Navigating the Uncertainty of Tariffs and Other Supply Chain Disruptions

The first United States Tariff Act was in 1789 and raised revenues for the new American government. Tariffs were imposed thirty-four more times in our history – ten times since Kent Elastomer Products (KEP) has been in business.

In our own history, we have observed that businesses with vision adopt methods to avoid uncertainty for when the next tariffs – and other supply chain disruptions – come along.

KEP is one of them and we like to partner with manufacturers who share that vision.

Recent economic disruptions like tariffs or the silicone shortage cause complicated ripple effects in the supply chain. In the case of tariffs, there are time-consuming delays for customs inspections, or price changes that test relationships. All of this cause and effect results in one thing the business world dislikes: Uncertainty.

In business, risk is expected. But in this case, uncertainty is avoidable.

Here are three ways to avoid uncertainty in a global economy affected by tariffs and other supply chain disruptions:

Look for Lean

The easiest, most common response to tariffs and other disruptions is to raise prices. Lean companies are built to better withstand fluctuating costs. Lean companies might eliminate or greatly reduce markups.

Beginning in 2006, KEP has applied lean improvements on billing, warehousing, manufacturing and every other process in our three facilities. From invoicing to assembly, we have reduced time, energy and material costs.

While we can’t control global supply and demand, shortages or tariffs, what we can control – efficiency and best practices – helps us absorb the shock caused by the disruption they cause.

Look for Domestic

Global sourcing that was cost-efficient in the 1990s is too uncertain in 2019.

In a 2019 survey of more than 200 corporate executives, 42 percent said they expected to get materials from a different global region in the next year, and 25 percent said they were redirecting investments out of China.

The tariffs and shortages dominating today’s headlines are only speeding up an existing trend: Many U.S. manufacturers have been returning to domestic sourcing.

What has changed? Robotics, plus increasing wages overseas, have shrunk the gap in labor costs. The uncertainty of logistics – tight margins, inventory-on-demand, and faster turnaround also makes global shipping riskier. Even in quiet economic times, red tape entangles global trade in ways that can be easily avoided, and made more profitable, by domestic trade.

Look for Expertise

Products are made of different components created around the world. Which are subject to tariffs? Manufacturers can spend way too much time looking at tariff codes to figure out which parts are subject to additional taxes.

In these rapidly changing times, even government officials might need extra time to be sure. We can simplify that by examining the product to determine how to create a domestic-made replacement component that meets performance and regulatory requirements.

KEP expertise also includes innovative prototype production in four to six weeks – which is typically half the time of the competitors.

Look Ahead

Even without tariffs and shortages, global sourcing and shipping has lost its luster. In today’s manufacturing climate, razor thin margins are common, especially for small manufacturers. The wait-and-see response to tariffs is harder to absorb. The uncertainty is no longer just a game. It’s a life-or-death business gamble.

In our nearly six decades of success, we have witnessed and weathered the cycles caused by all of these supply chain disruptions. Our lean operations, domestic base and manufacturing expertise are what continue to fuel our success – and the success of our customers.

KEP, a domestic business located right where you are, provides tremendous value. In fact, over our 60 year history and all of the market fluctuation which occurred during that time, we have remained a significant player in the industry we serve and the only surviving supplier of natural rubber latex tubing in the USA!

Resources

The Wall Street Journal

The New York Times