How do you steer your supply chain through a stormy sea of tariffs, geopolitical tensions and market disruptions? If you think the stakes are high now, think again.
During our latest CIPS webinar, we brought together industry experts Matthew Rock, CIPS content team, Andrew Wells, Fastmarkets editorial and pricing director for ferrous metals and mining, Felix Bello, Fastmarkets US steel analyst and Tom Jennemann, Fastmarkets commodity industry expert, to discuss the challenges reshaping procurement and supply chains today.
From their discussion emerged five key takeaways that can immediately sharpen your edge in today’s volatile trade landscape. Read on to discover strategies that can set you apart.
1. Supplier diversification is a core risk management strategy
A recurring theme throughout the webinar was the critical importance of diversifying supplier bases. Heavy reliance on a single supplier or sourcing region can place organizations at immense risk, particularly in an era marked by tariff volatility and geopolitical instability. The concept of “friend-shoring” and nearshoring is becoming increasingly popular, with companies seeking supply chain partners in stable or allied regions.
This move isn’t just about keeping the flow of materials consistent; it’s about building resilience. By spreading supplier relationships across multiple geographies, businesses can minimize the impact of localized disruptions and maintain steady operations. However, this requires thorough planning, from assessing potential partners to understanding their capacity and readiness for sudden shifts in demand.
Actionable insight
Audit your current supplier network to identify vulnerabilities. Look for opportunities to diversify suppliers geographically and maintain strong, open communication with existing suppliers to strengthen relationships during uncertain times.
2. Scenario-based planning is replacing annual budget strategies
Unpredictability is the new normal, particularly with fluctuating tariffs. Procurement leaders are increasingly moving away from annual planning to scenario-based models, preparing for potential outcomes like tariff hikes, material shortages or sudden cost shifts.
“What we’re seeing now is everyone’s moving to a scenario-based playbooks where they have multiple scenarios that that that could happen throughout the year from tariffs, cost basis and sell price strategies,” Jennemann said.
This type of planning equips procurement leaders with ready-made strategies for rapid execution when variables shift. Rather than being caught off guard, your organization can address challenges head-on with confidence. By incorporating triggers for decisions into strategic playbooks, businesses can make faster, better-informed adjustments to their supply chain strategies.
Pro tip
Develop dynamic playbooks for different scenarios to guide quick decision-making. For example, plan for tariff increases by negotiating flexible contracts or establishing pre-emptive stockpiles for key materials. Include a review mechanism to frequently update plans as conditions evolve.
3. Dynamic ‘should cost’ modeling revolutionizes procurement strategies
A significant shift in procurement strategy highlighted during the webinar was the adoption of dynamic ‘should cost’ modeling. “It’s really becoming a live dynamic activity now where people are doing should cost analysis on a day in and day out basis”, Jennemann said.
This approach transforms traditional, static cost evaluations into a real-time, adaptable framework, enabling businesses to respond to market volatility with greater agility. The benefits include:
- Proactive cost control: By continuously analyzing cost data, procurement teams can swiftly adapt to – fluctuations in raw material prices, tariffs and other market pressures.
- Enhanced scenario planning: Incorporating live cost insights into scenario-based playbooks equips businesses with the foresight to act decisively under shifting conditions.
- Stronger cross-functional collaboration: This method fosters closer alignment between procurement, finance and operations, ensuring coordinated responses to real-time challenges.
Dynamic ‘should cost’ modeling isn’t just a tool for managing risks; it’s a forward-thinking strategy that enables organizations to lead amidst uncertainty. By integrating this methodology, businesses can secure better margins and deeper supplier relationships, giving them a competitive edge in today’s fast-changing supply chain landscape.
4. Adaptation to tariff dynamics is critical
The blanket tariffs imposed this year have forced procurement professionals to rethink their strategies. Raw materials like steel and aluminium are particularly affected, driving up costs across the board. To manage this, companies are increasingly embedding flexibility into their procurement agreements, using innovative contract models that account for fluctuating tariff structures.
These contract adaptations include tariff-related cost-sharing clauses, renegotiation triggers and long-term agreements designed to weather market turbulence. The goal is to build partnerships with suppliers that can accommodate these changes, ensuring business continuity even amidst economic uncertainty.
Expert tip
Engage with suppliers to incorporate tariff-specific clauses into contracts. This not only mitigates financial exposure but also demonstrates a proactive commitment to tackling shared challenges.
5. Sustainability is now a strategic and economic priority
“Sustainability is no longer just a nice-to-have or a compliance checkbox. It’s now at the heart of strategic decision-making because customers, investors and regulators are demanding it. And, frankly, it’s becoming a key driver of economic value and competitive advantage”, said Wells.
It’s clear that sustainability initiatives are no longer seen as optional or purely promotional. There is a growing shift towards sustainability measures that also make economic sense. For example, localized production models, like the increased use of recovered containerboard within packaging, reflect how businesses are blending green practices with cost-saving opportunities.
This dual approach not only addresses environmental goals but also helps companies sidestep tariff impacts and supply constraints. Sustainability strategies are evolving to support broader operational goals, ensuring they’re embedded into long-term planning rather than treated as standalone projects.
Takeaway
Assess your sustainability initiatives through a dual lens of environmental and financial impact. Strive for solutions that align with your commitments to climate goals but also ensure measurable returns to the bottom line.
Position your business to thrive
The CIPS webinar highlighted that thriving in today’s challenging market demands agility, foresight and a commitment to innovative solutions. From diversifying supplier networks and adopting dynamic ‘should cost’ modeling to embedding flexibility into tariffs strategies, procurement professionals now have an arsenal of tools to build resilience and protect profitability.
Stay ahead by applying these forward-thinking strategies to your supply chain approach and positioning your business for success. Get started with Fastmarkets today.
