Tariffs on imported materials, such as steel and aluminum, are increasing costs for many manufacturers. Here are six ways to help evaluate and manage the effects on your business.
- Scrutinize Your Supply
Determine whether, and how, tariffs affect you. Analyze your supply chain to identify the countries from which materials and components originate. This isn't always immediately apparent, especially if you buy materials from distributors or service centers.
- Identify Alternative
If your materials costs are subject to tariffs, consider alternative sources that aren't affected by tariffs. Don't switch unless these sources can supply you with materials of comparable quality in the quantities you need on a timely basis.
- Buy in Advance
Stock up on materials before tariffs take effect, if possible.
- Increase Prices
Some manufacturers are taking a wait-and-see approach, absorbing increased costs in the hope that the "trade wars" will cool off soon. Others are increasing their prices and passing these costs on to their customers. As you review your options, research what your competitors are doing and communicate with your customers before imposing price increases.
Examine cost-cutting strategies. Examples include implementing just-in-time inventory or lean manufacturing techniques, redesigning products or packaging, or reducing overhead and administrative costs.
- Use Contract
You may be able to avoid or reduce tariffs by partnering with contract manufacturers in other countries to avoid importing affected raw materials or components.
Avoid knee-jerk reactions
These are just a few of the potential strategies for minimizing the effects of tariffs. Whatever you decide to do, avoid hasty reactions and carefully evaluate the potential risks and benefits of each option.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.