Impacts to global business from the pandemic are widespread, but a common denominator for companies are the challenges they face in their supply chain. Organizations are examining how diversified their sourcing model is and already calculating how to avoid a repeat of this sort of precarious moment — weighing how to find alternatives and build redundancies into the supply chain that can prevent it from being suddenly shut down by a shock felt elsewhere in the world.
As for geopolitics, the common pre-COVID-19 view in the recent past was that trade disruption would be a short-term problem. It’s becoming clear that may not be the case. Protectionism in some form may well be the new normal, as the US and countries in Europe and Asia focus on saving their economies, creating jobs and protecting their national interests. Together, the challenges underscore the need — for a nimble, creative and strategic global trade function. With that in mind, here are five actions that companies can take now to sustain growth amid the uncertainty.
Address global trade strategy from the executive level.
It is imperative that enterprises recognize global trade as a C-suite topic and have global trade experts at the decision-making table. Over the last two years, the idea of elevating the trade function has gained traction as organizations have dealt with high-stakes issues such as the China Section 301 tariffs, the US-Mexico-Canada Agreement negotiations and the COVID-19 response. By building an integrated, internal organization on trade – closely tied into supply chain strategy and an overall future manufacturing footprint – companies can start to form a comprehensive view on how shifting regulations and other market changes are impacting their business.
COVID-19 has underscored the importance of companies being able to sustain their supply chain and produce closer to the consumer. The global trade function must act strategically to optimize costs in the supply chain — whether that’s from using free trade zones, leveraging existing treaty networks, or developing other strategies on the importing of sub-assemblies and location of final production. Companies that relegate their trade function to a solely tactical role increasingly will find themselves left behind.
Understand the impact of dynamic regulations to develop a more proactive response.
A proactive trade strategy means doing the upfront work required to minimize duty spend — tackling tasks and identifying opportunities prior to importing products to arrive at the lowest legally accepted duty payments. This involves deploying strategic sourcing and may entail shifting manufacturing locations. The upfront work saves the valuable time and resources involved in looking back and claiming refunds for overpaid duties or costs that could have been avoided.
In addition, proactive companies take steps to articulate why they should be classified as essential in scenarios where non-essential businesses are ordered to close.