Global based supply chain management teams likely exhibited some relief this week regarding important postponements to global trade and tariff actions. Supply Chain Matters is of the view that this is just a pause, and that further diligence will be required.
Early in the week, President Donald Trump announced a delay in previously announced steep import tariffs scheduled to take affect on March 1st. The President pointed to progress in ongoing tariff and trade related talks with China as a basis of his decision to postpone the added import tariffs, while still preserving the threat to do so. A trade summit among the two country’s most senior leaders is to be scheduled in late March.
Meanwhile, yesterday in London, Prime Minister Theresa May agreed to allow Parliament to delay the UK’s exit from the European Union if legislators once again reject the government’s current Brexit proposal agreement. That move allows for a subsequent vote on an undetermined delay of Brexit, but at the same time, leaves the possibility of either UK exit with a deal, without a deal, or not leaving at all, depending on a new nationwide referendum.
For industry supply networks, steps were already underway to mitigate the business impacts of each of these potential global trade events.
There is now ample evidence, included business inventory reporting for the month of January, indicating that retailers and businesses procured or moved additional inventories from China into the U.S. before the Friday deadline. Other actions have been taken help mitigate additional tariff impacts including re-routing of shipments or orders placed with alternative, non-impacted suppliers.
What all of this implies is that once again, inventory and supply management strategy will remain as rather important decision-making concerns for supply chain and sales and operations planning teams in the weeks to come. Hard line U.S. trade negotiators such as Robert Lighthizer will likely continue to maintain a hard line on extracting trade and intellectual property protections, among other needs. Meanwhile, the President, and his associated political party supporters are under increasing political pressure to secure some form of an agreement before specific export markets are permanently affected, to include certain agricultural, food related and other markets.
In the case of Brexit, intense preparations were already underway to prepare supply networks for potential disruption. Additional contingency transport agreements were secured, added safety stock inventories have been positioned on either side, all in-anticipation of the worst-case scenario. Now, with the real possibility of added delay or changed scenarios related to a UK exit, plans will have to be continually assessed. Important decisions loom as to how long can such contingency measures be maintained given line-of-business budgets. Added warehousing and transportation capacity has since been committed, and the question is when or if such contracts are to be suspended.
This remains a period of high business uncertainty and we advise multi-industry supply chain management leaders and their respective teams to remain diligent in their supply risk mitigation efforts. Now is not the time to rest easy or follow the euphoria of equity markets. It is a time to actively practice heightened prudence and continuing advisories to senior management.
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