Tariff Readiness For COOs

When it comes to actions and reactions on tariffs, many companies are confused about what to do. We see clients who are wondering if tariffs will stick or lobbying for products to be exempt. Others are making products in Mexico with packaging from elsewhere and are weighing their next moves. Others still are trying to work out their enterprise’s tariff exposure compared to their competitors, knowledge that will directly inform strategy.

As global trade policies evolve, operations leaders are under intense pressure to ensure their supply chain and procurement strategies are resilient and future proof—or as future proof as they reasonably can be.

Making the right decisions involves balancing immediate needs with future uncertainties. Understanding the difference between near-term and long-term strategies is crucial. Chief Operating Officers (COOs) need to be preparing their organizations for the challenges and opportunities presented by tariffs.

Whether you’re looking to mitigate risks, optimize costs, build long-term resilience, figure out your tariff exposure relative to your competitors’, or seize the opportunity to make major changes to your supply chain and products, a response playbook helps you stay ahead in a dynamic market.

Key tariff readiness questions

It is essential for COOs to ask a few key questions to assess their current situation and identify areas that need attention.

• Which of your product categories are most susceptible to new tariffs? Understanding the impact on your external spend is crucial. If a significant portion of your raw materials or finished goods comes from countries with looming tariff changes you need a clear picture of how this will affect your costs.

• Will you adjust your inventory strategy to buffer against potential disruptions, or can you optimize production schedules to mitigate the impact? In this moment, nimble inventory management approaches can yield substantial benefits.

• Which of your suppliers are most vulnerable to tariff changes, and how can you mitigate this risk? Diversifying your supply base is a powerful strategy to reduce dependency on any single supplier.

• Can you work with your existing suppliers to include tariff-related contingencies in your contracts? This might involve cost-sharing mechanisms or clauses that allow for price adjustments based on tariff changes.

• How do these changes support the quest to procure materials efficiently in the years to come? The astute leader will recognize the need to not only adapt in the short term but to craft a supply chain strategy that is both robust and aligned with overarching business objectives.

• How are my products advantaged/disadvantaged vs my competition? Once businesses have got a handle on their own tariff exposure, understanding the position of competitors will yield intelligence to feed into resilience strategies, as well as a better understanding of whether products will be able to compete, given the new cost structure.

Resilience levers: near-term versus long-term

In the face of unpredictable tariffs, organizations must be proactive. For near-term resilience, renegotiating contracts to reflect current tariff costs is a practical early step. This allows companies to adjust their financial obligations and better manage resources in the short run.

As we look ahead, broadening the supplier base is a strategic move to reduce vulnerability to tariffs. By working with multiple suppliers, organizations can distribute the risk and improve their capacity to adapt to shifts in trade policies. Investing in supply chain technology for real-time tariff data can empower companies to make informed, data-driven choices that safeguard their operations and procurement processes. Indeed, we see several organizations investing in both their production plants and wider networks.

Organizations significantly affected by tariff changes and risks should also consider setting up a tariff “nerve center” to support their transition from near-term to long-term thinking. Comprised of cross-functional initiative teams (to work on specific projects), the nerve center can tackle the full range of potential tariff impacts on different parts of the company. The teams should be created to support multiple time horizons to ensure that the organization can address both urgent issues and longer-term challenges. To ensure a comprehensive strategy, a planning team (to work across projects) informed by distinctive analytics, should coordinate the initiative teams and ensure timely decision making.

Footprints and raw materials

The manufacturing footprint is yet another vital aspect of long-term supply chain robustness. The revival of the ‘design for manufacturing’ concept, which first emerged in the early 2000s, is also noteworthy. For companies that can use advanced analytics as a basis for determining their manufacturing network, there is an opportunity to mitigate volatility and find new sources of competitive advantage in their manufacturing footprints and portfolios. This approach emphasizes the creation of products that are easier to manufacture and transport, thus significantly boosting flexibility and efficiency.

In an integrated supply chain, visibility is key. While many organizations focus on the management of finished goods, it is equally important to consider raw materials. Creating supplier visibility for the entire supply chain, from raw materials to finished products, can help identify potential bottlenecks and opportunities for optimization. Enrolling suppliers into a broader ecosystem may itself foster collaboration and innovation that supports the overarching goal: the supply chain remaining robust and adaptable in the face of changing market conditions.

Operations on the agenda

Tariff readiness is not an event or program but a dynamic, continuous process and priority in every executive suite, underscoring the strategic importance of procurement in a company’s growth. While there is no universal formula for tariff preparedness, these strategies can serve as a foundation for meaningful discussions and practical action.

At the center of these key conversations is the significance of operations resilience. Once merely a foundational aspect, operational excellence now stands as a potent competitive edge. COOs must align with their procurement and supply chain counterparts to deftly maneuver the changing web of global trade. This partnership is not solely about risk mitigation, but about the decisive influence of operations in the strategic decision-making process. Through a culture marked by readiness and flexibility, organizations can move on from discussions about survival to ones focused on prosperity in the face of new, and quite different, economic dynamics.