Adapting to Tariffs and Supply Chain Uncertainty: A Risk Management Approach

Are tariffs, global instability, or supplier delays putting your operations at risk? In today’s manufacturing environment, planning for uncertainty isn’t optional — it’s essential. California manufacturers face a unique combination of global disruptions, shifting regulations, and regional challenges from tariffs and port congestion to wildfire season and seismic risk. Navigating these pressures demands a proactive, strategic approach to supply chain resiliency.

In this blog, we’ll cover:

• The internal and external risks affecting California manufacturers
• How tariffs work and strategies to manage their impact
• Practical steps to strengthen supply chain resiliency
• Critical roles of compliance, cybersecurity, and workforce agility

By understanding these risks and acting before disruptions occur, manufacturers can strengthen operations and remain competitive.

The Risk Landscape: What Manufacturers Are Up Against

For manufacturers in California and beyond, evolving supply chains are presenting a new, dynamic landscape. What was once predictable sourcing and logistics is now a strategic opportunity for building resilient and agile operations. To build meaningful supply chain resiliency, leaders must first understand the types of risks they’re dealing with.

Internal Risks: Challenges You Can Influence

Internal risks come from within your own four walls. They’re the operational and organizational issues that, while challenging, you can influence and improve. Left unchecked however, they can lead to missed customer deadlines (and penalties), costly reworks, excess inventory or damaging stockouts, and a slow erosion of your competitiveness in the market.

Common internal risks include:

• Process inefficiencies: Quality issues, equipment downtime, or bottlenecks on the line
• Supplier reliability: Poor vendor performance, late deliveries, or quality slippage
• Compliance and IT failures: Cybersecurity vulnerabilities or outdated documentation protocols
• Workforce disruptions: Unplanned turnover, skill gaps, low morale, or insufficient training
• Financial instability: Cash flow crunches and budget overruns

These internal risks don’t just affect the factory floor, but can ripple out into your entire business ecosystem.

External Risks: What’s Beyond Your Control

External risks, on the other hand, are those curveballs thrown from outside your business. Unfortunately, they’ve become more volatile and harder to predict in recent years, and California manufacturers feel this acutely.

Examples include:

• Geopolitical instability: Leadership changes, trade agreements, and armed conflict
• Transportation delays: Driven by shipping lane disruptions, port congestion and labor strikes
• Climate and weather-related events: Wildfires, droughts, hurricanes, floods, and earthquakes
• Demand volatility: Economic swings, consumer pressures or disruptive market competitors
• Tariffs and regulatory changes: Country of origin fees, tariff classification fees, and shipment value compliance

California manufacturers, in particular, are feeling the pinch. Between global sourcing dependencies and regional vulnerabilities, navigating these external factors is an ongoing balancing act.

Tariffs and Trade: What You Need to Know

For many California manufacturers, tariffs can be a make-or-break factor in pricing, sourcing, and overall supply chain resiliency. Understanding how they work and how to manage them strategically is critical in today’s trade environment.

What Are Tariffs?

A tariff (or duty) is a tax imposed on goods imported from another country. In the United States, it’s paid by the importing business (not the overseas supplier) and collected by U.S. Customs and Border Protection at ports of entry. This revenue flow through to the Department of Treasury.

Why this matters for manufacturers:

• Tariff rates can shift quickly based on trade policy
• Small classification changes can significantly alter the duty owed
• Failing to stay current can mean unexpected cost spikes or compliance issues

Almost every country imposes tariffs, and rates are determined by the Harmonized Tariff Schedule (HTS), a globally standardized system of product codes. Every product you import is classified under a specific HTS code which determines the duty rate. For California manufacturers who source components globally, reviewing these classifications regularly is essential, especially if your product design, materials, or suppliers change.

Tariff Mitigation Strategies

When it comes to mitigating tariffs, there are three basic areas to evaluate:

1. Country of Origin (COO): This is an opportunity to de-risk from countries that are designated with high tariff rates and from those regions with geopolitical conflicts that could also pose increased shipping lane risks.
2. Tariff Classification: Tariff engineering is the practice of strategically adjusting a product’s design and/or assembly process so it falls under a more favorable product tariff classification, such as importing parts separately and assembling domestically.
3. Shipment value: Rule of first sale. Many firms may be purchasing their international shipments through sales brokers who upcharge for their services. There is an opportunity to avoid paying tariffs on those increased costs and only pay for the originating manufactured costs.

These are all legitimate, compliance-based ways to optimize costs. The key is partnering with your co-manufacturer, freight forwarder, and customs broker to ensure accuracy and maximize benefits.

4 Practical Strategies to Strengthen Supply Chain Resiliency

Knowing the risks is only half the battle. What matters most is how you respond.

Manufacturers that weather disruption successfully are those that take proactive, structured steps to safeguard their supply chains before problems arise. The following strategies are drawn directly from proven practices that California manufacturers can adopt today.

