Global Trade: Manufacturers' Next Litmus Test

The ongoing gyrations in global trade agreements have made one thing abundantly clear: There is no alternative to creating more resilient organizations to navigate this historically volatile environment.  

This volatility, fueled by the recent tariff announcements, has manufacturers grappling with immediate and long-term implications on many fronts: 

• Financially, increasing costs of goods put profitability at risk. Some companies are also seeing financial strain from investor concerns and falling share prices. 
• From an operations standpoint, finely tuned global supply chains are being disrupted, threatening production continuity and supplier relationships. The current volatility also severely impedes forecasting and inventory management. This exposes manufacturers to potential competitive disadvantages against rivals operating in regions unaffected by the changing global trade landscape. 
• These financial and operational impacts are leading to calls for reshoring production to become even more frequent. But while long-term benefits may include reduced exposure to global trade disruptions, the short-term costs and complexity are significant.
• Finally, these global trade issues will have a significant customer impact. Many companies will be forced to raise prices and delay deliveries, which could erode customer loyalty and weaken demand.   

Three no-regret moves to strengthen operational resilience

These concerns have a common denominator: They severely challenge manufacturers’ ability to absorb the ensuing shocks and maintain continuity. Just a few years after the pandemic, resilience is being put to the test again. Financially, commercially and — most imminently — operationally. 

Here, the need for manufacturers to take action is most urgent. The following no-regret moves will help them navigate the current volatility and strengthen their resilience in the long run:   

1. Simulate imminent scenarios and their consequences. Manufacturers need to quickly identify and model plausible disruption pathways so their supply chain can make informed decisions. Immediate priority scenarios should focus on key supply chain elements, such as high-revenue and high-volume SKUs or essential raw materials, to assess how they would be impacted under various trade disruption scenarios. 

Manufacturers should also consider the potential interplay of current global trade challenges and future competitive dynamics. For example, an engine manufacturer wanted to determine which suppliers to re-shore to the U.S. while weighing the significant talent acquisition challenges. The team focused on whether competitors would face similar China supply chain exposure and — if by moving early — they could secure for themselves limited U.S. manufacturing capacity, thus creating lasting market advantages.   

2. Uncover hidden supplier risks. When disruption hits, it’s rarely the immediate suppliers that catch manufacturers off guard. Often, the real risk lies two or three tiers deeper — buried in companies’ N-tier network: their suppliers’ suppliers, and theirs in turn.

To manage that risk, manufacturers must trace critical materials and components beyond the first tier of suppliers. They need to connect product, supplier and trade data across all tiers to model cascading effects, such as how a disruption at Tier 3 might ripple up to impact fulfillment timelines or customer commitments.

Without this deeper look, companies risk acting on incomplete information. For instance, assuming domestic sourcing is tariff-proof, when the raw materials are, in fact, imported. That is how shocks become systemic business risks. An example is the value chain supporting U.S. data centers, where servers require materials like gallium and rare earths, on which there is dependency on China with no substitute.   

3. Strengthen digital capabilities. Comprehensive scenario planning and supplier mapping require strong digital capabilities. Manufacturers should prioritize strengthening the following:   

• AI agents are powerful tools for the generation of synthetic scenarios such as demand surges, delays or alternate sourcing options. Manufacturers can use those to reconfigure the order of manufacturing steps or shift demand fulfillment patterns to mitigate risks. Increasingly, autonomous AI agents are showing their value as they monitor real-time data and optimize decision making, for example, connecting risk exposure to new tariff codes.   
• Digital twins are another important enabler. Applied to supplier networks, they allow users to develop simulations of cascading effects, such as how a disruption at a Tier 3 supplier might ripple up to impact fulfillment timelines or customer commitments. Tools like the supply chain stress test pioneered by MIT and Accenture simulates disruptive scenarios virtually. It identifies points of failure, assesses operational and financial impact of such events, and evaluates the efficiency of mitigation plans.   

Strengthening a company’s digital core with AI agents and digital twin capabilities is critical in the long run, too. These capabilities are foundational to reinventing operations and establishing hyper-automated and autonomous factories and supply chains. Eventually, they will enable facilities and processes to self-optimize in response to disruption and continuously refine operations based on real-time data inputs.   

This is a defining moment for the industry. Whichever scenario manufacturers face, investing in resilience will pay off. Manufacturers that lean in now will be better equipped to lead through whatever comes next.

• Tariff Turbulence and the Impacts on Industrial Automation Technologies 
• Smart Inventory, Smarter Manufacturing: The Convergence of Automation and Supply Chain Management 
• Accenture Expands Manufacturing and Supply Chain Capabilities with Staufen Acquisition