Mitigating Potential Tariff Impact with Authorized Component Distributors

The looming likelihood of new, incremental tariffs designed to balance global trade in essential industries has prompted manufacturers, suppliers and customers alike, to consider contingency plans if their supply of raw materials, parts, and electronic components are disrupted or become too costly. Navigating these complex and evolving tariff dynamics can be challenging to plan for, but manufacturers can take proactive steps to prepare for potential changes and mitigate risks. 

From pandemic-induced labor shortages to blocked shipping lanes to geopolitical recalibrations, global supply chain disruptions have been coming at us fast and furious for the past several years. Many manufacturers have already done at least some due diligence to make their business more resilient. An equally conscientious approach is essential when assessing how tariffs influence production, trade patterns, and economic outcomes. Tariffs can increase the cost of imported raw materials, components, and finished goods. They can disrupt supply chains, making some inputs more expensive or more complicated, leading to production delays, process inefficiencies, or an ill-timed need to find alternate suppliers without the luxury of proper vetting. Tariffs can cause companies to move sourcing or production to entirely different countries, which may not be feasible if those relationships or facilities are not already in place. They can even put a company in a financial tailspin when the increased cost of producing goods outstrips the company’s or its customers’ ability to pay for them, and investors balk at shoring up shortfalls in the face of unstable economic conditions.

Suffice it to say that with the specter of tariffs on the horizon, it’s wise to be proactive in the evaluation of impacts on your supply chain. Balancing on-shore, off-shore, and near-shore suppliers, manufacturing facilities, and repair depots is a hedge against overreliance on a single source or location, building in alternatives that manufacturers can turn to when production or distribution is threatened in one part of the world but not another. Establishing relationships with distributors with diversified portfolios of electronic components sourced from multiple suppliers and regions, as well as those who are experts at managing supply chains and inventory, is another way to protect production from the vagaries of political one-upmanship.

Procurement professionals are adept at sourcing for all stages of the product lifecycle. Still, it’s the rare few who have not had to deal with scarcity, shortages, obsolescence, and untimely end-of-life notifications. Tariffs are yet another complicating factor in the procurement process. 

Utilizing Authorized distributors with a well-established global footprint and import/export compliance controls is essential to successfully navigating the ever-increasing complexity of the electronic component supply chain. 

• Breadth of relationships to recommend alternate components from low or no-tariff countries, ensuring an uninterrupted flow of mission-critical parts at effective cost points. 
• Well-versed in navigating tariff and compliance classifications to help minimize risk and costs for the manufacturers they work with. 
• Inventory management experience to implement adjusting strategies to lock in lower tariff rates for in-demand components through existing inventory positions. 
• Considerable technical expertise to offer trusted guidance on how manufacturers can adjust designs or source alternatives that minimize the impact of tariffs without compromising technical and functional requirements. 
• Authorized Distributors with an established Foreign Trade Zone can help facilitate cost mitigation programs, preventing the compounding cost of components by supporting international plants with parts through bonded carriers. 

Even the slightest whiff of production-halting, price-increasing tariffs can send manufacturers into an all-hands-on-deck search for ways to secure their supply chains and maintain business continuity. Authorized distributors often have the expertise, processes, and relationships to assist manufacturers in navigating these challenges. Global supply chain and inventory capabilities further support manufacturers in mitigating risks and ensuring uninterrupted production lines.

To read the article on Procurement Pro, click here (Pg. 46): https://procurementpro.com/issues/issue-5/