TIO Weekly MEMO

Small bursts of info + the TIO Poll.*December 6*

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TIO
December 06, 2024

This culture of hyper-collaboration leads to a stifling environment where innovation is suffocated by the need for unanimous approval. Decisions that should take minutes end up dragging on for hours—or even days—because everyone feels compelled to weigh in, no matter how trivial the matter.

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Success follows those adept at preserving the substance of the past by clothing it in the forms of the future.

- Dee Hock

Dee Hock is widely known as the founder of Visa, but his influence extends far beyond financial services.

In the 1970s, he envisioned and created a decentralized, cooperative structure that ultimately led to the formation of Visa, a global financial network linking thousands of banks around the world. Hock’s key innovation was introducing a “chaordic” organization, blending elements of chaos and order, to foster innovation and collaboration without traditional hierarchical structures.

In his book One from Many, Hock explains his approach to leadership and organizational structure through the concept of "chaordic."

In step with Dee Hock’s, ability to recognize the opportunity in seemingly chaotic situations, this Game Of Thrones character pumped out an iconic quote to describe perspective as only he could.

Click the below to check out the scene.

The Scenario: Imagine you've built a successful consumer brand with a finely tuned supply chain, mostly reliant on a single country for manufacturing. Then, without warning, trade tensions escalate, and tariffs spike by 25%, threatening to cut deep into your profit margins.

This is precisely what happened to e.l.f. Beauty back in 2019, when the U.S. slapped hefty tariffs on goods imported from China. At that time, too many of e.l.f.’s products were sourced from Chinese suppliers, a massive vulnerability exposed overnight.

The Response: Instead of panicking, e.l.f. saw the situation as a challenge to innovate.

They pulled multiple levers to counteract the impact: renegotiating with suppliers for cost concessions, leveraging favorable foreign exchange rates, and strategically raising prices on certain product lines.

Fast forward to today, they've diversified their sourcing to reduce reliance on China, cutting that exposure down to 80%. Plus, their international sales have surged, making up 21% of their business in the latest quarter—up from 16% the previous year.

Key Takeaway: The ability to adapt quickly to geopolitical shifts can determine whether your brand thrives or merely survives. e.l.f.’s playbook is a testament to resilience: diversify your supply chain, leverage cost-saving strategies, and look beyond your home market to cushion against future shocks.

As new tariffs loom on the horizon, having a proactive strategy like e.l.f.'s can turn a potential crisis into an opportunity for growth.

Looking Ahead: Tariffs aren’t going away, and the next wave could hit as early as 2026. Are you ready to pivot your strategy?

Stay tuned as we explore more case studies on how leading brands are navigating these challenges and future-proofing their operations.

Solutions: Navigating the Uncertainty of Tariffs in a Global Supply Chain

When faced with the challenge of navigating tariffs in an increasingly uncertain global trade environment, businesses need to adapt with agility and foresight. Here are some practical solutions that can help mitigate the risks and leverage opportunities:

Diversify Your Supplier Base
Reduce dependency on a single country by expanding your supplier network across multiple regions. This not only reduces tariff impact but also strengthens supply chain resilience. For example, e.l.f. Beauty reduced its reliance on China from 99% to 80% of its sourcing, creating flexibility against future tariff hikes.

Invest in Digital Supply Chain Technologies
Use technologies like AI, predictive analytics, and digital twins to simulate tariff scenarios and make informed decisions quickly. These tools allow companies to forecast the financial impact of tariffs and optimize sourcing strategies in real-time.

Negotiate Cost-Saving Agreements with Suppliers
Strengthen relationships with suppliers to negotiate better terms, such as cost reductions, extended payment periods, or volume discounts, to offset the impact of increased tariffs. Collaborative partnerships can create a buffer against sudden tariff increases.

Explore Tariff Engineering
Adjust product design or assembly processes to qualify for lower tariff classifications. For instance, shifting the final stages of production to countries with favorable trade agreements can minimize tariff costs.

Optimize International Distribution Channels
Leverage Free Trade Zones (FTZs) or Special Economic Zones (SEZs) to defer or reduce duty payments. Expanding international sales beyond tariff-impacted regions, like e.l.f. Beauty’s strategy of increasing its international presence, can also offset domestic tariff challenges.

Implement Strategic Inventory Management
Build up inventory levels of high-demand products ahead of anticipated tariff changes. This tactic can provide a cushion during periods of uncertainty, allowing businesses to maintain continuity while exploring long-term solutions.

Utilize Trade Agreements and Tariff Exemptions
Stay informed about current and upcoming trade agreements that can reduce or eliminate tariffs on certain goods. Applying for tariff exemptions or participating in government relief programs can provide temporary relief from tariff expenses.

Dynamic Pricing Strategies
Adjust pricing models to reflect the increased costs of goods due to tariffs, focusing on value-added products that can sustain a price increase. This approach can protect margins without significantly impacting customer demand.

Expect tariffs to remain a hot topic as we inch closer to 2025, and watch out for how companies like e.l.f. continue to adapt their strategies. Stay tuned because this is one story that’s far from over.

Looking for more insights on navigating tariffs and supply chain resilience? Keep an eye out for our upcoming posts that dive deeper into these strategies.

The future of global trade is unpredictable, but with the right playbook, you can stay a few steps ahead.

THE SUPPLY CHAIN EFFECT

From the boardroom, your marketing efforts and to the factory floor, every department feels its impact—whether it's through cost management, product availability, customer satisfaction, or sustainability efforts.

But here's the catch: many companies still treat their supply chain as a back-office function rather than the strategic powerhouse it truly is.

If your business hasn't revisited its supply chain strategy in recent years, it's time for a reset.

Why? Because supply chain disruptions, tariff shifts, and evolving customer expectations mean the game has changed.

To stay competitive, every player—finance, marketing, HR, IT, and beyond—needs to refresh their understanding of how an agile and resilient supply chain can drive growth, innovation, and long-term stability.

So, how does your supply chain stack up?

Supply Chain's Influence on Overall Business Leadership

Increasingly Complex Supply Chain Challenges Require a Clear Roadmap

Effect on Human Resources and Talent Management

Impact on Sales and Customer Satisfaction

Catch up with us.

Click the "The Impact Of" box to learn more.

How do tariffs reshape the way businesses manage their supply chains? Are they merely a disruption, or can they actually drive resilience and innovation?

One of our blog post, dives into how tariffs influence global trade dynamics and explores strategic adjustments companies can make amidst changing regulations.

If your organization relies on international suppliers, this is a must-read to prepare for future uncertainties.

Get the insights you need to turn challenges into opportunities!

➡️ What do you think?
Make sure to comment on the post or join the discussion on LinkedIn!

Results from this poll will be shared with subscribers in the next issue.

Enjoy the weekend!

-TIO

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