Tariffs and Procurement (Part 3): Tech capabilities for proper tariff management

In part 1 of this mini series on tariffs, we looked in more detail at what we mean by ‘tariffs,’ and in part 2, we talked about a Procurement action plan. In part 3, we look at the tech that can support Procurement in tariff management. 

Effective and efficient tariff management is rooted in robust direct materials and supply chain risk management. Together, these disciplines empower organizations to handle tariff-related risks (and a broader range of supply chain challenges that extend well beyond tariffs) because they provide the visibility and data granularity necessary to handle tariff complexities. 

Direct materials management is essential for aligning demand, supply and product objectives throughout the product lifecycle. It ensures that organizations have the right materials sourced from the right suppliers at the right time and for the best cost, making tariff management a natural part of these processes. By maintaining visibility and control over their direct materials sourcing, companies can strategically manage tariff costs, avoid regulatory pitfalls and respond to new trade policies more fluidly.

Supply Chain Risk Management (SCRM) complements this by systematically identifying and mitigating supplier risks, such as financial instability, geographic vulnerabilities and inconsistencies in supplier operations. Through SCRM, companies get the essential visibility into both direct suppliers and deeper-tier suppliers that may directly or indirectly expose them to tariffs, as these costs can cascade down the supply chain, impacting organizations even if they are not directly importing the goods that are taxed. 

Because tariffs are not only location-dependent but also vary by supply category, capturing detailed, supply/category-specific data through SCRM allows companies to evaluate the tariff implications for each supply type, making it easier to forecast costs and adjust sourcing strategies for optimal cost efficiency. 

Together, direct materials management and SCRM provide the data and insights needed to manage tariffs effectively while safeguarding the supply chain from other disruptions. For example, by continuously monitoring supplier risks and tariff implications, companies can model various ‘what-if’ scenarios — such as shifts in trade relations or new tariff increases. These insights also allow businesses to make informed, agile adjustments in their sourcing strategies for reasons other than tariff changes, keeping costs under control and ensuring continuity of supply.

In sum, sound direct materials management and SCRM don’t just help organizations manage tariff-related risks, they support a more resilient, flexible and cost-effective supply chain. By integrating these approaches, companies can better handle tariffs and a range of risks, maintaining a competitive edge and consistently delivering value to their customers.

For a deeper dive on the topics of digital capabilities for direct materials management and risk management, we recommend these mini-series:

• Defining and digitizing direct procurement: Introduction and framework, direct materials sourcing part 1 and part 2.
• Design-for-Supply part 1, part 2, part 3 and part 4.
• Key capabilities of risk management solutions: Enabling and supporting capabilities and risk governance.

Although these mini-series are not specifically related to tariffs, they highlight some capabilities that are useful in the context of tariff management. These articles also illustrate how tariff management and other considerations converge in terms of enablement and supporting digital capabilities.

Now, let’s focus on digital capabilities that support tariff management.