In today’s times, supply chain disruption is not an exception; it is rather the rule. Conditions can alter and take a turn in an instant, and there’s nothing that exemplifies the present state of affairs more than the recent announcement made by US President Trump pertaining to tariffs when it comes to imports from Canada, China, and Mexico.
The uncertainty that has resulted from it as well as the timing of the tariffs goes on to place the procurement as well as the supply chain function in a precarious spot. Businesses have to model a broad range of potential tariff positions, come up with new short-term as well as long-term strategies, and at the same time carefully evaluate the many downstream effects that each of the enforcement scenarios may as well have on supply chains globally. All of this is indeed a very heavy task that goes on to demand prominent resources.
A Suitable Action Plan
The fact is that organizations need to have a multi-pronged strategy so as to address the potential disruptions in the supply chain at scale – these essentially include six actions –
Assess the supplier exposure and check out options
The first step in case of facing a disruptive event is to evaluate the likely extent of the sort of impact on the suppliers throughout geographies as well as the cost that’s associated in terms of sourcing from them. Only then can there be a scenario where optional suppliers may as well get identified so as to optimize the entire ownership cost. If we take the US tariff situation as an example, there would be some organizations that may prioritize sourcing from the suppliers based in the US so as to avoid any tariffs completely. Although domestic suppliers may go on to levy higher prices, the tariff absence could as well make the cost increase. Moreover, nearshoring strategies like altering procurement to the neighboring nations that have trade agreements that are much more favorable can go on to aid in decreasing the geopolitical risk and at the same time also maintain the efficiency of the cost.
Consistently track the scenario
The fact is that when a tariff gets imposed, it can go on to trigger many retaliatory as well as protectionist responses. Much before the tariffs were announced by President Trump on EU steel and aluminum, the EU went on to condemn any sort of future US tariff hike, thereby threatening with retaliatory steps against American motorcycles, bourbon, and also agricultural products, among others.
There have to be teams that consistently conduct overall assessment of risks and also scenario planning to assess the likely effect of tariffs as well as other potential disruptions when it comes to their procurement strategies. Consistent tracking can get help from end-to-end tracking that’s digitally enabled, using Gen AI to process large datasets and also offer fast as well as contextualized evaluation when it comes to decision-making.
Be ready for an increase in cost
It is indeed very unlikely that the businesses are going to go through the present volatility revolving around tariffs sans encountering the rise in cost in some sort of capacity. Secondary impacts such as a rise in energy costs are indeed going to be quite a barrier to avoid as far as the short-term scenario is concerned. At this stage, the procurement leaders must ensure to align with the chief financial officer in their organizations to execute strategies like spending freezes as well as caps, which can as well go on to maintain the continuity in the business as well as profitability amidst the rising costs. It is worth noting that supplier consolidation can also go on to drive efficiencies by way of negotiating discounts that are based on volumes, and at the same time, sourcing diversification can also safeguard over-dependence when it comes to suppliers that are high-risk.
Turn towards tech so as to create contingency plans
It is indeed imperative to model how the tariffs may as well impact export-dependent suppliers. GenAI-powered procurement tech platforms can indeed be very robust, thereby helping to map out supplier effects rapidly and also model knock-on cost fluctuations.
Coming with technology-led pattern analysis when it comes to fluctuations in costs, currency volatility, as well as alternative routes of sourcing, companies can indeed go on to renegotiate terms so as to safeguard themselves against the steel price rises while at the same time protecting the suppliers from the sharp drops as far as the demand is concerned.
For businesses that happen to be already invested in traditional AI, the procurement data integration into GenAI platforms can precisely forecast the effect of tariffs and also suggest certain risk mitigation scenarios. For certain organizations that are yet to start their GenAI journey, it is now time to put the action in place so as to avoid falling behind in a spectrum that’s increasingly data-driven.
Make use of inventory management
So as to ensure short-term functional continuity, organizations should go ahead and also conduct a precise review when it comes to their safety stock scenarios as far as critical raw materials as well as finished goods are concerned. Through rolling out demand forecasting that’s AI-based, they can as well refine the AI strategies, thereby making sure that safety stock is completely optimized sans excessive overstocking.
A rise in the safety stocks for products having high tariffs can aid in mitigating risks that are related to short-term supply. But with a strategic approach like just-in-time inventory as far as low-cost regions are concerned, along with buffer stock for high-risk categories, one can as well balance resilience along with cost effectiveness.
Look into new supplier payment scenarios
Apart from the identification of the cost-saving options, organizations can also work along with suppliers so as to come up with payment strategies so as to help absorb financial shock when it comes to rising costs. Moreover, apart from tackling urgent challenges like higher tariffs, businesses must zoom out and also find ways to construct supply chain resilience that’s long-term and even agile.
Perspective that’s Long-term
Disruption happens to be an ongoing issue, placing the ownership on procurement as well as supply chain leaders so as to make sure that their organizations can go on to respond in a fast way or ideally in a proactive manner so as to avoid emerging risks.
In order to elevate responsiveness, companies must go on to continuously track the landscape when it comes to potential threats, evaluate the projected effect, come up with strategic responses, and also execute them with swiftness. All of this needs a seamless integration when it comes to digital tech as well as human expertise, working in tandem so as to drive informed as well as adaptive decision-making.
The point is that the key to being resilient, procurement that’s adaptive as well as supply chain strategies, is to harness tech such as GenAI in particular ways that speed up human intelligence and at the same time also empower users to go ahead and take right and reasonable actions at the right moment.
AI happens to be far more effective and efficient when it comes to scanning data, pattern detection, and also delivering valuable as well as timely intelligence related to procurement. This holds true for modelling the effects of potential disruptions along with marker changes. Through consistently evaluating geopolitical moves, trade policies, as well as supply chain trends, AI-led platforms can roll out highly contextualized insights that help the organizations to predict potential disruptions before they even take place. This sort of proactive intelligence helps the businesses to alter procurement strategies in a fast way – whether through shifting supplier relationships, negotiating the terms of contract, or optimizing the inventory levels.
Although the challenges that face procurement as well as supply chain leaders are highly complex, the fundamental reasoning is pretty clear – develop an environment in which AI as well as human expertise can complement and also elevate each other. By way of strategically blending AI so as to handle data-driven insights while at the same time helping professionals to focus when it comes to high-value decision-making, organizations can go on to build more resilient and disruption-ready procurement & supply chain models.
