Understanding Tariff Impacts on the MRO Supply Chain

That said, some companies are taking advantage of the opportunity in front of them. “We do see some supplier profiteering,” says Costi Campi, Senior Vice President for Global Procurement at RS Integrated Supply. “People jumping on the bandwagon and saying I’m going to increase prices now even though we aren’t feeling that impact yet.”

RS Integrated Supply has pushed back against such moves. “We’ve asked suppliers to hold pricing on what is currently in stock,” explains Bone. “That helps us to mitigate some of the price increases. Establishing open communications with our suppliers helps all of us work through these challenges and uncertainty.”

Tariffs may not be affecting prices as much as first feared (at least not at this stage), but they are still having other effects.

“The first and worst impact so far is insecurity,” says Laurent Chavagne, Strategic Procurement Director for Europe and UK at RS Integrated Supply. “If there were tariffs in place with a structured process that you can understand, you may not like it, but you can work around it. No matter how serious it is, usually you will find a way around it.

“At the moment, however, the situation is changing sometimes on an almost daily basis. That is more damaging. Why? Because insecurity leads to postponement. People hold off making decisions until the situation becomes clearer – and postponed behavior is at some stage going to lead to gaps in the supply chain.”

This could lead to dire consequences for MRO. “The entire industry could get called out like it did at the end of COVID when supply chains were disrupted and there were huge price increases,” says Chavagne. “There could be a repeat of that. We haven’t seen this yet but we’re just a couple of months in. We’re still working on old stock so far.”

Campi is likewise concerned about the eventual impact of tariffs on availability. “Initially you might have a price increase, but you can get your hands an item,” she says. “Longer term, what do tariffs mean for the manufacture of MRO parts? Do they mean that a country’s industrial strategy is going to change because it isn’t viable for them to produce that part anymore? Then you are going to start having issues with supply.”

In the face of such insecurity and uncertainty, preparation is key.

The first step that RS Integrated Supply took in response to tariffs announcements was to bring together an internal team of experts. “As soon as the news dropped about tariffs, we put together a task force with leaders from across the whole organization,” recalls Bone. “We wanted to be as proactive as possible and fully understand what information we need to be prepared.”

With tariffs, to analyze risk, you need to know where products are coming from. RS Integrated Supply has really focused on this. “We’re working hard to update our databases and get information on country of origin correctly registered,” says Chavagne. “It’s not been easy because it’s become so common to buy all kinds of items from all over the world, often suppliers don’t know.”

This process of collecting data on country of origin began during COVID but has accelerated recently. “Identifying where everything comes from means that if a new tariff comes in, you can quickly calculate what the impact is going to be,” observes Chavagne.

Mapping out the geography of the MRO supply chain also allows RS Integrated Supply to anticipate dangers – and avoid them.

“For every major client, we analyze their supply and where it is all coming from. What parts might be at risk and how can this be mitigated?” says Chavagne. “We’ve already done this, so what we are doing now is going through the supply chain looking not only at what is happening but considering what further changes may occur. What measures might other countries introduce in retaliation to US tariffs and how might these have an effect?”

RS Integrated Supply is also creating tailored mitigation plans for clients. “In some cases, for example, we’re advising a client to build up stock of a part,” continues Chavagne. “That might not be the most efficient thing to do, but if you don’t then you might end up regretting it more.”

Supplier diversification also has an important role to play in these mitigation plans, says Bone: “If a particular supplier has an item imported from a country where we’re going to see heavy tariff impacts, but another supplier has the exact same product sourced elsewhere, we’re going to put the latter in front of our client.

“It’s the same if we have a brand that a supplier is holding pricing for. We’re seeing a lot of clients willing to let go of brand loyalty because of the tariffs.”

These mitigation strategies typically represent good practice for MRO sourcing regardless of circumstances.

“It’s a matter of reducing dependency on a single stream,” says Campi. “It’s also part of a wider conversation you should be having about strategic supplies and pro-active risk management; today there is the risk of tariffs, and tomorrow it could be any number of unforeseen disruptions.”

“Dual sourcing is a good thing,” agrees Cummins, “Whether it’s because of tariffs or a natural disaster that shuts down a region.

“From an integrated supply standpoint,” he continues, “We have to provide the client with exactly what they are asking for but we have systems in place to help us identify alternatives so we can give them options wherever possible.”

The uncertainty and potential disruption associated with tariffs reinforces the value of good supplier relationships in mitigating risk, too.

“It’s like gold,” says Chavagne. “This is going to show once again that the old-fashioned approach of bullying suppliers into better pricing doesn’t work. You have to create a level of communication where they can come to you with the problems they’re facing so you can start thinking about solutions together. You need to have open discussions, so they warn you way before something goes wrong.”

This is again about preparing for when the effects of the tariffs really kick in. “You can look already at the products where you expect to have problems,” continues Chavagne. “You can start talking to suppliers, saying you want some extra stock of an item. If you have a good relationship with your preferred suppliers, you can do this. If you don’t, then guess what? You’ll have to wait for the free-for-all and slug it out with the rest.

“This is where it’s also good to work with an integrator like us,” he adds, “Because we have that holistic overview of your whole supply chain, especially if you’re a multinational, it gives you more options and control.”

Ensuring strong communication with customers continues as tariffs are introduced is essential.

Having identified the data and tools needed to navigate the situation, RS Integrated Supply is also talking to customers about what changes might mean for them. “We can have conversations with our clients saying this is where we see the problems happening, or where they are going to occur, and offer solutions,” says Chavagne. “We also produce a quarterly Global Procurement Insights report and have dedicated reports for clients outlining what we see as a risk in their supply chain, and this could be a mitigation.”

This is especially important given the speed of developments and levels of uncertainty. “We are proactively communicating to our clients,” says Cummins. “Staying on top of the MRO market is more important than ever because it is so dynamic – it’s more dynamic than it’s ever been. This is what we do day in, day out, whereas a client might only have time to focus on MRO sourcing when they do an update once a quarter.”

“It’s so dynamic right now,” agrees Bone. “Since the initial announcements, everything has settled down somewhat and our clients have seen relatively little impact – but that could all change.

“These are unprecedented times,” he adds, “And at moments like this, communication is huge.

“If you’re a client and you’re worried, please reach out. The first step is to reach out to your site team, and they can get in touch with someone from the task force. We’re making time for anyone that calls us in relation to tariffs because they affect all our businesses. The team is making available all the resources we can and we’re doing everything we can to protect our clients.”