Tariff Turmoil: Why Aussie business leaders need to get closer to supply chain

Image: Jefferson Sees / Unsplash

The chaos coming out of America over the last few weeks has many Australian businesses taking a wait-and-see approach.

While business leaders are speaking in measured tones, many supply chain professionals I’ve talked to say they are deeply concerned about the impact that the US tariffs will have on their company’s ability to maintain margin.

Their concern isn’t so much about US imports per se, but the indirect impact US tariffs will have.

Many supply chain professionals worry that the cost of global trade will increase across the board. After all, supply chains are complicated things, and indirect factors can cause major issues.

An increase in the cost of global trade causes serious problems because there’s a limit to how much customers are willing to pay for products – especially when cost-of-living concerns are already the biggest issue facing the country.

So, companies will be left with two options:

1. They can absorb some of the impact by adjusting their pricing.

2. Or they can look for suppliers closer to home.

Both have real potential to reduce margins, so it’s worth studying them closely.

So, what’s my take on this?

It’s not the first time we’ve been through a major disruption in the supply chain industry.

In fact, during the COVID years, the cost of international shipping rose drastically. In many cases, Australian companies were able to shift their supply chains to focus on domestic suppliers.

Some will do so again. Others won't. The important point is that the answer shouldn't be a given.

Will your company need to do the same this time around?

I can’t answer that question for you, but I can say one thing: it’s time for CEOs and GMs to work closely with their supply chain departments to prepare as best as possible for an uncertain future.

The majority of business leaders don’t come from supply chain backgrounds. Instead, many typically come from customer-facing roles. And when things are uncertain, people tend to fall back on what they know.

However, “sell better” is unlikely to be a winning strategy.

For Australian business leaders to truly understand how to navigate the challenges ahead, there needs to be a mindset shift around supply chain – from being a supporting function, to a business driver that is equally important as front-end sales.

A changing world needs a new approach

The world of supply chain is one of constant change, and supply chain professionals are constantly adapting along with it.

Not only are they great problem solvers who are used to quick thinking, they are experts at using data to model complicated scenarios and identify the best way forward.

That’s why business leaders should be working with their supply chain teams to game out different scenarios.

The cost of doing business may indeed rise. But a great supply chain professional can help you to be prepared for it. You might even find a few savings along the way.

After all, fortune favours those who are prepared.