Manufacturing

Supply chain risks are growing. A multitude of complex, interconnected risk factors are driving volatility and putting new pressure on manufacturing CEOs and COOs to adapt in response. Implementing a practical supply chain risk management strategy can help. Keep reading to learn what that looks like and how to get started. What are the top supply chain risks? Supply chain risks are largely shaped by government policy, geopolitical events and international conflict. Key risks include tariffs, the wars in Iran and Ukraine, energy shortages and USMCA ambiguity, as well as raw material pricing volatility — all of which are deeply interrelated. Here are the major supply chain risks explained in more detail: Tariffs: The Trump administration’s tariff policies have added new costs to U.S. imports (current tariff rates add 10-50% to the price of imported goods), with the volatility of the tariffs themselves also presenting a challenge. International conflicts: The Iran war has pushed oil and gas prices up significantly, while the war in Ukraine has affected prices for other commodities like wheat and cooking oil (while also resulting in current and possibly future sanctions on Russian gas and oil). Rising energy demand: The wars are affecting supply, but a growing U.S. demand for energy that’s driven largely by data centers has also pushed energy prices higher. Volatile raw materials pricing: Raw materials prices have continued to climb higher, including crucial materials like metals and resin, with supply chains for molds and dies also heavily disrupted. USMCA ambiguity: We don’t know whether the USMCA negotiations will successfully result in a new iteration of the trade agreement, creating additional uncertainty for manufacturers, especially those with cross-border operations. Driver shortage: New U.S. policies have limited the labor pool in the trucking industry, making it harder to move goods. Ending the wars with Iran and Ukraine may be a tall order for the average manufacturing business to take on. But that doesn’t mean you’re helpless here either. How do you implement a supply chain risk management strategy? Implementing a cohesive supply chain risk management strategy can help your manufacturing business weather the storm of today’s supply chain risks. The key here is to stop worrying about what you can’t control and focus on what you can do: 1. Map your supply chain Mapping your supply chain will help you better understand your specific risks so you can take steps to mitigate them. To do this, identify each of your vendors, evaluate all your different supply chain inputs throughout the entire process from quote to cash, consider how long you’re holding raw materials and finished goods, and note when payments are made. 2. Identify alternative vendors Based on your supply chain mapping, explore whether alternative vendors or geographies could lower costs or reduce volatility. For example, switching vendors to a lower-tariff country could help, as could finding a U.S.-based vendor willing to absorb certain tariff costs on its end. 3. Monitor supply chain pricing Designate someone on your team to monitor supply chain pricing and tariff updates. This can help your business react more quickly to changes , which is especially important in today’s volatile environment. 4. Rework costing and quoting Your expenses have changed, and your costing and quoting needs to reflect that. Rework it all to take today’s supply chain environment into account and price in tariff costs and volatility. 5. Find operational efficiencies Finding operational efficiencies and getting creative with AI can help you offset higher supply chain costs. Automation can be a game-changer here , especially if you use tax incentives like bonus depreciation and qualified production property to lower the barriers to entry. 6. Do scenario planning Planning for supply chain risks helps you better prepare to meet them. Game out different scenarios like tariff hikes or oil price spikes to evaluate what that could mean for your business and how you should respond. 7. Reevaluate customer and vendor contracts As you negotiate new customer and vendor contracts, take rising costs and volatility into account. Prioritize flexibility here: You don’t want to get locked into a long-term contract only to watch your costs spiral due to factors that are out of your hands. Shrinking margins mean the time to act is now In Wipfli’s recent survey of 456 manufacturing executives, those leaders reported that profitability is declining across the board . Today’s volatility has contributed significantly to that margin pressure, which means that acting to mitigate supply chain risks can help relieve it. The time to act is now. Businesses that adapt to today’s challenges will not just get through them but become more flexible and efficient in doing so. However, those who wait too long will only fall further behind the eight-ball — until it may be hard to catch up. Read more 9 top tariff mitigation strategies for manufacturing CFOs AI disruption is coming for manufacturing. How should your firm adapt? R&D tax credits can lower your tax bill. Do you qualify?