Tariff series: Adapting supply chain risk management strategies in uncertain times

Tariffs are upending the supply chain status quo, catalysing a fundamental and unprecedented shift of global trade. For supply chain professionals, this uncertainty means rethinking risk management strategies and evaluating trade-offs between completely restructuring versus maintaining traditional sourcing patterns. Each of these comes with unique risks, and while the future of the trade war is still unclear, there are realistic strategies businesses can implement to cultivate resilient and agile supply chains and optimise risk management.

Restructuring and diversifying: understanding risks and tradeoffs

Amid rising costs and pressure to maintain production rates, supply chain leaders are understandably turning to new markets to adapt to the new landscape. Diversifying sourcing may avoid levies that come with importing from China, but the solution may not be so simple.

New sourcing markets come with unknown variables and sustainability risks. New suppliers might operate under differing quality standards and regulatory requirements. This may lead to an increased risk exposure for businesses and inconsistent performance across the supply chain if not managed carefully. Reports show many companies are looking to geographies such as India, Mexico, or even the United States to move sourcing and manufacturing – but is this a ‘less risky’ option?

Take India, for example, which has proposed zero-for-zero tariffs with US on steel, auto parts, and pharmaceuticals, meaning both sides eliminate tariffs on these specific categories of goods. Many companies have spotted India as a potential new sourcing hub to avoid tariffs on Chinese imports, but EiQ data shows India denotes concerning risk levels for critical labour and health and safety issues.

Underpinning all this is the need for transparent, data-driven risk assessments to quantify exposure and guide decision-making.

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Realistic strategies for smarter risk management

Whether your sourcing strategy relies on maintaining your supplier base or restructuring – a data-driven approach to mitigate risks remains critical. Adopting technology that enables end-to-end visibility into supply chain health and improving supplier relations (legacy or new) can be the difference between a reactive supply chain and a proactive, competitive business. Systems such as EiQ centralise data, from supplier performance to compliance metrics, allowing for actionable insights that drive continuous improvement.

Businesses can also improve resilience and agility through:

1. Adopting segmentation to inform sourcing decisions: Companies may choose a balanced strategy—diversifying enough to mitigate risk while still leveraging the benefits of established supplier relationships. Segmentation, where suppliers are categorised based on risk and performance, can guide where to diversify and where to maintain stable relationships.
2. Horizon scanning to understand potential risks of new suppliers: Sourcing professionals must conduct risk analysis using metrics beyond standard annual audits. Media scanning tools, such as that in EiQ, allow businesses to identify and understand incidents such as labour issues or health and safety accidents associated with potential new suppliers, allowing for a more granular risk view when choosing new partners.
3. Engaging stakeholders and implementing training: Transparent communication with teams is crucial. Continuous reporting and benchmarking against industry standards can build trust and mobilise resources more efficiently during periods of uncertainty. Implementing training for suppliers promotes ongoing improvement as well as alignment of standards and regulatory requirements. 

Tariffs, while unpredictable, underline the importance of a resilient supply chain strategy that marries flexibility with stability. Whether choosing to diversify your supplier base or doubling down on established sourcing patterns, the key lies in a proactive, data-driven, and balanced approach to risk management. In an era where regulatory landscapes shift rapidly, supply chain professionals must be adept at both strategic foresight and tactical agility—ensuring that every decision strengthens their global operations in the face of economic turbulence.

By rethinking traditional models and adopting a holistic approach to risk, businesses can turn these challenges into strategic opportunities, driving innovation and achieving total supply chain confidence.