Facing Uncertainty with Flexibility in the Supply Chain

As supply chain leaders look to the new year, we see exceptional– and unpredictable– challenges, driven by shifting trade policies, geopolitical tensions and evolving economic trends. The uncertainty surrounding post-election tariffs and their wide-reaching implications have placed significant pressure on businesses, particularly small-to-mid-sized companies, to rethink their supply chain strategies.

According to a recent Gartner report, many organizations' current approaches to uncertainty remain inconsistent, unstructured, and too generalized. To remain competitive and agile, supply chain professionals must plan for uncertainty by adopting proactive, flexible strategies while considering the impact to their specific market.

Post-Election Markets and Tariff Uncertainty

The outcomes of recent trade policies, such as those introduced during the Trump administration, have rippled across industries. In 2018 and 2019, tariffs on $380 billion worth of goods from China, ranging from 10% to 25%, were intended to reduce trade deficits and encourage domestic manufacturing. Instead, they raised operating costs for U.S. businesses and inflated consumer prices, reducing long-run GDP by 0.2 percent, the capital stock by 0.1 percent and employment by 142,000 full-time equivalent jobs, according to the Tax Foundation.

Proposed new tariffs could further exacerbate these challenges. The Yale Budget Lab estimates that consumer prices could rise by 1.4% to 5.1%, increasing annual household costs by $1,900 to $7,600. Beyond higher prices, these tariffs could impact both essential and non-essential goods and unemployment rates, straining consumer purchasing power, in addition to behavior changes toward more conservative spending.

For supply chain managers, these looming changes demand preparation. Companies can no longer rely solely on traditional models— they must pivot to strategies that anticipate risks and disruptions. According to the 2023 Gartner Antifragile Supply Chain Management (Fellows) Survey, companies that conduct a high degree of experimentation in their supply chain models are 3.7 times more likely to avoid revenue losses or see a positive impact on revenue under uncertain conditions.

A Shift in Inventory Strategies

We have already seen a noticeable shift in the move from “just in time” inventory management to a more resilient “just in case” model. Small-to-mid-sized companies are front-loading shipments to secure inventory before tariff hikes. This proactive approach helps businesses stabilize supply chains and mitigate pricing uncertainties.

However, this shift significantly increases demand for warehousing and logistical services. National warehouse occupancy rates are averaging 90%, with key regions like Laredo and California hitting 98%. This tight market is driving businesses to optimize existing storage space with improved racking systems and establish new facilities in strategic locations to accommodate the growing need for nearshoring.

Companies are also diversifying suppliers to reduce their reliance on a single source, especially in politically sensitive regions. By exploring alternative markets such as Vietnam and Mexico, businesses can bypass certain tariffs while maintaining supply continuity. Although these strategies can be accompanied by higher costs and longer lead times, they offer much-needed resilience in uncertain times.

Anticipating Industry Impacts

Retail and Apparel

The retail and apparel industries are among the most vulnerable. Tariff-induced price hikes could dampen consumer spending on non-essentials, forcing retailers to adapt by diversifying suppliers or nearshoring production. Companies that fail to act may struggle to manage supply chain disruptions and remain competitive.

Automotive and Electronics

For industries like automotive and electronics, critical components such as semiconductor chips are in short supply. Businesses are stockpiling these materials to avoid production halts and preserve continuity during times of peak demand. While stockpiling increases holding costs, it offers a critical buffer against sudden disruptions. Given that, in 2023, the lithium market saw prices drop by 90%, supply chain professionals know all too well how quickly and severely market conditions for specific materials can shift.

Food and Essentials

Essential goods, including food, also face increased costs. With fewer options to switch suppliers, companies in this sector are leveraging technology to identify supply chain inefficiencies and streamline operations. 

Managing Warehousing Pressures

The surge in demand for warehousing reflects a significant shift in inventory practices. With nearshoring to countries like Mexico driving up cross-border activity, businesses are prioritizing warehouse investments closer to U.S. markets. This approach provides faster response times and lowers transportation costs, improving the overall efficiency of the supply chain.

To adapt, companies should:

• Secure Long-Term Contracts: Locking in storage contracts can help businesses stabilize costs in an increasingly competitive market. During and after COVID, contracts shifted towards shorter terms industry-wide; however, recent trends have indicated a return to longer terms.
• Optimize Existing Space: Advanced racking systems and layout redesigns can maximize storage capacity within existing facilities.
• Explore New Locations: Facilities in high-demand regions like California and border cities such as El Paso offer strategic advantages for nearshoring operations.

The Role of Technology in Supply Chain Optimization

Investing in technology is becoming a necessity rather than a luxury for businesses navigating today’s challenges. Artificial intelligence (AI) and data analytics can revolutionize supply chain efficiency by:

• Improving Decision-Making: AI-powered tools can analyze large datasets to uncover hidden risks and identify opportunities for optimization. 
• Enhancing Visibility: End-to-end visibility through digital tools allows businesses to track shipments in real time, ensuring transparency and better decision-making.
• Streamlining Operations: Automated processes and integrated services save time and reduce errors, enhancing overall productivity.

Organizations that prioritize tech-driven strategies will be better equipped to manage geopolitical risks, global port disruptions and other uncertainties plaguing the supply chain landscape. 

Preparing for an Uncertain 2025

The supply chain industry is at a pivotal crossroads. With global disruptions and the uncertainty of economic policy changes, the challenges supply chain leaders face will only grow more complex. To remain resilient, businesses must incorporate uncertainty into their decision-making processes. 

Strategies to consider when ordering include diversifying suppliers to avoid over-reliance on any single region, investing in technology that enhances visibility and decision-making, and strengthening inventory management by adopting a “just in case” model. “Just in case” models also benefit from securing warehouse space to proactively manage increasing storage demands.

While the path forward may be uncertain, businesses that adapt with agility and foresight will emerge stronger. The future of supply chains lies in innovation and resilience— preparing for the unexpected will no longer be optional.