As global markets convulse under the pressure of gyrating tariffs and geopolitical uncertainty, the temptation is to wait for clarity. But some leading companies aren’t standing still—they’re making bold, informed bets.
1. Map Your Exposure
In a deeply interconnected world, supply chains stretch across continents and industry tiers. Understanding true exposure isn’t simple, but it’s foundational. The key lies in identifying not just where your dependencies are but also how they cascade across suppliers and geographies. And, of course, it requires a dynamic model—uncertainty will wax and wane, but it is now a permanent feature of trade.
That model starts with costs, since tariffs increase costs. But they don’t do so in a uniform way. Costs depend on componentry, flow, country, and so on—and those dependencies will affect each product differently.
Demand is an equally important variable. Who will have to bear those costs? You? Your suppliers? Your customers? Product demand modeling can help you understand the demand elasticity of your different customer segments, giving you a better sense of your full exposure.
At this point, every company also is examining its exposure to international suppliers and looking at the tariff rates applied to those countries. But for many, that doesn’t dig deep enough. Companies also have domestic suppliers with international Tier-2 country exposure (not to mention domestic suppliers with little or no exposure that will nonetheless use the tariff regime to opportunistically raise prices).
2. Benchmark Competitively
But absolute exposure tells only part of the story—and playing defense is only part of the game. What matters most is your position relative to the competition. Companies with lower exposure have the opportunity to go on offense while others remain reactive—and playing offense during times of turbulence usually has extraordinary benefits.
Bain’s research consistently shows that companies win or lose the greatest share during periods of turbulence and uncertainty—either because they make mistakes or stay on the sidelines. Crises produce more rising stars and more sinking ships.
3. Rethink Cost
Another way to play offense is to take costs out now. The shift from globalization to regionalization is eroding economies of scale. As structural costs rise, the advantages of being a cost leader become more pronounced.
One caveat: In the past, companies typically reduced costs by benchmarking and creating top-down targets. The result: Costs came creeping back in within a couple of years. In a structurally more expensive world, those costs need to come out permanently. Companies that want to achieve that need to redesign their ways of working from scratch using zero-basing techniques and embedding cost discipline into the tools and culture of the organization.
4. Reinvent Supply Chains
Today’s supply chains (still long, opaque, and inflexible despite pandemic-era improvements) are misaligned with tomorrow’s demands. Smart companies are proactively redesigning their footprints, aiming for resilience, agility, and strategic control.
The world of operations has shifted from the predictable and algorithmic approach in which economic order quantity was used to decide where to locate inventories with the stroke of a computer key. Today, companies need their supply chains to meet a host of complex demands from customers by investing in resilience, flexibility, traceability, and circularity.
Read the full article by Hernan Saenz and Karen Harris / Bain & Company
