Navigating Tariff Turmoil with Data-Driven Supplier Relationship Management
In today’s hyper-connected global economy, where supply chains span continents and industries are interlinked globally, it is understood that supplier collaboration is key to growth and resilience.
Tariffs and counter tariffs, however, are rocking the status quo of supply chain relationships and putting supplier collaboration networks to the ultimate test. On February 3, the Trump administration imposed 25-percent tariffs on goods from Mexico and Canada, two of the U.S.’s largest trading partners; these were pushed back at least 30 days. An additional 10-percent tariff was imposed on Chinese goods, triggering retaliatory tariffs on U.S. coal and liquefied natural gas, among other products. China also has put certain metals on an export control list.
A trade war, where countries weaponize tariffs to score points against each other, would pose a huge risk to the global interconnected supply chain. Businesses will need to wisely leverage data-driven insights and collaboration to rapidly respond to sudden changes and remain competitive in this changing environment.
The Right Data
Supplier collaboration refers to the strategic alignment and joint efforts between a company and its suppliers to achieve common goals that go beyond transactional objectives, like price and delivery terms. If effectively implemented and managed, supplier collaboration can enhance supply chain performance, reduce costs and contribute to broader business objectives. This collaborative approach can take various forms, from co-developing new products to jointly managing risks and ensuring sustainability in the supply chain.
Successful collaboration rests on a view of the supply chain as a dynamic network involving partnerships within an extended ecosystem, rather than just a cost center. The broader ecosystem not only includes suppliers and vendors but also logistics providers, consultants, market researchers and even regulators. The insights derived from the data these players share is key to risk-proofing the supply chain in turbulent times.
Data-driven insights and intelligence are key to helping businesses along the supply chain unlock the benefits of collaboration such as:
Enhanced visibility. When companies and their suppliers share data and insights, they gain a clearer understanding of the entire supply chain, from raw materials to finished products. This enhanced visibility allows for better planning and decision-making, reducing the likelihood of bottlenecks, stockouts and excessive inventory, as well as reducing overage and storage costs. Better visibility helps businesses identify suppliers that are about to become targets of additional levies and rapidly find alternative sources.
Efficient response to demand. In industries where speed to market is crucial, companies can help reduce lead times and eliminate redundancies, streamlining production processes by working closely with suppliers.
As businesses reinvent their supply chain under the impact of tariffs, they will struggle to find an adequate response to demand from national production facilities that will be working to the hilt. Sharing data insights along the supply chain will become critical to ensuring that demand is met and bottlenecks avoided. Moreover, by involving suppliers in the initial stages of product development, companies can identify potential issues before they snowball.
Cutting waste. There is no bigger drain on productivity and efficiency than waste. And as businesses struggle to maintain margins despite tariff-induced price hikes and seek out alternative suppliers, they will need to manage stock ever more carefully. Data-driven insights from the market and beyond will also help inform potential.
Risk mitigation and resiliency. By analyzing market and supplier data more efficiently, companies can respond to policy changes and mitigate the potential impact of new tariffs more rapidly and efficiently.
Last year was wracked by geopolitical instability and conflict. However, extreme adverse climate events and infrastructural disasters revealed that they also pose a threat to smooth operations, as evidenced by the Francis Scott Key Bridge collapse in Baltimore. Integrating data from the Internet of Things (IoT) and the broader market, including Tier-2 and Tier-3 suppliers, will help businesses manage risk in a timely fashion and rapidly pivot when needed.
Real-time data insights can help identify alternative suppliers, logistics providers and ingredient sources, so that food manufacturers, for example, can develop contingency plans and diversify their supply chains, thus reducing the likelihood of costly production delays.
Cutting costs. Through greater data sharing and transparency, businesses and their suppliers can unlock opportunities for cost reduction that range from reduced labor expenses to more efficient use of materials or lower transportation costs.
Specifically, the interpretation of cost has evolved from a simple per transactional price to encompass other elements, for example, those relating to carbon footprint. With tariffs threatening to push up production costs and squeeze margins, efficiencies are more important than ever.
Sustainability. As businesses become more accountable with their stakeholders and customers for the ethical and environmental sourcing decisions they make, data insights will be key to (1) help track impact up and down the supply chain and (2) ensure that reputation and compliance are preserved throughout.
Unlocking Supplier Collaboration
As the number of players and relationships in the connected supply chain balloons, however, so does the volume of data available to strategic decision-making. While this yields greater transparency, it also requires new tools and skills to aid its timely interpretation.
Modern supply chain management technologies that integrate artificial intelligence (AI) and predictive analytics tools can help optimize supplier relationships, unlocking insights and risk-proofing businesses with solid intelligence. Data-driven insights offer enhanced visibility into the supply chain, improve efficiency, build resilience, reduce costs, mitigate risks, increase customer satisfaction and contribute to environmental, social and governance (ESG) goals.
By harnessing the internal transactional data derived from procurement systems and market intelligence from third-party suppliers, companies can unlock the full potential of supplier collaboration to drive innovation and secure competitive advantage, even as they see their margins threatened by tariffs that may make raw materials and components more expensive to source.
As national production builds the infrastructure to respond to unprecedented demand, businesses that leverage data-driven insights to identify alternative suppliers, routes and goods internationally will be able to avoid expensive production delays.
(Image credit: Getty Images/KanawatTH)