The National Association of District Export Councils (NADEC) advises that companies prepare for significant changes driven by tariffs by completing these five steps:
- Organize a cross-functional team that can plan and execute in the event of tariff changes. Your tariff impact team should meet to design contingencies for both short and long-term tariff changes.
- Start lining up back-up sources for primary supplies, if you don’t have those already. The sources of your top 75% of cost should have back-ups ready to go in potentially other countries/locations (lessons learned from COVID).
- Model various options now so that in the event tariffs are enacted, you have plan A, plan B, and potentially plan C. This model should be an end-to-end model that includes impact to cash flow (this is typically overlooked), as well as customer service levels. Your CFO will need to review these to determine how that affects the financials.
- Establish transportation and warehousing relationships that would support these scenarios in advance. You do not want to delay in-bound shipments because you are negotiating service agreements with service providers.
- Make sure to engage your C level executives in these plans. They will need to inform a lot of stakeholders in the event of tariff impacts.