Blog Post
The global trade landscape is shifting rapidly, New tariffs and constant trade policy changes create uncertainty for wholesalers and manufacturers.
Trade policy actions—and reciprocal tariffs—are moving so quickly that your playbook for responding to them could be out of date by lunchtime. Recent changes, like the temporary pause on new tariffs in the USMCA (United States, Mexico, Canada Agreement), bring some hope. But they also remind us that policy shifts can occur suddenly.
Tariffs and trade disputes are out of your hands. But how you respond matters. Your actions will affect your profits and customer satisfaction. These fast-moving shocks to your supply chain, current customer contracts, and profit margins require more than reactive efforts.
The key to mitigating risk and navigating tariff-related disruptions effectively is to build adaptability, automation, and intelligence into your order fulfillment process.
Harnessing the rapid pace of AI innovation can give your company a leg up on supporting high levels of customer service. By keeping your company one step ahead of new disruptions it can also give you a competitive advantage to win new business.
Understanding the Impact of Tariffs on Distribution and Manufacturing
What Tariffs Mean in Practical Terms
Tariffs are taxes on imported goods that increase costs for businesses that rely on global supply chains. Extra costs can hurt profit margins for wholesale distributors and manufacturers. They can also disrupt supply chains and require rapid renegotiations of customer contracts. North American markets and US-China trade routes are hit hardest today. European and other global markets also face a lot of uncertainty. This needs quick and smart responses.
Most tariffs don’t provide relief for any sales orders or pricing commitments you’ve already made. For a wholesale distributor, this means if you signed a contract with your customer to sell a product for $1,000, that was originally imported from supplier, for $900, a 25% tariff on your import would turn an 11% gross margin into a 12.5% loss. Manufacturers have a similar challenge, but often their biggest pain point is with potential tariffs on raw materials or intermediate goods.
The main point is this: any sales contracts you've signed can turn into negative margins. This happens if you depend on imported goods that now have tariffs.
Options to Protect Profit Margins
Existing customer contracts pose the biggest challenge to maintaining margins. Many supply chain teams are trying to find new suppliers. However, they may not do it quickly enough for all important products and parts. This delay could hurt profit margins. Most companies don’t have the luxury of absorbing 25% more in input costs.
Force majeure may be the most practical way in the short term. Most contracts include a legal clause that lets you cancel obligations if impacted by major events outside either party’s control. New tariffs that arise after you sign the contract would typically qualify. (Of course, please consult your own legal counsel before considering this way.).
At the recent NAW Executive Summit, a CEO panel of key distributors reached a consensus. They said they would need to use force majeure clauses to change or exit contracts. This would happen if new import duties lead to financial losses based on their original sales agreements. This underscores the importance of having a structured approach to handling tariff-related disruptions.
The Operational Challenges: Cost, Time, and Complexity
Researching Impacted Products and Customer Contracts
Tariffs do not apply uniformly across all products, making it essential for companies to conduct detailed part number-level analyses. Finding affected items and assessing their fiscal impact is a resource-intensive process.
Searching for Alternative Suppliers
Shifting suppliers is not as simple as finding lower tariffs. Businesses must evaluate alternative sources based on cost, quality, lead times, and regulatory compliance. Establishing new supplier relationships adds further complexity to an already challenging situation.
Renegotiation of Customer Contracts
If Tariffs break the economics of current deals, businesses will have to renegotiate. This means they will need sell those same products at higher prices. And potentially expose the business to new competitive bids too. This process requires considerable time and effort, particularly when sales, customer service, and supply chain teams are already stretched thin.
Immediate Priorities for Customer-Facing Teams
To handle changing trade policies, customer-facing teams should focus on three main priorities. First, they need to lower operational costs. Second, they should free up time for important negotiations. Lastly, they must prevent costly mistakes and outdated pricing in sales orders. This way, they can balance serving customers and meeting profit targets.
Lowering the Cost to Serve
Since not all buyers will accept the full cost of tariffs added to the new price , companies need to cut operational expenses. This helps protect their profit margins. A great way to cut costs and boost efficiency is by automating manual tasks. Minimizing order errors through automation also lowers the cost serve. The fully loaded cost of each order error is $18,000 on average, including its impact on customer churn. Adding automation that saves labor and reduces costly order errors helps avoid expensive rework, returns, and disputes that hurt profits.
