Mitigate the Impact of Tariffs on your Supply Chain

Tariffs are as old as trade itself – just ask the silk merchants of Ancient Rome, or the grain merchants of Ancient Greece. What’s new is their volatility. Today, tariffs are shifting at an unprecedented pace, and often by very substantial amounts.

All this has transformed tariffs from an expected cost of global trade to an unpredictable business challenge. Failing to respond to a new tariff rate, or responding in the wrong way, can significantly damage profitability and competitiveness.

In this article we explore the multiple ways in which rapidly shifting tariffs amp up pressure on global supply chains. We also explain how to use process intelligence to minimize the risk that tariff volatility poses to your business – and to successfully model the impact of proposed changes before they take effect.

So, whatever tariff challenges the future holds, you’re ready to meet them with a strategic, coordinated, and timely response.

Watch the demo: Celonis for tariff management

How tariffs affect the supply chain

Increased tariffs can impact your global supply chain – and ultimately, your business – on multiple fronts.

Higher costs

Naturally, when your imports are subjected to a higher tariff, the cost of buying those goods or materials goes up. If you do nothing, your profit margins will be eroded. If you pass the cost down the supply chain to consumers, you risk sacrificing competitiveness and market share.

Supplier disruption

Let’s face it, neither of those outcomes is ideal. So, you might seek to sidestep the problem by finding different suppliers, located in geographies where the tariffs don't apply. But switching suppliers takes time and money, and comes with risks of its own – especially when sourcing decisions are made in a rush, without sufficient strategic insight.

Logistical and operational challenges

To mitigate the impact of increased tariffs on your global supply chain, you may also need to rethink the shipping routes you’re using, or even relocate outsourced operations to be closer to home.

Compliance delays

Very often, tariffs breed retaliatory tariffs – and in turn, tariff escalation increases the complexity of conducting international trade. Complying with all relevant regulations and navigating new, or simply more stringent, customs clearance procedures can hold up the flow of vital goods and materials.

Inventory issues

Hefty tariffs can create waves in previously calm markets, making it harder for supply chain leaders to effectively forecast demand and manage inventory. For a modern global supply chain, especially one that involves just-in-time operations, the results can range from overstocking and higher costs, to shortages and delayed deliveries.

How inefficient processes amplify the risk

If your supply chain runs on inefficient processes, you’ll feel the impact of tariffs all the more keenly – and find it all the more difficult to respond to them quickly and effectively.

Issues as commonplace as duplicated supplier records can be a significant stumbling block when you’re trying to switch up your sourcing strategy. They can lead to disjointed procurement processes, and ultimately, missed consolidation opportunities. Similarly, slow purchase order approval processes and invoice cycles can exacerbate any shipping delays that newly imposed tariffs create.

Eliminating such process inefficiencies is a key step towards creating a global supply chain that can roll with the punches – whether they come from tariffs, or from other disruptive forces, like geopolitical conflict and natural disasters. Indeed, 88% of supply chain leaders say that, when it comes to minimizing risk, focusing on the things that you can control is now more important than ever.

Another key component of successful tariff management is shifting your business from a reactive stance to a proactive one. This means effectively modeling the impact of proposed tariffs before they arrive, and simulating a range of alternative sourcing strategies.

Simulating the best sourcing options

Global supply chains are, by their nature, complex and fragmented. That’s one reason why supply chain efficiency can be so difficult to achieve. It’s also why business leaders have traditionally struggled to predict the potential impact of new tariffs, and been forced into a reactive scramble to rethink, reroute, and renegotiate.

But Process Intelligence is challenging this long-standing status quo. It unites data from across teams and systems, and allows companies with complex, global supply chains to create a digital twin of their business operations.

With the help of a digital twin, you can identify and address opportunities to improve supply chain efficiency. But you can also model alternative sourcing and shipping strategies, and ensure your response to new tariffs is timely and strategically sound.

Let’s explore how, using a simple hypothetical scenario.

Understanding the impact of a new tariff

Imagine you’re a US automotive manufacturer. The Government has just proposed tariff increases on imports from a number of countries, including some you rely on for key raw materials and components.

You’ve used Celonis to create a digital twin of your business operations. You’re seeing how your company is moving materials globally – from sales and purchase orders, to incoming materials documents.

With Celonis, you can now see:

Which supply routes and materials would be affected by the new tariffs
How the tariffs would impact your spend, and your margin
Which routes and materials most urgently need your attention

You zero in on the material and supply route at greatest risk from the new tariffs: aluminum imported from a supplier in China, a trading partner that’s set to face a substantial tariff hike.

Evaluating alternative sourcing options

You could, with a click, notify your sales team of the increased cost of production. But you really don’t want to pass this burden onto your consumers. Instead, you ask your Celonis-powered Copilot to find alternative suppliers that won’t be impacted by this specific tariff.

It searches a global supplier database and suggests a couple of options: one in Vietnam and one in Mexico. You use Celonis to model the time and cost impacts of switching to each – factoring in everything from lead times and customs clearance considerations, to the readiness of internal processes.

You share your findings with your Procurement team, and in doing so, you ensure they’re prepared to execute a quick and strategic response, if and when the proposed tariff comes into effect.

Why shared data is key

The foundation of this proactive approach to tariff management is data. Unified data, visible to everyone who needs to work with it, free to move across systems, and described in a language everyone understands. That’s what the Celonis Platform provides, and it’s what makes effective collaboration possible.

After all, the impact of rapidly shifting trade tariffs cuts across business functions. Yes, they create headaches for Procurement teams. But they also ask questions of everyone from Logistics to Customer Service. When supply chain data languishes in siloed systems, it’s easy for teams to remain focused on their own problems. One team’s solution – switching a shipping route – could unwittingly cause a raft of new issues for colleagues elsewhere in the business, as customer orders are suddenly subject to unexpected delays.

The Celonis Platform can connect to any and all systems. In doing so, it helps you to quickly extract supply chain-relevant data from Oracle and SAP systems, other ERPs and CRMs, and the rest of your enterprise systems. By uniting all relevant data, and giving it a standard definition, you’re able to create a single source of truth for each global supply chain process.

Suddenly, every team affected by a proposed tariff is able to collaborate around a shared view of its implications. This drives cross-functional alignment, while helping to ensure the tariff management decisions you take are made based on complete information. Everyone’s needs are considered, and new strategies can be communicated and executed clearly and effectively.

Getting ahead of the curve with Process Intelligence

For as long as tariffs remain volatile, developing effective tariff management capabilities should be a priority for any business with a global supply chain. Using Celonis Process Intelligence, they’ll be setting themselves up to thrive, whatever the future holds.

With a clear, unified view of your processes, you can identify opportunities to improve supply chain efficiency, reducing tariff exposure. You can drive alignment across teams, so when you need to take action, you can take it quickly and confidently.

And, vitally, you can model different tariff mitigation strategies, prepare alternative playbooks – and even turn new tariffs to your advantage, by navigating them in smarter ways than the competition.

How to mitigate the impact of tariffs on your supply chain