Supply Chain Decisions in the Face of Tariffs

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Change on the horizon: Decision-making in the face of tariffs

For over a year, the fate of the U.S.-based apparel and footwear companies has been unclear.  As trade negotiations continue to highlight the friction between the U.S and China, the Office of the United States Trade Representative released a list of $300 billion worth of Chinese imports, including apparel and footwear items, that could be slapped with another hike in duties up to 25%.  Included in the list are items like dresses, underpants, sweaters, shoes (and shoe parts) and much more. This type of cost increase (paid by U.S. companies – not China) can wreak havoc on global supply chain decisions, forcing companies to find new ways to decrease their labor costs or increase their earnings. For some of those brands, it means moving their production out of China altogether.  Others won’t be able to absorb the cost and will transfer some or all of it to their customers. It’s projected that the tariffs imposed will cost the average American family an additional $767 a year to purchase everyday items.

But how can organizations make the right supply chain decisions in the face of such a heavy impact to themselves and their customers? The simple answer: with Advanced Analytics. Financial projections, scenario modeling, and trade-off analyses will light the path toward survival during this fated time.

Supply chain decisions made easier

Business planners can use Advanced Analytics to raise enterprise strategy and decision-making to a whole new level. When faced with 25% cost increase for imported goods, planners need powerful modeling and simulation tools to look at trade-off outcomes and make statistically-informed decisions about next steps.  Is it be better to shut down all manufacturing in China and move it to Vietnam?  Can we absorb some costs by reducing our safety stock?  Can we keep our U.S. workers employed and our retail prices low?  All of these questions and scenarios can be answered statistically and with associated levels of probability.

Advanced Analytics modeling capabilities allow organizations to:

  • Assess competing courses of action
  • Compare risk-reward scenarios
  • Test ideas and supply chain decisions virtually

Vanguard Advanced Analytics applies an exhaustive range of time-series and model-based methods to not only capture and extrapolate historical patterns but to simulate and compare innumerable outcomes from seemingly unprecedented events and circumstances. Something like huge impending tariff enforcement will call decision-makers to trial different pathways and gather data on possible outcomes to determine what is the best course of action for both the company and its consumers.