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As global markets convulse under the pressure of gyrating tariffs and geopolitical uncertainty, the temptation is to wait for clarity. But some leading companies aren’t standing still, they’re making bold, informed bets. Here are four actions they are taking now: mapping exposure, benchmarking competitively, rethinking cost, and reinventing supply chains.
1. Map Your Exposure
In a deeply interconnected world, supply chains stretch across continents and industry tiers. Understanding true exposure isn’t simple, but it’s foundational. The key lies in identifying not just where your dependencies are but also how they cascade across suppliers and geographies. That model starts with costs, since tariffs increase costs. But they don’t do so in a uniform way. Costs depend on componentry, flow, country, and so on, and those dependencies will affect each product differently.
Demand is an equally important variable
Who will have to bear those costs? You? Your suppliers? Your customers? At this point, every company also is examining its exposure to international suppliers and looking at the tariff rates applied to those countries. But for many, that doesn’t dig deep enough. Companies also have domestic suppliers with international Tier-2 country exposure.
Most companies built additional flexibility into their existing supply chain structures in response to Covid-19. That means they now have a lot of levers they can pull to manage their exposure through their supply chain, whether it’s inventory levels, plant uptime, “make vs. buy” decisions, or shifts in logistics and inventory operations. In Bain & Company’s work, we’ve seen the tariff regime create very different economics for the same products simply because of different flows. Ultimately, playing defense requires both levers: the supply lever and the pricing lever.
2. Benchmark Competitively
What matters most is your position relative to the competition. Companies with lower exposure have the opportunity to go on offense while others remain reactive, and playing offense during times of turbulence usually has extraordinary benefits.
Bain & Company’s research consistently shows that companies win or lose the greatest share during periods of turbulence and uncertainty, either because they make mistakes or stay on the sidelines.
How do you play offense? You model your exposure relative to your competitors. Understanding the magnitude of exposure your competitors have by supplier and by product and the extent to which they can mitigate it is crucial.
If you can identify areas where your company is less exposed, you have an interesting opportunity to compete on price for price-sensitive segments and gain share. And for less sensitive segments, you might be able to match industry pricing as it goes up and create a reserve of money for investment.
3. Rethink Cost
Another way to play offense is to take costs out now
The shift from globalization to regionalization is eroding economies of scale. As structural costs rise, the advantages of being a cost leader become more pronounced.
Leading companies are simplifying to focus on the customer value proposition while reducing complexity in product lineups, processes, and organizations. Technology plays a crucial role in creating lean operations that can flex with uncertainty. Automation, machine learning, traditional AI, and generative AI are already reshaping the relationship between revenue and cost lines.
One caveat: In a structurally more expensive world, costs need to come out permanently. Companies that want to achieve that need to redesign their ways of working from scratch using zero-basing techniques and embedding cost discipline into the tools and culture of the organization.
4. Reinvent Supply Chains
Today’s supply chains are misaligned with tomorrow’s demands
Bain & Company finds that smart companies are proactively redesigning their footprints, aiming for resilience, agility, and strategic control as today’s companies need their supply chains to meet a host of complex demands.
Until recently, supply chains operated with enormous efficiency at a global scale. Now, companies need to achieve scale and economics at a regional or local level. The supply chain you need will not be perfect; it will be adaptable. The priorities of the old world won’t disappear, but they must be balanced against the realities of the world we’re in today. And the tough trade-off decisions will be made by business leaders, not algorithms.