Guiding a Manufacturing Business through Tariffs: Webinar Recap

Joining Homkes on the panel were Chuck Orzechowski, CEO of the Chief Operating Officer Business Forum (COO Forum) and Chris Azur, president of Warwood Tool, a West Virginia manufacturer of hammers, axes, crowbars and other industrial hand tools.

During the hourlong session, panelists discussed communications strategies, planning options, inventory management and motivating teams. A few key pieces of advice emerged.

Stop Planning, Start Preparing

Homkes said the market is changing too quickly to expect longer-term plans to survive the moment, but companies can pick a direction and prepare for possible outcomes.

“You can’t plan for tariffs because we’re going to change, but you can prepare for them,” Homkes said. “And the biggest shift is we’re going to have to make decisions based on beliefs, not waiting for established facts. ... By the time something becomes an established fact, there’s no insight, and that might change tomorrow. So, spending time with your team to articulate your beliefs, really think about optimizing for directions, not just destinations.”

For example, if a leader says she believes costs on raw materials will go up 20% during the next six months, a company can plan for that level and adjust if the true number is higher or lower. Stating that belief clearly and openly gives everyone on the team a sense of expectations and a responsibility to pivot if that number later feels too low or too high.

Talk to Everyone in Your Organization

Orzechowski said leaders should look for insights from a variety of sources – news sites, economic reports, social media, etc. ... But, a great source of insight can come from your own organization. Most companies have employees with different political views, different socioeconomic statuses and different backgrounds. Actively seeking out opinions from that diverse group can be extremely valuable.

“You can get some really great unconventional insights from just walking your floor, talking to your machinists, asking them how are the castings machining. You might be picking up on some supply changes [that imply] suppliers might be cutting corners,” Orzechowski said. “Go talk to your receiving people, what are they seeing in the packaging that’s coming inbound. Are you seeing a shift in perhaps the quality of packaging? Talk to your buyers, your accounting team, talk to truck drivers, what are they seeing and what are they feeling?”

Management experts have long suggested turning to front-line workers for advice on how to improve operations, and Orzechowski said your workforce can be an underrated source for insights if you take the time to listen.

Work with Your Vendors

Azur was the most optimistic about tariffs, as the policies could help his company, which gets the vast majority of its raw materials from U.S.-based suppliers. The environment has presented some challenges for Warwood – it’s raw materials and finished goods inventories are higher than he’d like – but the overall market conditions are good.

His key advice was to work with suppliers during these disruptive times. Companies that had been relying on imported raw materials are looking for new U.S.-based options, and that’s creating big opportunities for domestic companies hoping to expand. Several of those, he added, have gotten very creative in ways they can support their customers.

“We actually recently switched one of our major vendors for almost all of our raw materials because we were able to negotiate,” Azur said. “They’re buying inventory for us, almost 12 months out on some of our products, and then they hold it for six months without charging us. And, as we draw upon it, we then begin to get invoiced and then we’ve got great payment terms. So, [I] definitely just encourage you to look for new vendors. Don’t say, ‘I’ve used this person for 30 years, so I’m going to keep going.’”

The May 7 webinar was the first of four tariff-related webinars planned by Endeavor Business Media’s Manufacturing Group. The next, to be held on June 8, looks into the costs of reshoring manufacturing to the U.S. We’ll be talking to site selection professionals, machine tool market experts and construction engineers about how quickly companies will be able to build new capacity, and how costly those efforts will likely be.