Shielding Your Supply Chain: How to Mitigate Tariff Risks and Optimize Operations

BDO Canada's article provides businesses with a resilience blueprint to navigate trade tensions, specifically between Canada and the U.S. The article emphasizes leveraging a temporary trade hiatus to strengthen operations. It includes a checklist that advises on risk assessment, strategic planning, and operational enhancements. Businesses are urged to diversify supply chains, explore government support, and integrate technology. Legal and compliance aspects, alongside a plan for internal and external communication, are also highlighted. The piece recommends creating a Tariff Advisory Committee to help implement these resilience strategies. Finally, it offers contact information for advisors at BDO Canada, in order to help businesses get started.

 

Risk Assessment:

• Map supply chain to identify key dependencies and concentration risks.
• Calculate percentage of revenue at risk due to potential tariff changes.
• Identify industry-specific risks related to trade disputes.
• Review supply chain for dependencies and vulnerabilities, down to ingredients, parts, and materials affected by potential tariffs.
• Evaluate impact of tariff changes on operations and costs.
• Assess cash flow, liquidity, and price elasticity for resilience against cost increases, including lender relationships.
• Create a Tariff Advisory Committee (lawyers, lenders, accountants, COO, CFO, ownership) for rapid response.

Strategic Planning:

• Develop scenario plans mapping potential policy changes and impacts, including a 25% tariff scenario.
• Explore supply chain diversification:
  • Identify alternative suppliers/sourcing.
  • Explore reshoring/nearshoring. ( Find a Contract Additive Manufacturing Services Partner )
• Review government support options:
  • Canadian remission applications for surtax relief.
  • Innovation credits.
  • Reduction in inter-provincial trade barriers.
  • Assess Canada's Trade Gateway for new market access (Asia, Europe).
• Engage with industry associations and government lobby groups for policy changes.

Operational Enhancements and Efficiencies:

• Operations optimization for increased agility. ( Digital Workflows )
• Explore tariff engineering for reduced-duty classifications.
• Shorten delayed payment times for improved cash flow.
• Shorten sales cycle.
• Assess pre-payment of goods at lower tariff rates.
• Explore hedging opportunities against a strengthening US dollar.
• Implement scenario analysis to optimize supply chains within current constraints.
• Develop strategies to adapt operations to potential tariffs.