Look to Logistics to Manage Inventory Efficiently and Offset Tariff Pressures

By Noah Hoffman, VP for retail logistics at C.H. Robinson

Tariffs have injected new and constantly changing complexities into retail supply chains. Though the U.S. Supreme Court is considering the legality of how some tariffs were imposed, a decision isn’t expected till November or December and it’s uncertain if or when companies may be reimbursed. Meanwhile, new tariffs unaffected by the court challenge keep getting added and the list of items subject to existing tariffs continues to expand.

While retailers may be struggling to stay abreast of their tariff exposure in this environment, a number of tools can help. For example, C.H. Robinson launched a U.S. Tariff Impact Analysis Tool that’s like having a spotlight in a dark room. One of our customers discovered that 70% of their duty expenses were tied to a single tariff. With that insight, they could look at their purchases country-by-country and product-by-product to reduce that cost.

While considering your options, keep in mind that your true import costs are dictated not just by your sourcing decisions and their tariff implications, but also by fluctuations in shipping rates, your port selection, your freight consolidation choices, and how you move your merchandise inland once it arrives.

For imports from Asia to North America, ocean shipping rates are trending downward and opening up savings opportunities. However, that comes with a risk of unreliable schedules. With weaker demand, ocean carriers are canceling vessel departures, which reduces departure port options and service frequency, while remaining vessels may sail with different schedules or skip destination ports. Retailers may want to secure guaranteed space for time-sensitive cargo, while moving up some non-urgent shipments to capture today's favorable ocean spot rates. Air rates from Asia are expected to rise moderately from the second half of October onward.

For European imports, ocean rates are stable and capacity is ample. Air rates should remain steady through October. Before prices and demand go up in November and December, retailers flying in goods from Europe are encouraged to secure space early.

Logistics providers that handle ocean, air, rail and truck shipping while also doing customs brokerage have the expertise and tools to help you make more informed decisions.

Especially when consumers are buying with restraint and spreading out their holiday purchasing, you may need to adjust your logistics for smaller orders. While that can seem like you’ll lose some of the economies of scale you typically rely on, there are other ways to find efficiencies and cost savings. Starting with item-level visibility and centralized purchase orders, retailers who manage inventory with precision will be the winners.

Many retailers have little visibility into their inbound supply chains because they purchase goods from their suppliers with the storage and transportation costs included. That means their supplier is the one who knows what items are where and in what quantity. The retailer knows that air fryers are flying off their store shelves in Georgia, but might not know they don’t have to order more because there’s a warehouse full of them in New Jersey, where the item hasn’t been selling as briskly.

With item-level visibility, we can pinpoint where the air fryers are, truck them where they need to be, lower the retailer’s carrying costs in New Jersey and capture more sales in Georgia. Then with centralized purchase orders, a new order is triggered only when and where it’s needed and only in the quantity needed.

This more granular approach enables much better alignment between your inventory, demand and transportation.

Using our proprietary AI artificial intelligence, we just conducted an analysis for a retailer who’s experiencing less demand for an assortment of products they used to need by the truckload. They’re running less-than-truckload routes with six, seven or eight smaller pickups at their various suppliers, which creates a lot of wasted miles and dwell time to fill each truck.

By more efficiently bringing all their products directly to one of our nearby retail consolidation centers instead, we can combine smaller quantities of each product to create full truckload density to all their distribution centers across the country. They can achieve a 40% increase in trailer utilization and remove over 7,700 deliveries annually.

Smaller vehicles are another great option for retailers finding themselves ordering in smaller quantities. Straight trucks or box trucks can be cost-effective and also improve speed.