Morgan Stanley’s recent report ‘Why Trade Tariffs Could Rattle The Global Supply Chain’ provides the following insights:
- If Trump imposes a generalized 25 percent tariff, 23 percent of the total growth impact will come from the initial tariff.
- Domestic and international supply chain effects would account for 35 percent and 42 percent respectively.
The reason for these figures is the combination of lowered demands and the impact of increased costs. Morgan Stanley also predicts that the tariffs will create significant adverse effects on the economy. Not only could tariff costs get passed down to customers, but a ripple effect could also occur due to how domestic, and global supply chains, are completely intertwined through all regions, and all sectors.
The rapidly escalating trade war is of great concern for business worldwide. Procurement costs are set to rise to exceptional levels, and partnerships could become disconnected as companies get forced to relocate their manufacturing processes.
The previously cited analysis report conducted by Morgan Stanley, also states that supply chain disruptions could account for about 80 percent of the predicted impact on global growth. It is, therefore, of no surprise that every industry sector is scrambling to cope with the new and unknown trade landscape.
How Supply Chain Digitization Helps
Businesses need to identify, manage, and mitigate the risks that trade wars pose by executing a more risk-tolerant supply chain.
Technology companies now consider the constant supply uncertainties to be the norm in today’s climate. Given the uncertainty around potentially changing sourcing origins, businesses need to understand it is imperative to gain complete visibility and transparency of their supply chains. This clarity needs to occur in real time to enable fast decision making. Digital supply chain management platforms such as that provided by Gravity Supply Chain Solutions, come into their own with their ability to help build more resilient supply chains.
By digitizing and connecting all parties in the value chain, companies can enable efficient and accurate accounts of all milestones throughout the critical path, which significantly reduces manual processes.
Supply chain management software can help reduce the impact of trade wars.
Gravity’s suite of modular apps provides unprecedented levels of visibility throughout the critical path, from source, through to final destination. Some of the benefits appreciated by utilizing a digital platform such as Gravity are:
- Full visibility of the critical path by moving away from fragmented, disparate information systems, and the use of manual processes and communications such as spreadsheets and emails.
- Enabled integration, and coordination through the use of validated data
- The provision of one version of the truth and one solution all on one platform enabling decision making with certainty to take place.
- In the event of a company’s regular suppliers charging higher rates due to tariffs, they can use the Source product to view alternate vendors from a single dashboard and procure the best prices.
- The risk chain tile can provide a heads up regarding what markets or products will be most affected by tariffs, allowing companies to take pre-emptive action
- The visibility, collaboration and integration capabilities provided by supply chain management software significantly enhance communication, eliminate fragmentation, reduce labor costs, and help ease the impact of higher expenses incurred due to tariffs
Information can get uploaded into the system regardless of whether it's historical, current, or potential. The impact of sourcing from vendors from differing countries can then get analyzed to establish the cost implications for businesses.
If you would like to learn more about how Gravity can support your business during times of uncertainty and beyond, please contact us to arrange a convenient time to speak to one of our advisors by clicking here.