fully utilizes container capacity while reducing product damage and connects through distribution channels to actual consumption.  In a typical logistics scenario, a pallet could travel 200% more miles in equipment that is only 60% utilized. Turning this into an optimized scenario requires a focused effort and unique tool set to analyze a supply chain through a part-level lens. Packaging design, freight negotiations, and planned routing all work together as a system that should enable flow and reduce total cost of fulfillment.

While sourcing strategies continue to evolve in fluctuating trade policy, strategic daily transportation execution is really what can help supply chains stay agile and withstand the test of these impacts.

Posted by Derek Browning

blog author

As a Director of Consulting services, Derek directs a portfolio of end-to-end supply chain projects for companies in a wide array of sizes and industries. He's trained thousands of professionals in lean, six-sigma, leadership, and supply chain through LeanCor and leading education partners. Derek complements his experience with an MBA, a bachelor’s degree in marketing, and several professional certificates.

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