By Guilherme F. Frederico
The beginning of 2025 has brought uncertainty to global supply chains due to the new US administration’s tariffs on global trade. This article considers how strategic sourcing can support supply chains in minimizing the effects of this new and impactful reality.
The global supply chain scenario has been threatened with dramatic change from the beginning of 2025. The tariff policies established by the new USA administration are going to pose a huge challenge for decision-makers involved in supply chains to overcome the cost increases generated by this new imposed reality. In this context, procurement professionals will have to rethink their sourcing bases and be able to strategically locate new sources of materials, as well as trying to find solutions to reduce the impact on supply chain margins. The following tips may be useful to strategic sourcing professionals in rethinking their current status and trying to minimize the impacts potentially caused by this new reality.
Locating New Supply Sources
This activity may be challenging in a situation where some materials and components are sourced from specific regions. However, there may be some opportunities to look at new regions where it is possible to buy supplies affected by the tariff rise. In this case, the ability and support of the logistics department may be crucial to make this new source feasible once a new logistics route is deployed. Also, companies must consider developing and enhancing competencies for less-capable suppliers located in such alternative regions. For this reason, strong collaborative action involving engineering and supplier development departments is the key to making this potential initiative feasible.
Trying to Renegotiate with the Current Suppliers
Perhaps this tip is the most feasible action, especially for the short and mid-terms. Strategic sourcing and procurement managers should be able, in renegotiating contracts, to share the financial risks and losses with their suppliers. New contracts should be designed by considering this new reality with a more shared risk perspective. Once the risk is shared, its impact may be reduced in the same proportion, too, which would mitigate the negative effects for both contractors and suppliers. In this initiative, legal departments should be completely involved from the beginning, with the aim of properly guiding the new contract design and negotiations.
Finding Solutions in the Current Supplier Base
Also, finding solutions in terms of the use of alternative materials and components and the reduction of consumption through project redesign could help to minimize the impact of this disturbing imposed event. Collaboration with suppliers in terms of product reengineering and development and new cost-reduction initiatives may help to reduce the financial impact on the supply chain added margin. Strategic sourcing professionals should be able to think systematically with regard to looking for opportunities in upstream supply chain flows, which may involve creative solutions that reduce the impact of cost increases. For instance, redesigning logistics and transportation flows and contracts may be an opportunity. Also, thinking about lean procurement is another potential opportunity to generate cost reduction through best management practices in sourcing and purchasing activities.
Final Remarks
It is obvious that it is impossible to completely avoid the effects that may be caused by this phenomenon of tariff increases, especially in the short and mid-terms. However, it is at this time that supply chain managers, and especially those involved in procurement and strategic sourcing activities, must demonstrate their talents and abilities to overcome such challenges. Hence, the need to consider highly qualified people to work in supply chains is even more relevant to supply chain performance amid times of challenge. In addition, investment in cutting-edge technologies, mainly in artificial intelligence and big data analytics, becomes crucial to support those professionals in the application of smart and mitigating solutions in this impacting moment for supply chains.
