Quick change - Global Trade Magazine
  September 17th, 2018 | Written by

Quick change

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Sharelines

  • Retailers have shown growing concern around next steps in the trade war.
  • Trump’s push to produce American-made goods is backfiring.
  • The US will face the loss of over 400,000 jobs if Trump’s tariffs continue.
  • Over two-thirds of Trump’s tariffs jobs losses will affect workers in production and low-skill positions.

The global trade landscape is evolving at lightning speed, thanks in large part to intensifying trade wars between the United States and its major trading partners. President Donald Trump has thrust the US into global trade’s limelight, forcing retailers to go on red alert when it comes to what materials, products and sectors might be affected next.

US-based companies must prepare for and adapt to new governmental regulations at the drop of a hat. Tit-for-tat tariffs have dominated the news cycle with trading partners, including China, Mexico, Canada, South Korea, India, Australia, Brazil, Turkey, and the European Union, placing their own tariffs on US goods as retaliatory measures.

The chaos has affected a variety of everyday consumer goods, such as clothing and food as well as products across agriculture, maritime and auto industries, to name a few. With tariffs ranging from 10 to 50 percent and valued in the billions, the costly trade war doesn’t show signs of slowing any time soon, and retailers have shown growing concern around next steps.

Under pressure: Retailers move to mitigate rising costs

Trump’s tariffs are reportedly meant to reinforce his Make America Great Again campaign by encouraging US companies to design, develop and deliver products solely in America. However, the push to produce American-made goods is backfiring: The US will face an estimated 400,445 total net loss of jobs should the tariffs continue, and more than two-thirds of those lost jobs would affect workers in production and low-skill positions.

Additionally, major brands are considering (if they haven’t already done so) raising prices to offset new, unanticipated sourcing and production costs. Organizations such as Harley-Davidson and Coca-Cola have already begun raising consumer prices on products to mitigate the effects Trump’s tariffs.

Retailers asking, “what if?” have the right mindset

Retailers will have to get creative to mitigate the outcomes from current and upcoming tariffs. Other than simply moving their sourcing and/or production operations from one country to another, organizations must think outside the box to manage rising production costs. One strategy that can help: what-if costing.

What-if costing as a concept isn’t new. Traditionally, retailers have used manual tools such as Excel to manage costs and make projections based on hypothetical what-if scenarios. The reality of this practice, though, is that cost projections aren’t run as frequently as they should be. Obviously, this practice misses the frequent changes that regularly occur in costs due to variables such as weather, geography and political climate. Retailers that invest in advanced, predictive what-if costing technologies have greater visibility into how their demand is distributed globally. In fact, retailers can make more informed decisions by accounting for commodity trends pricing, currency fluctuations and more, leading to better accuracy in decision-making for the business.

Most importantly, what-if costing tools can help retailers predict the impact of new tariffs with real-time integration into the government’s Harmonized Tariff Schedules (HTS) for pre-classification and duty calculations. This process simplifies the complexity associated with global trade and purchasing, saving time and money by providing all the trade information retailers need at the click of a button. The tool can also help reduce risk and complexity by using one platform to connect importers and exporters with overseas suppliers, logistics providers, brokers, carriers, finance institutions and any other links throughout the supply chain.

Retailers that employ a what-if costing approach are also in a better position to collaborate with all the enterprises in their retail communities. After receiving notice of impending tariffs, they can immediately determine which items, orders and suppliers are affected by the tariffs and shift production to a supplier in another country almost instantaneously. Using machine learning capabilities on the same platform provides the ability to auto adjust routing and scheduling to meet new demands and push production and shipping dates to earlier time frames, avoiding the impact of upcoming or potential tariff increases. Organizations can expedite the supply chain process by allowing all links in the supply chain to communicate in real time, enabling them to better predict which suppliers can fulfill their needs at the lowest price and best quality possible.

Retailers, be warned: The trade wars have just begun

Retailers are witnessing a pivotal moment in global trade. The US is no longer on the brink of a substantial trade war: It’s in the midst of one. Retailers’ current cost management and organizational solutions alone won’t cut it – they need to employ what-if costing to increase supply chain visibility and proactively forecast the changes needed as new tariffs are introduced.

Only time will tell how these costly trade wars will play out. For now, it’s on retailers to decide how to proceed.

Sue Welch is the founder and CEO of Bamboo Rose, a B2B digital marketplace and collaborative PLM platform that helps retailers discover, develop and deliver products at consumer speed. Follow Sue on Twitter at @SueWelch.