Newly imposed tariffs on U.S. imports, and the threat of many others, are leaving companies across the country unclear as to what’s next and U.S. consumers uncertain about how they’ll be affected. While consumers will inevitably face higher prices and product shortages, manufacturers are up against more nuanced challenges. Like many businesses, they now must bear the burden of tariff costs while overhauling the supply chains that they’ve spent decades streamlining—while ensuring compliance every step of the way. Manufacturers operating in highly regulated industries, like aerospace, defense, and medical technology, must navigate even stricter compliance requirements and a supplier base limited by a lower number of skilled manufacturing vendors and new economic realities.
As a result, many U.S. manufacturers are looking to onshore operations to address the impacts of these recently imposed tariffs—and prepare for those to come. But making that transition to build new infrastructure, train skilled manufacturers, and shift to more resilient onshoring solutions is neither quick nor realistic across many sectors.
Manufacturers can’t rely on onshoring alone, especially in the short-term.
Onshoring, or relocating production operations back to domestic soil, is an effective strategy in theory. It decreases lead times, increases control and visibility into the supply chain, and circumvents tariffs on international imports.
Unfortunately, this doesn’t happen overnight, and the economic realities of the domestic labor market don’t allow for a rip-and-replace model. It is much more involved than simply moving manufacturing to the U.S.
Supply chain operations have deep and complex interconnections across borders. The U.S. relies on other countries not only for materials but also for their infrastructure and labor to create those materials. Bringing this stateside would require months for simple operations and up to decades for more complex manufacturing processes, given the need to develop and scale new infrastructure and upskill workers. Even if this were immediately possible, there are raw material considerations.
While the U.S. has significant resources, some materials required to manufacture products are not available domestically.
When onshoring isn’t an option
There are also certain suppliers, such as those that build mature node electronic components, that simply can’t be replaced in the short term. If we abruptly limit or cut off access to foreign markets for these kinds of materials and components, the remaining supply chain quickly bottlenecks, causing shortages in critical industries. This would mean critical PCBA and related subassemblies used in communication, transportation, defense, and many other industries could not be manufactured.
So, when the US imposes tariffs on countries where these specialised suppliers are located, manufacturers are left with no choice but to pay them and absorb higher costs themselves or pass them along to their customers.
Manufacturers should, and likely need to, consider onshoring at least some of their production to be more cost-effective, support domestic manufacturing and economic growth, and drive more efficient processes. However, it isn’t realistic for this to happen quickly enough to avoid the impacts and rippling effects tariffs will have on their supply chains.
The good news is that manufacturers can strengthen their supply chain resilience in ways other than onshoring. Here are four ways they can proactively mitigate risks and build a more adaptable supply chain in the short term:
1. Build A Diversified Supplier Network
Many manufacturers have spent decades getting their supply chains to a point where they heavily rely on a small circle of suppliers they regularly work with to minimise touchpoints, keep costs low, and drive efficiencies. The appeal of handing back office supply challenges to tiered vendors was a logical and valuable choice. Unfortunately, with today’s uncertainties, they can no longer afford a hands-off approach.
Manufacturers are now expanding or shifting their supplier networks to mitigate delays and shortages, attempting to ensure production continues at unit economics that still fit existing business models. But manufacturers must go beyond increasing the number of suppliers to mitigate risk—to leverage better optionality they need to diversify geographically and consider where subcomponents are sourced to eliminate single points of failure.
While manufacturers should explore this in the near term, they can’t compromise on due diligence: establishing relationships with new suppliers requires thorough research into vendor ratings, PPAP, and industry reputation. For critical assemblies or components, a site visit to fully understand a supplier’s capabilities and quality control processes may be necessary before engaging with them.
For manufacturers in highly regulated industries, who are typically constrained to a list of pre-vetted suppliers, they can diversify by activating suppliers in their approved vendor list who may not currently be engaged, ideally while negotiating transparency across vendors into where they’re sourcing subcomponents from and their ability to ramp up or down quickly in response to demand shifts.
2. Invest in Technology to Track Thousands of Moving Components in Real-Time
A manufacturer’s supply chain is only as strong as the visibility they have into it. Without a real-time look into their tiered supply chain, it’s difficult for manufacturers to anticipate risks, respond quickly to disruptions, and make informed decisions to drive efficient operations.
