It’s been quite some time since the international business landscape felt stable. From global financial collapses to increased geopolitical tensions, organizations know that uncertainty is part of the price of doing business in the 21st century. Meanwhile, the global interconnectivity required to bring the best products to consumers shows no signs of disentanglement and businesses are more reliant on foreign partnerships than ever before. This network of buyers, suppliers and customers further magnifies that exposure to any risks, increasing the effect of the shockwaves that crises send through the supply chain.
Even new legislation here at home has the potential to totally upend the way companies do business in 2017 and beyond. Continued rhetoric around the introduction of new tariffs, under the auspices of bolstering the domestic workforce, threatens to change the way that many companies—especially those in retail—source materials, one of the most critical components of delivering a cost-effective product to consumers. Apparel companies that outsource operations to China and Bangladesh, for example, would have to totally restructure their costing approaches if the House Ways and Means Committee were to pass a border-adjusted tax, as has been proposed.
Whether suppliers, buyers, manufacturers or distributors are affected by change, adopting a what-if costing approach can help alleviate the pain. As it stands, retailers focus too much on the initial cost when purchasing goods from abroad—that is, what their supplier is charging—and don’t have visibility into the full cost until after the deal is done. The what-if costing technique offers a picture of the international distribution of demand, providing increased transparency, which helps decision-makers execute new strategies with more information at their disposal. Anything from border taxes to shipping disruptions to changes in licensing can be factored in to the landed cost, if retailers use the what-if model.
This approach is only possible with updated technologies embedded throughout the supply chain. To pull those price levers, retailers need a comprehensive, single-pane look at all their different suppliers and global markets—something that Excel just can’t provide. As with any decision, it’s impossible to be confident that you’re making the right call if you aren’t aware of all the variables. You might be able to imagine endless nightmare scenarios, but you can never make the right move on the chessboard if you don’t know which pieces you’re playing with. In the face of uncertainty, having visibility into trends like commodity pricing, currency fluctuation and the spread of volume across multiple suppliers to many markets and customers might just save the day.
As January’s travel ban—which, as outlined in the executive order, “suspended the issuance of visas and other immigration benefits to nationals of countries of particular concern”—illustrated that overnight changes can have immediate ramifications, leaving those affected either scrambling or stranded. The retail community must be ready to act if changes are made at the drop of a hat and pricing is one of the most important levers that organizations can manipulate to mitigate negative consequences. In an era of profound uncertainty, hashing out pricing techniques using opaque technology like spreadsheets puts organizations at risk of being left in the dust as competitors race to accommodate change.
A veteran of the tech startup world, Sue Welch is the founder and CEO of Bamboo Rose, a business-to-business (B2B) digital marketplace. Welch is committed to bringing the world of product development and sourcing to par with how consumers shop for goods through a collaborative platform that enables digital sourcing and is driven by trade engines. Follow Sue at @SueWelch and Bamboo Rose at @GoBambooRose.