What Is Your Tariff Strategy?

The so called “Liberation Day” has happened. Everyone was surprised by the size of the tariff numbers and the markets reacted negatively across the board. These tariffs, whether short term or long term will cause the manufacturing landscape in the United States and supply chains across the globe to undergo a seismic shift.  This shift is driven by evolving tariff policies, supply chain disruptions, and increasing pressure to remain competitive in the domestic market.

Will these be permanent or just positioning for negotiations? For manufacturing companies, the question is no longer if they should rethink their supply chain strategy but how can they effectively adapt to these changes both in the short and long term. You and your leadership team are likely engaged in scenario planning which will require that you and your team think through short term reactions and long-term strategies using multiple scenarios regarding pricing, cost, profitability and optimization. 

One of the scenarios to consider is moving a portion of your supply chain into the United States—known as onshoring. Onshoring has become a critical strategy for maintaining competitiveness in the U.S. market by minimizing supply chain disruptions and improving the resiliency of your supply chain. We know that regardless of the next moves, our current government is going to reward those who make product in the United States.

Why Onshore Your Supply Chain?

Onshoring offers several advantages that are particularly relevant in today’s economic and geopolitical climate:

1. Tariff Pressure

Recent tariff policies have made importing goods more expensive and unpredictable. By relocating production to the U.S., companies can avoid costly tariffs and stabilize their cost structures.

2. Supply Chain Resilience

Global supply chains have proven vulnerable to disruptions caused by pandemics, geopolitical tensions, and natural disasters. Onshoring strengthens supply chain control and reduces reliance on distant suppliers, ensuring better responsiveness to market demands.

3. Cost Management

While labor costs abroad may still be lower, rising wages in offshore markets and increasing transportation expenses are narrowing the gap. Onshoring reduces logistics costs, customs fees, and lead times while improving overall cost efficiency.

4. Customer Satisfaction

Manufacturing closer to home enables faster delivery times and better alignment with consumer preferences. This agility is particularly valuable in industries like consumer products, where demand can shift rapidly.

Challenges of Onshoring Manufacturing Operations

While onshoring offers numerous benefits, it also comes with challenges that companies must address to ensure success:

1. Higher Labor Costs

Onshoring typically involves higher labor costs due to wage disparities between developed and developing countries.

2. Skilled Labor Shortages

The U.S. faces a shortage of skilled workers capable of operating advanced manufacturing systems, which can hinder production scalability.

3. Upfront Costs

Establishing domestic manufacturing operations often requires significant capital investment in facilities, machinery, and workforce training.

4. Regulatory Compliance

Navigating complex local regulations can be time-consuming and costly for manufacturers.

5. Supply Chain Reconfiguration

Switching suppliers, renegotiating contracts, and reevaluating logistics strategies can be a complex process when transitioning operations domestically.

How Onshoring Enhances Market Effectiveness

Despite these challenges, onshoring significantly enhances a company’s ability to respond to market demands:

• Reduced Lead Times: By shortening supply chains, companies can deliver products faster to meet customer needs.
• Improved Agility: Localizing production allows businesses to adapt quickly to changing consumer preferences or unforeseen disruptions.
• Greater Visibility: Proximity to suppliers improves oversight of production processes, enabling better quality control and faster decision-making.
• Enhanced Collaboration: Working closely with domestic suppliers fosters stronger partnerships that drive innovation and efficiency.

Strategic Approaches to Onshoring

Onshoring is not a one-size-fits-all solution—it requires careful planning tailored to each company’s unique needs. For middle market manufacturing companies who don’t have subject matter experts in this area, it is important to find advisors who specialize in helping manufacturing companies define and implement effective onshoring strategies and supply chain optimization through approaches such as:

1. Mergers & Acquisitions

Acquiring or merging with domestic manufacturers to quickly establish U.S.-based production capabilities.

2. Joint Ventures

Collaborating with existing manufacturers or suppliers through joint ventures provides cost-effective ways to share resources while establishing a local footprint.

3. Plant Location Identification & Design

The identification of optimal locations based on factors such as labor availability, logistics infrastructure, utilities, taxes and proximity to key markets.

4. Make vs. Buy Analysis

Evaluation of whether it’s more effective to establish wholly owned facilities or partner with contract manufacturers in the U.S., ensuring alignment with strategic goals.

How Group50 Can Help

Group50 Consulting brings decades of experience in supply chain optimization and onshoring strategies, offering end-to-end support from strategic planning through implementation:

• Strategic Planning: Group50 works closely with your team to develop a comprehensive roadmap tailored to your business goals. We will help you create scenario plans with trigger points that will keep your focus as the geopolitical landscape evolves.
• Implementation: Their consultants assist with every aspect of execution—from securing funding for mergers or acquisitions to designing state-of-the-art manufacturing facilities.
• Optimization: Using tools like Group50’s Supply Chain Hierarchy of Needs™, they ensure your supply chain operates efficiently and delivers measurable ROI.

Conclusion

As tariffs continue to reshape the competitive landscape for all companies, scenario planning, supply chain optimization and onshoring have emerged as vital strategies for staying ahead in the U.S. market. Despite challenges such as higher labor costs and regulatory hurdles, the benefits of reduced lead times, improved agility, and enhanced quality control make onshoring an attractive alternate move for businesses looking to thrive.

With extensive expertise in strategic planning, supply chain management, mergers and acquisitions, joint ventures, and plant design, Group50 Consulting is uniquely positioned to guide your company through this transition.

Contact Group50 Consulting now to start building a resilient and efficient U.S.-based supply chain! You can reach us at +1 (626) 644-9746 or via email at info@group50.com.

 

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