Tariffs are here. And more are coming. That is the world we are living in right now. If you are like us and are facing new tariffs, here's some advice:
Explore making it domestically - sounds easy.?That said, with higher input costs, lack of availability, and start-up costs, it is becoming harder and harder to replace current international supply chains at a remotely cost-effective domestic way, where the tariffed cost is still lower.
Explore cost mitigation at origin - but do it logically.?Check your input costs - are there any variables (i.e., raw materials, currency, etc.) that offer some savings that can be implemented immediately??Sure, you should be looking at these variables all the time, but this is a gentle reminder to pay particular attention to them now.?However, using pure muscle to gain short-term concessions is not a sustainable strategy.
Remember that the final cost is not being tariffed - do the math.?If the tariff is against finished goods, that doesn't include other costs that make up the final customer cost.?Exploring cost reductions for line items that are not tariffed (like ocean freight and domestic warehousing) can help offset customer increases from new tariffs.
Time any increases to when you sell the product - otherwise, it's simply a margin grab.?When you're determining the timing of an increase, consider current on-hand inventories and sales forecasts.?Time the increase to when you actually sell the tariffed products to your customers.
Look elsewhere - there are new, emerging manufacturing "hot spots" all over the globe.?Take the time to look around.?You'll never know what you find in other countries.?Perhaps use this moment to renovate your products, improve designs, etc.
Be prepared to rescind any increases if tariffs are rescinded or provide decreases if tariffs are lowered- in other words, don't bank that revenue increase just yet.?Fairness to your customers and to the consumers dictate not using this opportunity as a margin grab.
There are ways to do this in such a way that can improve your relationship with your customer and ease the burden on the consumer.?You just need to do the hard work.