Gartner: Procurement Strategies Shift Amid Tariff Pressure
Tariff increases are presenting procurement and supply chain leaders with complex choices.
According to research from Gartner, as costs rise, executives are divided on their approach to managing these growing financial challenges.
The consulting giant's recent survey shows 45% of decision-makers prefer to pass additional expenses directly to customers. In contrast, 43% are taking steps within their supply operations to mitigate these costs.
Gartner collected insights from executives between 17 March and 7 April, predominantly representing companies with annual revenues exceeding US$1bn.
Tariffs prompt re-evaluation of supplier agreements
An overwhelming 92% of Gartner's participants cite increased costs as the primary issue associated with tariffs.
Slowing customer demand isn't far behind, with 75% marking it as a crucial concern. This includes declining customer interest (49%) and apprehensions about retaliatory trade measures affecting international sales (45%).
Some leaders believe passing costs on is unsustainable in the long run, prompting them to revisit foundational elements of their procurement strategies.
Renegotiating supplier contracts is a leading action, noted by 47% of these leaders. Additionally, 43% are exploring enhanced collaboration with suppliers and 40% are focusing on compliance by examining country of origin rules, valuation and trade practices.
Sourcing changes are also a consideration. Around 39% are reevaluating supply locations internationally, with 26% contemplating relocating production. Furthermore, 23% opt to advance inventory to manage expenses more effectively.
“Supply chain leaders have many potential levers to pull from in mitigating new costs related to tariffs,” states Vicky Forman, Senior Director Analyst at Gartner’s Supply Chain practice.
“While supply chain leaders have multiple initiatives under way to potentially lessen the impacts, many of these actions have yet to be completed.”
Transformation over cost transfer
Gartner's findings indicate that enduring resilience comes from meaningful structural changes, not just quick solutions.
The emphasis is on avoiding short-term cost transfers by investing in the supply base, focusing on trade compliance and diversifying sourcing.
A large number of respondents rethinking supplier relationships highlights the scale of change. These adjustments signal a shift from reactive to a more strategic, risk-aware procurement approach.
Amid demand uncertainty, leaders are aware that just passing on costs won’t suffice for long-term sustainability.
Relocating production and supply operations abroad can be challenging due to regulatory, logistical and cost factors. Nevertheless, the findings suggest companies are determined to explore these paths to better shield themselves from policy-induced cost shifts.
Gartner Supply Chain Symposium/Xpo
These insights will form part of a broader discussion at the upcoming Gartner Supply Chain Symposium/Xpo.
Taking place in Orlando (5-7 May) and Barcelona (19-21 May), the event will bring together professionals for a series of engaging sessions that cover how procurement and supply chain leaders can adapt to ongoing volatility.
Attendees will gain perspectives on how their peers are responding, which strategies are effective and how to forecast the next wave of disruptions.
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