Tariff exposure is a planning problem for manufacturers: The cost rides the product. By Priya Anand
When a tariff rate changes overnight, some companies move and others go looking for a plan. The ones that move already have somewhere to go – alternate sourcing, alternate routes, landed cost worked out ahead of time. The ones that don’t are starting that analysis the day the rate lands, and rate changes come out of nowhere, with no runway to model the financial impact and no way to insure against them. The difference between the two dates back to long before the announcement, and it has little to do with reaction speed. The variable is how many options already existed.
A tariff never lands where most people go looking for it. Pricing agreements with third-party logistics vendors cover freight – the physical movement of a product from point A to point B. Booking freight works like booking an airline seat, where you reserve early and lock the fare.
The tariff, however, attaches to the product itself. The supplier, the manufacturer, or the final customer carries it. The tariff is a charge on the value of what sits inside the luggage, not its transportation. Whether you’re carrying bricks or gold, the ‘fare’ doesn’t move. So, when a tariff rate changes, renegotiating the freight contract does very little. The exposure traces back to where the components were sourced and when production was scheduled – decisions made before anyone knew a 3am tariff announcement was coming.
Now that we know chaos is the norm, planning must be proactive. The logistics challenges customers bring us are strategic before they are tactical: financial planning, sourcing planning, investment in digital tools, and the methodology behind how they orchestrate the supply chain. Orchestration means building the options in, well before anyone needs them.
When we source a commodity or set up how a product will travel, we build a plan A, B, C, and D across countries, sourcing models, and freight modes, with landed cost prepared ahead of time for each. Then, when an input changes, we adjust the variables up and down until we find a scenario that holds. Agility and flexibility are the challenges our customers name most often, and neither one can be improvised when tariffs change overnight.
Supply chain orchestration turns a full-scale search into a simpler problem: selection. Once a rate is real, the decision turns to the product itself. If it’s critical and the market needs it now, it moves. Somebody absorbs the cost, either the customer or, on the outbound side, the supplier adds it to the product price and sends it on.
If the product can wait, the options widen. A cost and storage evaluation tells you whether to hold it until the rate comes down. You can move the production planning instead, stopping the line because there is enough in stock to deliver, then restart a few months later.
For example, new markets emerge when a tariff in one country has a huge impact on revenue and creates an opportunity for a market to surface that isn’t affected by increased duties. Or it goes into a foreign-trade zone, where it sits until it’s needed, and duty is paid only on what comes out.
Which of those options applies to a particular company depends on how critical the product is. When it’s needed makes a difference too, as do whether it can be stored, and whether other markets exist for it. Those are agility decisions, and they only work when the answers are already sitting there before the question arrives. Holding that data is what an orchestration layer is for.
We run our own supply chain on the same logic. For ocean freight, we collect the requirement from each of our manufacturing sites for the coming months – or for a full year, when forecasts allow – then launch requests for proposal, locking space and pricing ahead of time. We stay out of the spot market, where reliability is a question and last-minute pricing is expensive. Instead, our sites get a consistent delivery timeline at a price that was forecast and financially planned for in advance.
The market has been moving this way on its own. Companies are now pricing the tariff exposure in, forecasting an expected rate into production planning at the start of the year or building it into what the final customer eventually pays. Decisions about whether to manufacture inside a given country or source from somewhere else have become more deliberate. This pressure has opened markets, as products that leaned on a single region went looking for new ones and found them.
None of these disruptions will resolve on their own. Even if it stops being tariffs, it will be something else. The chaos will not run indefinitely, because it would drive inflation and collapse markets if it did. But the companies still standing when it settles will be the ones that converted the volatility into financial modeling and business planning first.
Priya Anand
www.jabil.com
Priya Anand is the Director of Global Logistics Services at Jabil. She leverages more than 20 years of experience in logistics primarily specializing in ocean, air, road, domestic execution. Jabil is a trusted partner for the world’s top brands, offering comprehensive engineering, supply chain, and manufacturing solutions. With 60 years of experience across industries and a vast network of over 100 sites worldwide, Jabil combines global reach with local expertise to deliver both scalable and custom
