On December 15th, the U.S. is still set to impose tariffs on Chinese goods. All industries are at risk –especially apparel since about 4.3 billion meters of clothing fabric was produced in China in September alone! Now more than ever, clothing apparel brands need to formulate a plan of action to protect their businesses. In order for clothing brands to survive tariff increases, they will need to select at least one of the following options listed below.
#1 ABSORB COST
Not every business has this luxury, but if your margins are large enough to remain profitable. Absorbing the cost is a short-term option, and you will need to determine how long you can withstand the extra cost. While lower profit margins aren’t desirable, you will remain competitive, and your consumers won’t have to bear the price increases.
#2 INCREASE PRICING
If your margins don’t permit you to absorb an increase, another option is to raise product pricing as soon as the tariffs take effect. This option does come with the risk of losing customers and contracts, but it is a temporary way to cover additional costs.
#3 NEW SUPPLY CHAIN PLAN
Out of the three options, reworking your supply chain is a long term option. Diversifying your supply chain can avoid tariffs altogether, by rerouting products away from countries and suppliers who are subject to the current increase. Moving operations does not come without risk; it can delay shipments, affect lead times, and product quality. But in the longterm, you mitigate unexpected future threats such as new geopolitical issues, extreme storms, and natural disasters.
Don’t be afraid to branch out!
Diversifying your supply chain may seem intimidating when strategizing about how to manage new resources–such as factories, and suppliers. But supply chain software like the Suuchi GRID has the capability to connect your supply chain and all its parties.