1. Supplier Relationship Management & Risk Assessment

Treating suppliers like interchangeable order-takers is a short-sighted strategy. When disruptions hit, you want partners with boots on the ground who will help you problem-solve because your success matters to them.

Best practices include:

• Develop long-term partnerships: Work toward mutual goals rather than one-off orders
• Collaborate on contingency planning: Build joint playbooks for handling disruptions
• Maintain transparent communication: Ensure you’re the first to know about potential delays or shortages
• Implement supplier scorecards: Evaluate financial stability, delivery performance, compliance records, and geopolitical risk
• Conduct scenario planning: Assess the likelihood and potential impact of different disruption scenarios

When your suppliers understand that their performance is tied to your success — and vice versa — you’re better positioned to adapt quickly.

2. Smart Inventory Planning

Think of inventory as both a cost center and a lifeline. Get it wrong, and you either tie up too much cash or leave yourself exposed to supply interruptions. Get it right, and you buy yourself valuable breathing room when external events cause delays or shortages.

Options to consider:

• Front-load critical inventory to buy time while qualifying alternate suppliers.
• Adopt a “just-in-case” model for high-risk items, keeping higher stock levels as a buffer.
• Leverage Vendor-Managed Inventory (VMI) to shift storage and replenishment responsibilities upstream.
• Use ERP/MRP systems to integrate real-time data into purchasing and production decisions.

The goal is agility — the ability to adjust quickly without overcommitting resources.

3. Logistics Flexibility & Supply Chain Visibility

Transport disruptions can devastate even the most efficient manufacturing operation. Improving both the flexibility of your logistics and the visibility of your supply chain is essential for resiliency.

Key actions:

• Diversify transport modes: Rail, truck, air, and sea each have unique advantages and risk profiles
• Partner with 3PL providers: Gain flexibility in warehousing, order fulfillment, and last-mile agility
• Adopt dynamic routing: Use real-time data to adjust shipment paths on the fly
• Implement tracking technology: Visibility from supplier to customer allows faster intervention

Greater visibility means you’re not blindsided; and flexibility means you can pivot when needed.

4. Financial Risk Tactics for Supply Chain Resiliency

Financial planning is as much a part of supply chain resiliency as physical infrastructure. Unexpected duties, currency swings, or supplier failures can undermine profitability without a safety net.

Mitigation strategies include:

• Utilize Foreign Trade Zones (FTZs) to store, process, or assemble goods without paying duties until they leave the zone.
• Leverage tariff inversion when finished goods are taxed at a lower rate than raw materials.
• Invest in supply chain insurance covering disruptions from natural disasters, political unrest, or cyber incidents.
• Diversify geographically to avoid overreliance on suppliers from a single region.

By diversifying both your sourcing and financial exposure, you protect your margins as much as your operations.

Bottom line: Resiliency is built on proactive investment in relationships, data, infrastructure, and planning. The manufacturers who implement these strategies before they need them are the ones most likely to emerge stronger when disruptions occur.

Compliance, Cybersecurity, and Workforce Agility

Strengthening the legal, digital, and human elements that keep your operation running smoothly is a critical aspect of supply chain resiliency that you can’t afford to overlook.

Here’s how to do it...

Staying Ahead of Regulatory Changes

Trade laws and compliance requirements can shift overnight, especially when tariffs or international agreements change. For California manufacturers importing regularly, the cost of being reactive can be steep.

Proactive steps like these can soften the blow:

• Develop internal compliance programs that are integrated into daily operations, not just annual checklists.
• Regularly review contracts to ensure alignment with current regulations.
• Engage legal counsel early to anticipate and prepare for policy changes.
• Consider CTPAT certification to reduce customs inspections and speed processing at ports.

Cybersecurity as a Core Resiliency Pillar

Supply chains are increasingly digital, making them vulnerable to cyber threats that can halt production or compromise sensitive data.

• Evaluate your vendors’ cybersecurity practices as thoroughly as their delivery performance.
• Implement industry-recognized frameworks to protect ERP systems, supplier portals, and shared data platforms.

Closing gaps is essential. A single weak link in your supplier network can become an entry point for cyberattacks.

Workforce Strategies that Support Supply Chain Resiliency

Your people are the most adaptable part of your operation when disruptions hit.

• Cross-train employees so they can fill multiple roles in a pinch.
• Adopt remote or flexible work arrangements where feasible.
• Invest in upskilling and reskilling to keep pace with new technologies.

While systems and software need time to adapt, a well-prepared workforce can often adapt much faster.

Start Building Supply Chain Resiliency

Supply chain resiliency isn’t built in a day. It’s the result of consistent planning, informed decision-making, and strong partnerships. From identifying and mitigating risks to leveraging tariff strategies, inventory planning, logistics flexibility, and workforce readiness, the strategies in this blog can help California manufacturers strengthen their operations against uncertainty.