Freeing Up Time for Renegotiations and Issue Management
Customer service and sales teams must dedicate considerable time to navigating the complexities of tariff-driven pricing adjustments, supplier evaluations, and contract renegotiations. However, these same teams are already overwhelmed with managing day-to-day order processing and customer inquiries. It's vital to free up their time.
This lets them focus on managing customer relationships that are vital to protecting and growing revenue. The key to success is automation. It cuts out manual data entry, reduces status updates, and streamlines order management workflows. AI-powered sales order automation can free up to 50% of your team’s time each day.
Correcting Pricing Errors in Inbound Purchase Orders (POs)
Tariffs lead to sudden price changes and disrupt supply chains. So, errors in inbound POs happen more often. Incorrect part numbers, missing product details, outdated pricing, and incorrect shipping information can all lead to costly mistakes. Each of these errors results in delays, customer dissatisfaction, and unnecessary costs. Using AI for anomaly detection can stop issues before they start. This ensures orders are accurate and follow current pricing rules.
The Conexiom Ideal Order Platform
The Conexiom Ideal Order Platform meets three key needs. It helps wholesale distributors and manufacturers handle uncertainty. At the same time, it boosts operational efficiency and customer satisfaction.
Lowering Cost to Serve: by achieving 85% or greater touchless order processing, Conexiom dramatically reduces the cost to serve. By cutting the need for manual data entry and reducing order errors, businesses can protect their margins even in a high-tariff environment. This reduction in labor-intensive tasks translates into significant cost savings and improved profitability.
Freeing Up Time: the platform frees up to 50% of a customer service rep’s workload by automating order capture and minimizing back-and-forth troubleshooting. This extra time helps sales and customer service teams. They can now focus on tariff impact assessments, supplier negotiations, and customer contract renegotiations. This way, important discussions get the attention they deserve.
Correcting Pricing Errors: Conexion's AI finds and fixes mistakes in purchase orders. By using AI anomaly detection and real-time checks against the master ERP data, it saves your team from accidently accepting outdated prices and other compliance issues. These errors may become more common as contracts are renegotiated often. Businesses no longer need to manually fix mistakes. Pricing errors, wrong part numbers, and unit-of-measure mismatches are flagged and resolved right away. This helps prevent costly problems later on.
Key Steps to Prepare for Ongoing Tariff Uncertainty
To stay ahead of the curve, wholesale distributors and manufacturers must take deliberate steps to adapt and prepare for continued trade policy changes.
Strengthening Policy and Market Intelligence
Staying informed is the first line of defense against unpredictable tariff shifts. Industry organizations like National Association of Wholesale Distributors (NAW.org) and National association of Manufacturers (NAM.org) provide valuable updates on trade policy developments, equipping businesses with the knowledge they need to make proactive decisions. Keeping an eye on global trade negotiations and emerging legislation can help businesses predict disruptions before they occur.
Revamping Contract Management Strategies
To avoid being caught off guard by sudden tariff hikes, businesses should conduct a comprehensive audit of their contracts. Understanding the flexibility of pricing structures and the presence of force majeure clauses can provide a clear roadmap for renegotiation when necessary. Implementing AI-powered contract management tools can help track tariff-related changes and ensure compliance with updated terms.
Improving Supplier Diversification
Reducing reliance on a single supplier or region can mitigate the risks associated with trade policy changes. Developing relationships with multiple suppliers—both domestic and international—can offer backup options when tariffs change existing sourcing strategies. Having pre-vetted alternative suppliers in place ensures that businesses can react quickly when supply chains are disrupted.
Automating Operational Processes
Automation is no longer optional—it is essential for businesses looking to reduce costs and increase agility. Automating sales order capture and processing cuts down on human error. This helps companies use resources better. Teams can then focus on strategic tasks instead of routine admin work.
Investing in Long-Term Agility
Businesses should invest in technology that helps them adapt to future disruptions. Integrating ERP, CRM, and sales order automation systems helps data flow smoothly. This boosts operational efficiency and gives companies the agility to succeed in uncertain times.
Harness AI for More Zero-Touch Orders and Root-Cause Solutions
To better understand how Conexiom can help businesses protect margins and support customer satisfaction amid tariff uncertainty, explore the Conexiom Ideal Order Platform or Speak to Our Experts today.