It’s easier said than done for companies to achieve this kind of transparency. Every time a ccompany procures or moves a component—from factory to warehouse to assembly line—it must document the latest stage in the journey. This includes details like its country of origin, compliance certifications, and any material transformation made along the way. With thousands of parts moving at any given time, the sheer volume of data makes tracking nearly impossible without the proper systems in place. Even a single component or part’s traceability is challenging to track. Did that screw come from a lot of materials from McMaster or Granger? Was this resistor from a lot that originated in Taiwan or China?
These questions can be difficult to answer, and when an OEM digs into the details with their manufacturing partners, the answers can sometimes be murky and can affect the economics and compliance of a final assembly. This makes the risks during manufacturing more obscure, possibly compromising compliance, and makes traceability nearly impossible for efficient maintenance and repair if errors arise.
“With a rise in tariffs on U.S. imports, having documentation readily available is even more critical” — Phillip Gulley, Co-Founder and Chief Strategy Officer, Cofactr
For example, for duty drawbacks—or a refund on duties paid that are later exported or destroyed—manufacturers must have precise documentation. Just one missing piece of documentation can result in rejected claims and lost refunds.
The problem is that many manufacturers still rely on invoices and records tracked through physical paperwork, across multiple digital platforms, and in spreadsheets, none of which are scalable or efficient. The only way to ensure manufacturers have every piece of documentation on their thousands of moving parts—exactly when they need it—is to bring every part of their supply chain into a unified and centralised platform.
We’re at a turning point where implementing technology into the supply chain is no longer a nice-to-have. From AI to IoT to blockchain solutions, manufacturers need to lean into technology to automate processes, capture and analyse data in real-time, and consolidate all moving pieces to have an end-to-end view of their supply chain. It’s the only way they’ll be able to keep their operations intact in such an uncertain and rapidly changing environment.
3. Understand Where Each Individual Part Comes From to Properly Assess Costs
Manufacturers’ visibility into their supply chain needs to go beyond knowing who direct suppliers are and where they’re located. To get the full picture on their exposure to tariffs, manufacturers need visibility into their tier-two and tier-three suppliers—the sources of components and subcomponents. Otherwise, they risk underestimating the true cost or risk exposure of their products.
For example, a manufacturer might assume tariffs don’t apply to a specific part because their direct supplier is located domestically. However, if that supplier imports subcomponents from a now-tariffed country, costs for that supplier will rise. The supplier will then pass those costs down the chain. If the manufacturer doesn’t have visibility into these deeper supplier relationships, they could face unexpected price increases.
Keeping track of every component, subcomponent, and their country of origin—in addition to how various tariffs apply as they continue to change—is nearly impossible to do manually. Manufacturers can leverage technology to streamline and analyse part movements, assess tariff impacts, and calculate landed unit costs. Automating these processes also helps make more informed decisions on sourcing and planning to mitigate unit cost increases and delays in manufacturing. Plus, real-time tracking across distributors can help manufacturers continuously monitor changes in suppliers’ ownership, location, and compliance statuses—all of which can change to significantly impact products.
With tiered supply chains, assessing risk without compromising IP becomes even more challenging. But clearly defining risks, communicating them effectively across vendors, and strategically using technology to distill thousands–if not millions—of parts into actionable insights leads to smarter, more effective decision-making. Utilising technology to protect IP while surfacing risk across upstream vendors can keep prime manufacturers alerted to the risk profile of their tiered vendors.
4. Build Out Worst Case Scenarios on a Virtual Model of the Supply Chain
Arguably the most effective way for manufacturers to build a resilient supply chain is to prepare for disruptions before they happen. With the right protocols and systems in place to address disruptions the moment they occur, manufacturers will be able to mitigate, or even prevent, severe operational and financial impacts.
The first step is to identify any vulnerabilities in their supply chain operations. Manufacturers can do this by building a digital supply chain twin, or a virtual model of the entire supply network. A digital supply chain twin lets manufacturers simulate different disruption scenarios—such as tariffs, sanctions, and logistical bottlenecks—and see exactly how these disruptions would affect their supply, either ahead of an event or in real-time. By testing different scenarios ahead of time, they can identify weak points and create contingency plans to minimise risks before they turn into crises.
This goes beyond financial risk. A digital twin also helps manufacturers assess their vulnerabilities across multiple factors, including geographic (whether at a broad level like a specific region or at a granular level, such as a single supplier or commodity), cybersecurity, or reputationally.
As global supply chains face increasing pressures from tariffs, manufacturers need to proactively address the uncertainties ahead. By diversifying their supplier base, investing in technology to improve supply chain visibility, and building a digital supply chain twin, manufacturers can build more resilient operations that let them stay agile and prepared in the short and long-term future.
- Risk & Resilience
