Inauguration Day next week comes with a sticker shock. The president-elect has promised to implement 25% tariffs on Mexico and Canada, as well as an additional 10% tariff on goods made in China.
The manufacturing sector stands at a critical juncture – tariff increases not only raise consumer costs but are poised to dramatically disrupt global supply chains. What can you do to prepare?
What happens when tariffs increase?
- Increased Production Costs
Tariffs on imported raw materials and components can raise production expenses dramatically. A 25% tariff on Mexican and Canadian goods and a 10% tariff on Chinese imports would significantly impact manufacturers relying on these sources.
- Price Increases for Consumers
Higher production costs result in increased prices for end products, which can reduce consumer demand and affect sales. The Consumer Technology Association predicts significant price hikes for consumer electronics if tariffs are enacted.
- Supply Chain Disruptions
Manufacturers may face challenges sourcing materials, leading to delays and potential shortages. The automotive industry, for example, is considering relocating production to mitigate tariff impacts.
- Retaliatory Tariffs
Other countries may impose their own tariffs in response, further complicating international trade and potentially reducing market access for U.S. manufacturers. Canada, for example, has broadly criticized these proposed U.S. tariffs, indicating potential retaliatory measures.
While we have yet to see what these sweeping promises hold, they’ve already ignited economic uncertainty as manufacturers prepare for higher production costs, supply chain disruptions, increased prices passed to consumers, and retaliatory trade measures.
How are manufacturing companies preparing for tariff increases?
To mitigate the effects of these looming tariff hikes, manufacturers and supply chain managers are taking preventative measures such as:
- Diversifying Sourcing
By identifying alternative suppliers and regions, manufacturers can reduce their reliance on any single source. This approach helps mitigate the risks associated with tariffs and ensures a more resilient supply chain.
- Optimizing Supply Chain Efficiency
Streamlining processes, minimizing waste, and improving logistics can help manufacturers offset the dramatically increased costs associated with tariffs. Implementing lean manufacturing principles and investing in supply chain optimization tools can help significantly improve efficiency and cost savings.
- Investing in Technology
Advanced data analytics, AI, and machine learning can help manufacturers gain insights into their supply chains, predict potential disruptions, and optimize operations. Manufacturers can enhance their decision-making capabilities and maintain a competitive edge by investing in better, faster access to their data across disparate source systems.
Control your controllable costs with the power of Incorta
With a highlighted need for adaptability and foresight in manufacturing strategies, Incorta helps manufacturers hone in on where to cut costs while bracing for potential tariff increases:
- Streamlined Data Access and Decision-Making:
With Incorta, manufacturers have easy, fast access to live, detailed operational data from any source – without relying on complex ETL processes. By having quick access to accurate data, manufacturers can make more informed decisions about sourcing, production, and pricing – letting them quickly adapt to supply chain disruptions.
- Optimized Supply Chain:
Incorta makes it easy to find cost-saving opportunities: giving you an overhead view of your data, from any source, in a unified view. With visibility into details such as procurement costs, inventory levels, and supplier performance, manufacturers can better manage suppliers and renegotiate contracts to offset the impact of higher tariff costs.
- Forecasting and Scenario Planning:
See around corners with better forecasting and scenario planning. Incorta’s advanced analytics let you simulate the potential impact of tariff hikes on cost structures and profitability – so you can plan alternative sourcing strategies, adjust production schedules, and optimize pricing strategies.
- Increased Operational Efficiency:
Access to live, detailed data means manufacturers can uncover inefficiencies in their operations, from production processes to distribution networks. By automating insights and streamlining operations, manufacturers can reduce waste and cut costs in areas like labor, energy, and logistics, helping to offset rising costs due to tariffs.
- Financial Planning and Cost Control:
Incorta supports financial planning and analysis (FP&A) by providing finance teams with up-to-date, granular data on costs and margins. With this visibility, manufacturers can more accurately forecast the financial impact of tariff hikes, make adjustments to their budgets, and ensure they are controlling costs effectively.
- Faster Reporting and Monitoring:
In times of economic uncertainty, quick and reliable reporting is crucial. Incorta allows manufacturers to monitor key metrics and business performance in real-time, so they can respond rapidly to changing market conditions, including tariff changes, and take proactive measures.
By leveraging Incorta’s live data capabilities, manufacturers can stay agile, reduce costs, and make data-driven decisions that help them mitigate the financial impact of potential tariff hikes.
Manufacturing leaders staying one step ahead
How have other manufacturing leaders navigated the unexpected by getting full access to their data from any source with Incorta?
PAR Systems
PAR Systems, a leader in intelligent manufacturing automation, faced challenges accessing and analyzing critical data stored in legacy ERP systems. By adopting Incorta’s data analytics platform, PAR Systems improved data access, enhanced supply chain management, and fostered a data-driven culture within the organization.
Nortek
Nortek struggled with disconnected data systems that affected their supply chain agility.
By integrating Incorta, Nortek achieved faster integration of acquisitions, reduced total cost of ownership, and improved their pricing strategy. These improvements allowed Nortek to respond more effectively to market demands and maintain a competitive advantage.
Navigating the future of manufacturing
The future of trade policies remains uncertain, but manufacturers can take proactive steps to stay agile and competitive. By investing in technology, diversifying sourcing, and optimizing supply chain efficiency, manufacturers can better prepare for the uncertainty on the horizon.
Learn more about what manufacturing leaders are doing today to future-proof their operations: join our virtual discussion on January 30th.