Best Practices For Sourcing Products During Economic Changes

Dollar Tree’s $200M tariff problem is a preview of what’s coming for all U.S. retailers and Dollar Tree responded with a masterclass in real-time supply chain strategy. Tariffs added $70 million in unexpected costs last quarter for Dollar Tree Stores. Over the full year, they expect the impact could hit $200 million. For any business, that’s a massive blow to profitability. But what stood out wasn’t the challenge, it was the response. To mitigate these pressures, Dollar Tree is activating a five-pronged strategy it has refined over the past several years. These levers include: → Negotiating with suppliers → Respec’ing, or modifying, products to lower the cost → Shifting country of origin → Dropping noneconomic items → Leveraging their expanded multi-price capabilities to pass along selective increases Dollar Tree used these levers to offset 90% of the initial 10% tariff announced in February and is actively applying the same strategy to subsequent tariff changes. The company’s approach is a good example of how agility is not optional, it’s existential for many companies. Especially in a world where policy risk, geopolitical shifts, and supply chain disruptions continue to arrive unannounced. At the heart of Dollar Tree’s strategy is its longstanding commitment to sourcing products at the lowest landed cost. While China remains an important part of its supply chain, the company is actively diversifying its sourcing footprint and is prepared to further shift origin points as tariff conditions evolve. Despite rising tariffs, global sourcing remains a foundational pillar of its business model, enabling Dollar Tree to consistently deliver value, convenience, and discovery to its customers regardless of the broader macroeconomic or policy landscape. Lesson: When the storm hits, it’s too late to build a boat. Build your playbook in calm waters.

It is now clear that peak globalization is over and that the upcoming decade will be defined by mercantilist industrial policy on all sides. While we can argue about what tools of industry policy are appropriate for the US and how they should be applied, the bottom line is that we are officially in a new era. Leaders and supply chain execs need to quickly move past “what is happening” and “why is this happening” to “what do I need to do about this to ensure the success of my business for the next 25 years.” These are some of the best practices we are seeing:  • Wait and see is the wrong strategy. Speed to relationship with new suppliers is critical, especially in categories where there is limited domestic capacity.  • Lean in to relationships with your current US suppliers, they are getting more inbound demand and you need to stay a priority. • Dual source or align secondary sources of supply on as many components as possible. Single-source is too big of a risk, even for your US suppliers. • Weigh production ramp lead times vs. total cost of ownership with overseas purchases to prioritize the highest-impact work transfers. • Look at your team and processes to ensure you have the ability to get quotes from multiple suppliers quickly. Agility will be key as tariff rates continue to shift. Don’t miss the moment, market share will be won and lost in the next 3-6 months. Read our full perspective here: https://lnkd.in/gJHXYFcF

During times of tariffs and trade uncertainty, e-commerce businesses face significant challenges, including increased costs due to import duties, unpredictable pricing for goods, potential delays in shipments, and consumer anxiety about price fluctuations, often leading to hesitant buying behavior and impacting overall sales and business planning. Key impacts on e-commerce during tariff uncertainty: 1. Higher product prices: Tariffs directly increase the cost of imported goods, forcing e-commerce sellers to raise prices for consumers, which can lead to reduced demand, especially for price-sensitive items. 2. Supply chain disruptions: Fluctuating trade policies can lead to delays in shipments, causing inventory issues and impacting delivery times, potentially frustrating customers. 3. Market volatility: Uncertainty about future tariff changes can make it difficult for e-commerce businesses to plan inventory levels and pricing strategies, leading to potential losses if they miscalculate market trends. 4. Consumer hesitation: When consumers are aware of potential price increases due to tariffs, they may delay purchases, leading to decreased sales for e-commerce businesses. 5. Shifting sourcing strategies: Businesses may need to explore alternative sourcing options to mitigate tariff impacts, potentially requiring new supplier relationships and logistics adjustments. How e-commerce businesses can navigate and action tariff uncertainty: A1. Transparency with customers: Clearly communicate price changes to customers, explaining the impact of tariffs on product costs. A2. Diversify sourcing: Explore options to source goods from multiple countries to minimize dependence on a single source impacted by tariffs. A3. Inventory management: Optimize inventory levels to manage fluctuations in demand and potential supply chain disruptions. A4. Data analysis: Monitor market trends and customer behavior closely to adapt pricing and product offerings accordingly. A5. Engage with policymakers: Stay informed about trade policy developments and advocate for policies that support e-commerce businesses.