Many public companies say they are straying to the Trump administration's tariff push, but they haven't lie. Negotiating cost concessions from vendors, enacting parts resources, supply chain efficiency measurements, tightening cost controls, increasing production of domestically made products, and increasing prices for some finished products are all part of the company's game plan.
Increases tariff induction costs It also encourages CFOs to adjust their capital allocation, often causing repeated projects, Michael Perica (pictured above) tells the CFO of Rimini Street, an enterprise IT support and services company specializing in large ERP systems.
Certainly, the fluid trade policy environment presents a dilemma for financial directors. Short-term moves to offset policy fluctuations could redirect resources from praiseworthy long-term goals, such as creating more resilient supply chains to withstand future economic disruptions.
How can businesses deal with fluctuations in trade policy and ensure future resilience in their supply chains? IT investments and upgrades will be an important part of adapting to rapid, cost-effective trade policy changes. Katie Kuehner-Hebert asked Perica some insight into why it is.
One solution to the tariff disruption we see is to invest in local suppliers. What are the advantages and disadvantages?
Partnering with local suppliers helps reduce transportation costs, improve lead times and increase operational agility while reducing exposure to tariffs and supply chain disruptions. However, local procurement can involve higher labor and production costs, and requires a careful assessment of the ROI to the CFO. Government incentives and tax benefits can offset these cost differences, provide pricing stability and help to provide better control over the supply chain. Reducing dependence on overseas suppliers will also increase resilience to global disruptions such as the pandemic and geopolitical tensions.
Furthermore, bringing production closer to home will encourage collaboration, drive innovation and support R&D growth between manufacturers, research institutes and technology developers.
What role does CFOs play in helping them manage what could be the deglobalization of trade?
Ideally, supply chain visibility will be available, allowing CFOs to make data-driven decisions about sourcing and logistics. For example, in an uncertain trade environment, enterprise-wide analysis can improve forecasting and cost modeling. Automated compliance tools can also help manage evolving tariffs, regulatory changes and tax impacts. Companies that consolidate funding, management and procurement through it will gain a competitive advantage in the age of deglobalization.
However, you need to take into account rising cloud costs and vendor challenges, such as vendor lock-in, forced migration, and forced upgrades that could break custom configurations. By optimizing spending on core IT infrastructures such as ERP systems, businesses can reduce unnecessary costs and improve operational resilience. This approach unlocks resources for innovation and innovation in revenue-generating technologies for customers.
How will technology and automation restructure financial planning in the degloblazed world?
AI and predictive analytics will strengthen scenario planning for trade policy change. Flexible financial systems that can be customized to your business model allow real-time adjustments to the tariff and global pricing models, eliminating costly decisions associated with delayed data availability.
In a fragmented trade environment, companies investing in technology to develop holistic, enterprise-wide AI capabilities can achieve greater cost savings, operational agility, and better decision-making. However, it is essential that the operating entities do not commit to the AI strategy of a single vendor prisoner. Flexibility can be costly and allows organizations to be permanently placed behind the technology curve.
Will CFOs shift to a more flexible budgeting model to handle the uncertainty of global trade?
CFOs prepare multiple emergency scenarios to more effectively manage tariff fluctuations and supply chain disruptions. As trade policies evolve unpredictably, more frequent budget adjustments will also be required. Companies will focus on measuring cost-effectiveness and optimizing operational spending, and financial planning will increasingly require sensual collaboration to coordinate trade, finance and supply chain strategies.
