Insight

Optimizing Procurement Strategy in the Face of Rising U.S. Tariffs

Focus Area/Service

Procurement Strategy

The growing prevalence and fluidity of protectionism and tariffs across the globe mean that a proactive procurement strategy is no longer optional — it is essential for business survival and competitive advantage.

U.S. Tariffs & the Impact on Procurement

Organizations now contend with a three-headed challenge concerning cost increases, supply chain disruptions, and operational challenges:

Vendors pass higher raw material and indirect costs downstream, squeezing margins at every supply chain level.

Longer delivery times, unreliable suppliers, and higher global sourcing risks cause major supply chain disruptions while organizations quickly reshape their procurement networks.

Price volatility, complex contract negotiations, and evolving compliance requirements create intensified operational challenges for procurement leaders.

These challenges fundamentally alter approaches to geographic sourcing strategies. Organizations that once optimized for lowest unit cost now prioritize supply chain resilience, leading to increased interest in onshoring and nearshoring options. The total cost of ownership calculation has expanded to include tariff risk as a quantifiable factor in sourcing decisions.

Direct vs. Indirect Procurement: Unique Challenges

Direct Procurement

Direct procurement faces particular vulnerability to tariffs due to reliance on imported goods. The impact can be immediate and severe. When tariffs are imposed on essential manufacturing inputs like steel, aluminum, or electronic components, production costs can surge overnight. Supply chain diversification continues to become critical for risk mitigation with many organizations shifting sourcing from high-tariff regions to alternative locations.

The manufacturing sector illustrates this challenge. When faced with tariffs on critical inputs, production facilities must choose between absorbing significant cost increases, passing costs to customers, or undertaking the complex process of qualifying new suppliers. Organizations have implemented sophisticated strategies to manage these challenges, including:

Developing multi-sourcing relationships across different geographic regions

Negotiating volume-based price protections with clauses addressing tariff impacts

Exploring material substitutions or engineering redesigns to reduce dependence on tariffed inputs

Creating hedging strategies for commodities subject to price volatility

Implementing just-in-case inventory approaches rather than just-in-time for critical components

Indirect Procurement

Indirect procurement is often overlooked in tariff mitigation strategies, creating a blind spot in organizational planning. While not immediately obvious, tariff-driven cost increases inevitably ripple into software, facilities management, logistics services, and other operational expenses.

The contractual landscape presents additional hurdles, as many indirect supplier agreements lock in multi-year terms with limited flexibility, making price adjustments difficult to implement when external economic conditions change. Unlike direct materials where price adjustments might be expected when tariffs hit, indirect service providers often renegotiate existing deals to account for the cost of rising tariffs.

Organizations must recognize that tariff impacts extend far beyond direct materials and develop comprehensive strategies that address both direct and indirect procurement categories.

Key Strategies to Optimize Procurement Amid Tariffs

Proactive Cost Management & Supplier Strategy

Successful organizations must take decisive action to mitigate the financial impact of tariffs and supply chain disruptions. Spend categorization helps companies assess exposure by identifying affected suppliers and products, thus enabling strategic renegotiations or alternative sourcing. Supplier Mapping enhances visibility into the supply chain, allowing businesses to identify risks. Additionally, membership in Group Purchasing Organizations (GPOs) and relationships with Value-Added Resellers (VARs) can secure more favorable terms through collective buying power.

Scenario Planning & Cross-Functional Alignment

Forward-thinking procurement teams develop detailed tariff impact scenarios that model potential cost increases, supply chain disruptions, and supplier shifts to inform strategic planning across departments. Organizations should align teams to ensure consistent risk mitigation approaches and prepare for multiple potential outcomes. This fundamental shift from deterministic planning to multi-factor probabilistic planning forces organizations to contend with a new wave of uncertainty.

Supply Chain Diversification & Risk Management

Supply chain resilience requires evaluating nearshoring and reshoring opportunities based on total cost of ownership rather than unit price alone. Organizations should develop multi-supplier relationships across different geographic regions to reduce reliance on high-tariff sources and create contingency options for critical components.

Leveraging Procurement Technology

Modern procurement platforms like Coupa and Ignite deliver powerful solutions for navigating tariff complexities. These integrated systems streamline spend management while providing the analytical insights needed to adapt your procurement strategy in real time.

Leading solutions like Coupa now incorporate artificial intelligence to automate routine purchasing tasks, freeing procurement professionals to focus on strategic supplier relationships. These AI capabilities also enhance decision-making by identifying alternative sourcing options and predicting potential tariff impacts before they affect the bottom line.

By implementing these technology solutions, procurement teams gain the essential visibility and agility required to respond effectively when tariff announcements impact key supply categories. The investment in procurement technology transforms from a cost center into a strategic advantage by enabling faster, more informed responses to changing trade conditions.

Long-Term Planning & Governance

Organizations should unite procurement, finance, legal, and supply chain leaders to develop immediate, tactical, and strategic plans to address tariff volatility:

Immediate (0-3 months): Conduct comprehensive spend analysis, review all contracts for tariff clauses, map suppliers by geographic risk, identify alternative vendors in lower-tariff regions, and engage GPOs for immediate cost relief.

Tactical (3-12 months): Rationalize the supplier base, consolidate volumes with tariff-advantaged partners, launch structured RFPs to test market pricing, implement cost benchmarking, and accelerate nearshoring for high-risk categories.

Strategic (12+ months): Diversify manufacturing footprint across multiple regions, implement automation to offset labor cost differences, and develop predictive analytics capabilities to anticipate future trade policy shifts.

Throughout each phase, establish metrics and accountability by creating tariff impact scorecards with clear KPIs for measuring procurement’s effectiveness in mitigating tariff costs across business units.

Looking Ahead

Tariffs create uncertainty in the global marketplace, making strategic agility crucial for procurement success. The financial impact of tariffs can be substantial — a 25% tariff on key inputs can eliminate profit margins entirely for companies operating in competitive markets with thin margins. This reality elevates procurement from a tactical function to a strategic imperative requiring C-suite attention.

Leadership involvement and comprehensive strategic planning provide the foundation for effective tariff management. Organizations must establish governance structures that enable rapid decision-making when tariff announcements occur, with clear approval authorities and escalation paths.

Information quality becomes paramount in this environment. Organizations should develop reliable intelligence networks comprising industry associations, trade advisors, customs brokers, and logistics partners who can provide early insights into potential tariff changes. Harmonized Tariff Information from the U.S. International Trade Commision serves as a definitive reference ongoing tariff news, updates, and announcements.

While much will be written about tariff impacts as trade policies evolve, organizations can only control what falls within their sphere of influence. The procurement function stands at the intersection of external market forces and internal operations, uniquely positioned to create competitive advantage through effective tariff management.

By partnering with specialized procurement experts and taking a structured, proactive approach to tariff management, procurement can shift from an administrative function to a strategic driver of value – especially in times of uncertainty. Organizations that remain proactive will navigate the challenging global trade environment more successfully than competitors who merely react to tariff announcements after they occur.

Acquis works with global organizations to develop, adapt, and optimize procurement strategies. As trade environments continue to shift, Acquis procurement experts can help to generate measurable and pragmatic solutions for your team. Learn more →