“Companies that fail to proactively explore alternative sourcing, negotiate pricing fl exibility or build the right amount of buffer inventory may fi nd themselves scrambling when tariffs shift suddenly, as they have recently.”
— Chad Autry
Myers Distinguished Professor of Supply Chain Management University of Tennessee, Knoxville
want the fi nancial commitment to occur on their watch.”
Understanding how these types of short-term decisions erode long-term operational and fi nancial health can motivate companies to adjust their incentives to better reward lasting initiatives and avoid short-sighted decisions that lead to higher costs, more ineffi ciencies, insuffi cient or inaccurate data, and further strained relationships. Applying that thinking to supply chains can lead to similar positive long-term results. By aligning goals across channel partners, companies can “move toward a more integrated, optimized supply chain that is built to be resilient in the long haul,” Autry says.
Turning Obstacles Into
Opportunities The more closely connected dealers and suppliers become, the more both must embrace trust and share information. Autry says these two factors are key to driving innovation and effi ciency because they help create sustained competitive advantages. “In the absence of these drivers, companies will eventually struggle to compete when they run up against rival supply chains that have begun to leverage the drivers that benefi t the end user,” he concludes.
The ongoing trade uncertainty is an example of how this relationship-driven approach can be put into practice. Government trade policies can create supply chain planning challenges,
14 FEDA News & Views
and the resulting ambiguity may hamper contract negotiations, reduce profi tability and hinder supply chain resilience. Autry says dealers and suppliers in some industry sectors are tackling the issue by collaborating to diversify sourcing, negotiating bulk purchasing agreements that include supplies from non-tariff or lower-tariff nations, and, as mentioned earlier, shifting procurement to countries with lower tariffs.
Other companies have successfully used joint inventory management strategies such as vendor-managed inventory — where the supplier maintains inventory at the dealer’s facility — or strategic stockpiling to buffer against tariff-driven cost spikes. Some dealers are even leveraging advanced analytics to improve demand forecasting, and they are sharing that information with their partners, ensuring that manufacturers are not producing excess products and that distributors don’t end up with surplus inventory that is diffi cult to sell. “These collaborative approaches help minimize fi nancial strain while maintaining service levels across trading partners,” says Autry, who advises against a wait-and-see approach to the current tariff situation. “Companies that fail to proactively explore alternative sourcing, negotiate pricing fl exibility or build the right amount of buffer inventory may fi nd themselves scrambling when tariffs shift suddenly, as they have recently.
Delays in assessment and response can also lead to lost market share, strained supplier relationships and diminished profi tability. All types of businesses operating in chaotic environments should scenario-plan and establish contingency strategies to remain agile.”
What’s Next?
Looking ahead, Autry expects more companies to shift to using more globally regionalized supply chains with an emphasis on nearshoring. In some cases, domestic production could also be used to mitigate tariff effects but making this happen depends on labor and overhead costs of the domestic operation. Another possible strategy includes dealers establishing effi cient relationships with one another (consistently with the antitrust laws) to combine their inventories and fulfi ll orders based on which company has the product available. Additionally, Autry predicts more companies will invest in automation and digital tools, including artifi cial intelligence-driven procurement and blockchain for supply chain transparency, both of which can help with cost management. Strong integrations with business partners, even competitors, could also become the norm. “Long-term collaboration between dealers and suppliers has always been an advantage,” Autry adds, “but it will become even more critical, ensuring resilience against future trade fl uctuations.”
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