Outmaneuvering Tariffs: Navigating Disruption with Data-Driven Resilience
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An edited version of this blog is also posted on InsightJam.

Saying we live in a world of disruption and change has become cliché, but sometimes unpredictable events arise that put this statement into stark reality and challenge even the most resilient organizations. The most recent example of this has been the recent tariffs policy of the U.S. and responses from around the world.  

Not a Surprise

The fact that tariffs are coming was expected – President Donald Trump campaigned promising tariffs – but few could have expected their severity (145% on Chinese imports, as of this writing) and their pace of change (prohibitively high “reciprocal” tariffs on 100+ countries, only to be temporarily rescinded days later). Also unpredictable were second-order effects such as stock and bond market reactions, affecting the cost of capital, and the impact on consumer demand, due to the changing expectations of inflation or concerns of job loss. In a global economy in which organizations are geographically distributed and source components and services come from all over the world, this type of volatile economic situation makes it exceedingly hard to answer the following questions: 

  • What are the margin impacts, across our complex supply chain, of tariff scenarios? 
  • What are the optimal manufacturing sources, at any given point in time, and can we switch on short notice? 
  • What are the impacts of new tariffs on downstream customer demand, including demand elasticity of a given product, as well as the propensity to switch to a similar product that is less affected by tariffs?
  • What are the tradeoffs between long-term investment in supply capacity in less-tariffed countries or the U.S. itself, versus short-term switching between supply-chain options already in place?  

In most of the Global 2000’s C-suites and boardrooms, these questions are being asked, and operating leaders are struggling to present data-driven answers that are up-to-date as of the current day’s tariff reality.

The Heart of the Problem

The root cause of this struggle is the lack of the right data to make decisions within days of a new tariff scenario being put in place by the U.S. administration, or even within the same day. Most organizations will have fragmented views of data, including views of all of the components that come from a given supplier or are delivered through a specific transportation provider. They may have a product-centric view that includes all suppliers that contribute all of the components of a given product. But this data often resides in a variety of supplier-management apps, procurement apps, demand forecasting apps, and other types of apps. Some may be consolidated into a data lakehouse or a cloud data warehouse to enable advanced analytics, but the time required by a data engineering team to build the necessary data pipelines from these systems is often multiple days or weeks, and such pipelines will usually only be implemented for scenarios that the business expects will be stable over time. Most organizations lack the ability to quickly combine the right data to provide answers to questions arising from a specific tariff scenario that wasn’t thought of ahead of time. “On the fly” data delivery is a problem. Just telling the data engineering team to build data pipelines faster doesn’t work, especially if the work usually takes multiple days or weeks, and the business wants answers in hours; a fundamentally different approach is needed.

An Alternative Strategy

Denodo’s customers have not had this problem. Leveraging a logical approach to data management, the Denodo Platform enables customers to rapidly combine and compose disparate data into a unified view in real time, in response to changing business scenarios, without requiring complex pipelines to move and consolidate data. Instead, line-of-business users can search and discover the data they need through semantic search, enabled by the Denodo Platform’s comprehensive semantic layer, which includes all available business context from all available data sources. 

Powered by AI, the Denodo Platform can automatically provision the right data, creating views that draw from the right data sources only the data needed to respond to the task at hand, while keeping these views updated in real time, without incurring high storage and compute costs. As a result, organizations get the right data at the right time, in a cost-effective manner.  

A Hypothetical Scenario

Imagine that there was an organization that has already shifted from a Chinese supplier to another Southeast Asian supplier whose countries are affected by  lower tariffs, but then the U.S. government’s negotiations with those countries goes sideways, and the organization’s board wakes up the next morning to the news of those countries’ tariffs being unexpectedly raised over 100%, an almost certainly prohibitive level. What are the options of these board members now? Can they source from Europe? What would be their costs/margins if they choose to do so? Which source would be optimal? At what point does it make sense to invest in building the equivalent in the U.S.? And how long would that take? This organization’s operating leader is hearing these questions on the same day that the news is announced. “I’ll get back to you in a few days” is an unacceptable answer. But if the Denodo Platform were in place, this individual would already know the answer.

“Black swan,” unpredictable scenarios of this kind have already happened. March 15, 2020: Most of the world has suddenly locked down in response to COVID-19. What are the impacts on customer behavior? Have they stopped purchasing, or have they increased, to “stock up?  Are they shifting to e-commerce? Are they changing the mix of products they buy? What is the impact of lockdowns on our suppliers, and the optimal way of sourcing and delivering in response to sudden shifts in demand? 

Forewarned and Forearmed

Organizations that stood up the right dashboards to make the right decisions quickly, within days, thrived in this environment. Those that couldn’t, struggled to stay in business. Companies that were ready were able to provide solutions, like one Denodo customer, the leading healthcare provider in a large U.S. state, was able to provide a COVID-19 contact-tracing dashboard for the entire state within days, and this enabled real-time distribution of medical staff and equipment across the state on a day-to-day basis. The company made this operational within days of March 15. Another Denodo customer, a large retailer across North America, was able to optimally allocate product between in-person stores and e-commerce channels. These organizations were asked, within days of the lockdowns, “What are the impacts on our organization?” Denodo was in place, so they already knew.

Become a resilient organization in the face of truly unpredictable, high-stakes situations. If you have Denodo in place, you will already know the answer, because you have the right data at the right time.

Dominic Sartorio
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