The holiday season is upon us, bringing festive traditions, from decorating trees to enjoying classic seasonal films like Planes, Trains and Automobiles. In this iconic movie, Neal Page, a marketing executive, faces a cascade of disruptions —flights are diverted, trains break down, and even rental cars go missing—as he desperately tries to make it home for Thanksgiving after a delayed meeting with an indecisive client. His journey underscores a crucial truth: uncertainty is inevitable, and its source is often unpredictable.
As we know, businesses navigating the complexities of global supply chains face their own Neal Page moments. From uncertainties about tariffs and shifting trade policies, organizations must be ready for changing conditions that can derail even the most well-laid plans. Now, with the potential for significant tariff changes under United States’ President-elect Donald Trump’s administration, scenario planning has never been more essential as a lever to prepare for uncertainty and help organizations quickly adapt.
The Tariff Conundrum: A Cloud of Uncertainty
President-elect Trump’s proposed tariffs - ranging from 10% on Chinese goods to a possible 25% on products from Mexico and Canada—promise wide-reaching impacts across companies doing business in multiple regions. These policies could increase the cost of goods for manufacturers reliant on imported components and spark retaliatory measures from trading partners, raising barriers for U.S. exports. Conversely, the threats may lead to negotiations with some countries possibly relaxing existing tariffs on U.S. products to avoid being slapped with U.S. tariffs.
This looming uncertainty creates a high-stakes challenge for supply chain leaders: how to prepare for policy changes that are unpredictable in timing, scope, and impact. Companies must balance immediate actions with long-term strategies, ensuring resilience and adaptability no matter how the tariff scenario unfolds.
Scenario Planning: Your Ticket to Supply Chain Resilience
Just as Neal Page had to consider every possible travel option to reach Chicago, businesses must run through a myriad of scenarios to prepare for potential tariffs. This means:
- Understanding Costs and Tolerances
The first step is assessing how much tariff-induced cost increases can be absorbed. For instance, if tariffs raise costs for certain components in your bill of materials by 10%, does your business remain profitable? What about at 25%? Running sensitivity analyses on metrics like cost of goods sold and profitability helps businesses understand where their thresholds lie. - Pre-Buying and Inventory Positioning
Companies can mitigate immediate impacts by purchasing additional inventory before tariffs take effect. Companies utilizing foreign trade zones (FTZs) to store goods without incurring immediate tariffs, need to strategically plan to pay duties before new tariffs take effect to optimize cost-savings of the FTZ. - Reevaluating Global Manufacturing Footprints
Tariffs targeting specific countries may prompt a shift in manufacturing locations. For example, if goods from China are heavily taxed, could operations shift to Taiwan, Mexico, or even the United States? Scenario planning helps evaluate the financial and logistical implications of these moves. - Competitor Analysis
Not all businesses will face tariffs equally. Understanding how competitors are impacted—whether they manufacture locally or abroad—can highlight vulnerabilities or opportunities for market share gains. - Modeling Long-Term Impacts
Plans must also account for scenarios where tariffs are delayed, reduced, or withdrawn entirely. For instance, if a company invests in reshoring production but tariffs don’t materialize, can the higher production costs be offset through a “Made in America” marketing strategy or shorter lead times?
Transform Uncertainty into Opportunity
The uncertainty surrounding tariffs is a microcosm of the broader unpredictability in global supply chains. From geopolitical tensions to natural disasters, challenges will always arise. The key is to approach uncertainty with the willingness to adapt.
Advanced supply chain planning software provides the visibility and power to analyze variables across multiple scenarios, ensuring that businesses can pivot quickly as conditions change. These tools integrate data from suppliers, partners, and markets, enabling informed decision-making even in volatile environments.
We help companies like yours advance your strategies from wherever you are, guiding you through different supply chain planning capabilities and levels of scenario planning, and empowering your team to move from reactive measures to a proactive, opportunity-focused mindset. By embracing scenario planning, you can ensure you’re prepared for any outcome, minimizing disruptions and positioning you to thrive regardless of what lies ahead.
Let us show you how the Atlas Planning Platform can help you transform uncertainty into a competitive advantage. After all, just like making it home for the holidays no matter what, success in supply chain management isn’t about avoiding uncertainty—it’s about effectively navigating and capitalizing on it.
