Love them or hate them, it’s hard to escape the proposed sweeping changes to America’s trade policy put forth by US President Donald Trump. From withdrawing from the Trans-Pacific Partnership (TPP) to re-negotiating the North American Free Trade Agreement (NAFTA), it’s clear the 45th President of the United States is pushing hard on an America-first agenda. But what impact will his trade policy changes have on your end-to-end supply chain?
Supply chain risks
The majority of US manufacturing leaders are optimistic about this shift toward more business-friendly policymaking, at least according to a recent survey by the Aberdeen Group and consulting firm TBM. Their research found as a group, manufacturers anticipate a 1.8% increase in profits and a 1.6% revenue gain from proposed tax, regulatory or trade policy changes.
What remains unclear is the potential fallout of any changes to international trade agreements, which could be devastating to companies running global supply chains.According to the 2017 Aberdeen Supply Chain Readiness Research Study, tax structure changes are likely to have the biggest impact on financial results over the next few years, but unfortunately for you, that’s largely out of your control. What you can control is how you mitigate the supply chain risks associated with any negative impact of changes to foreign trade agreements. That means knowing:
- What could change?
- When could that change happen?
- How will it affect current cost structures?
It also means starting collaborative discussions with customers, suppliers and manufacturers to make sure you can still strike the right balance between service levels, working capital and costs. Changes in foreign trade policies could shift supply chain variables like energy and supplier costs, customer and supplier relationships, distribution networks, and manufacturing strategies. And it isn’t just red, white and blue companies who will feel the impact.
America’s trade policy will have a ripple effect on businesses – and global supply chains – based outside the US. The cost to sell your goods to American customers may go up as new duties and import taxes are levied. It could become more difficult to use the US as a distribution or logistics hub for bordering countries like Canada and Mexico. You might even see implications on being able to manufacture within America’s borders if you aren’t a US-based corporation.
Supply chain readiness
No matter what happens in Washington, having the right supply chain capabilities will help you respond quickly to any policy changes. But Aberdeen’s research revealed an unsettling reality where companies’ supply chain priorities don’t align to their current abilities. Some of the areas of biggest concern are supply chain network design, and inventory planning and optimization, which were ranked second and third on the priority list, with readiness well below their perceived importance.
The one bright spot was sales and operations planning (S&OP), which business leaders ranked as the most important priority – and the supply chain process they’re most ready to run with. However, even with that high level of supply chain readiness when it comes to S&OP, that critical business function still isn’t without its challenges. Survey respondents noted that people represent the biggest stumbling block on the path to S&OP readiness.
That’s not surprising given the heavy reliance on collaboration, compromise and trust required. End-to-end supply chain technology itself was the largest hurdle for nearly every other priority in Aberdeen’s list, with inventory planning and optimization, and manufacturing capabilities feeling the most restricted. Supply chain network design, and demand planning and forecasting, were most impacted by poor processes.
Supply chain competencies
Economic and market trends beyond your control can have a real, lasting impact on progress toward your strategic and financial goals. Prepping your supply chain in advance to deal with any uncertainty, or unexpected opportunities, requires building the right foundation. That means connecting data, people and process into a single, harmonized system that allows you to continuously and simultaneously plan, monitor and respond across your end-to-end supply chain, aka concurrent planning.
Collaboration and the ability to rapidly simulate anything, anytime, anywhere are critical success factors. Don’t wait for the fallout of changes to US foreign trade policies and tax structure. Examine your supply chain today to see what options you might have in terms of shifts in suppliers, manufacturers, distribution routes, etc., so if policy changes do impact you, you’ll have a plan of action in place and know your options when it comes to how best to maintain customer satisfaction, market share and your bottom line.