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This is the first in our series about how CFOs are dealing with uncertainty across the business, political, and economic landscape. Check back frequently for more stories in this series.
You’ve done everything right. You stopped your screentime an hour before bedtime. You got blackout curtains. The white noise machine is humming along splendidly.
Then suddenly: You bolt upright in bed, thinking about your company’s supply chain resilience and its susceptibility to uncertainty. (Just CFO things!)
We don’t have to tell you what’s driving supply chain uncertainty right now. All the usual suspects still apply—from natural disasters to geopolitical conflict to cybersecurity concerns—but now there’s also the T word.
“The big thing that’s challenging us today with these tariffs is that the situation is just so dynamic,” Ted Stank, co-executive director of the Global Supply Chain Institute at the University of Tennessee Knoxville’s Haslam College of Business, told CFO Brew. And as long as the temporary moratorium on China tariffs holds, “what that means for a supply chain manager having to make decisions about what we’re going to buy over the next three months is total uncertainty,” he continued.
But savvy companies launched tariff mitigation plans yesterday. (Or, more precisely, a few years before yesterday.) For the state of your sleep schedule, we hope your company is one of the lucky ones, but it’s not too late to improve communication between your supply chain and finance teams (and that’s where the “luck” really lies) to help mitigate supply chain uncertainty.
Becoming the lucky ones. Any company that pivoted its supply chain reliance away from China, just for a totally random example, is the envy of everyone who didn’t. But really, those kinds of strategic pivots are likely the result of a broader supply chain strategy—one that prioritizes communication and healthy risk-taking.
“You’d be amazed how many companies, if you just go through [a supply chain] mapping exercise, get surprised about where they might be exposed,” Lance Saunders, a professor of supply chain management at UTK’s Haslam College, told CFO Brew. “They all know who their suppliers are, but they don’t know who their suppliers’ suppliers are, or their suppliers’ suppliers’ suppliers,” Stank added.
While lots of companies worry about the exact likelihood of a certain supply chain disruption occurring—is it a 24% or 25% chance of a weather disruption in the eastern region this year?—the “special sauce” is actually considering every (like, every) possibility, Saunders explained. “If you don’t understand what could happen to your supply chain, you’re implicitly assuming the chance of it happening is zero,” Saunders stressed.
Price check. To avoid that pitfall, one of the first things Stank suggests is developing “a really granular total cost model. One of the things that restricts [supply chain leaders] a lot of times in doing different things is that CFOs often don’t like to see things like cost avoidance in a total cost model.” But the more elements you can include, the closer you can get to an exact(ish) number, Stank stresses, which benefits everyone.
“You’re never going to get an exact number, but if you can put ranges—what happens to revenue if we have this disruption, what happens to cost if tariffs go to X percentage—the more that we can play with that, do that kind of scenario planning, the more we will be prepared for whatever eventuality comes down the pike,” he said. “If you’re prepared, forewarned is forearmed.”
The special sauce. And that can be the proverbial special sauce. For CFOs, an effective playbook against supply chain uncertainty in 2025 will mean offering a receptive ear to solutions with up-front costs that might pay off in the long run, Stank and Saunders agreed.
Stank cites a company he worked with that shifted its supply chain away from China during Trump 1.0 because it looked like a potential risk area in 2016, and moved operations to Vietnam. Companies that used similar tariff mitigation strategies look like geniuses today. Now, Saunders says that “while a lot of their competitors are still to a large degree exposed to China, they’re very much not,” and they’re now “looking at that as a way to actually increase market share, potentially.”
When it comes to tariffs and sourcing solutions, Stank noted that “most of the sourcing professionals I know are looking [on a] scenario-by-scenario basis, and trying to build that total cost model and say, ‘This is where there are legitimate suppliers, and compared to everywhere else, if you include the cost of disruption and potential tariff costs, this is a good choice.’”
More broadly, Stank sees the “creative tension between the financial side and the supply chain side.” Some companies might agonize over making the “wrong” decision as supply chain leaders vouch for an operational decision and CFOs try to appease shareholders, he noted.
But the real worst case scenario “is to get in a position where we’re frozen and we can’t make a decision, and we’re just going to stick with what we have, hoping that things work out [for] the best,” Stank said. “And that’s not a strategy.”