How to measure tariff risk in a manufacturing company
No doubt, the risk created by 25% tariffs will be hard to predict for each region and any specific company. However, when considering tariff risk in a manufacturing company, there are several Key Performance Indicators (KPIs) that can help assess and manage the impact of tariffs on operations, costs and profitability.
If your digital transformation game is on point, these data will be at your fingertips. If your company is still in the early stages of digitalization, you will need to compile these from different sources. While every company will have its own specific metrics, here are some basic relevant KPIs that can help you quantify any potential tariff impacts:
Cost of goods sold (COGS)
Why it’s relevant: Tariffs can directly impact the cost of raw materials, components, and goods imported from other countries. Tracking COGS allows the company to monitor how tariff increases affec
t the overall cost structure and profitability.
What to track: Compare pre- and post-tariff costs for critical materials or products and assess the impact on overall COGS.
Supply chain lead time
Why it’s relevant: Tariffs may disrupt supply chains by delaying deliveries due to customs processes, new suppliers or changing routes. Monitoring lead times helps evaluate whether tariffs are increasing time-to-delivery for materials or finished goods.
What to track: Track delays in the arrival of materials and products due to tariff-related issues (such as port congestion or customs clearance) and adjust production schedules accordingly.
