How you can leverage the right tools, use size to your advantage, and anticipate change
The new wave of tariffs is reshaping the competitive landscape for U.S. manufacturers—and small to mid‐market firms are feeling the squeeze the most. Unlike large corporations that often have diversified supply chains and greater capital buffers, smaller manufacturers typically operate with thinner margins and limited flexibility. But smaller businesses also have an opportunity to leverage their agility and modern, innovative application of technology. Here’s a look at the potential effects of these tariff-related changes and how you might navigate them:
Tariffs on imported raw materials and components (from China, Mexico, Canada, etc.) force U.S. manufacturers to pay more for essential inputs. For many small and mid‐market firms that depend on globally sourced parts, these higher costs directly erode profit margins. Without significant economies of scale, they have less bargaining power to negotiate better prices or switch suppliers quickly.
With limited ability to absorb these extra costs, many smaller manufacturers are compelled to raise their prices. However, in competitive markets—especially where customers are price‐sensitive—this can result in lost sales and diminished market share.
The tariffs—and the closing of certain exemptions (like the de minimis rule that once allowed duty-free shipments of lower‐value goods)—mean that even small shipments must now face additional scrutiny and fees. For manufacturers without robust logistics departments, this can translate into delays, unexpected administrative costs, and the need for rapid supply chain reconfigurations.
Unlike larger firms that might have the resources to establish new relationships with domestic or alternative international suppliers, small and midmarket companies often lack the capital to quickly pivot. This makes them potentially more vulnerable to disruptions, as the cost and time needed to qualify new suppliers can be prohibitive.
Large corporations can often shift production or negotiate long-term contracts to mitigate the impact of tariffs. Small manufacturers, however, usually don’t have these options. Their relatively limited product ranges and less diversified supplier bases mean they face a double hit: higher costs and the need to charge more—which can in turn reduce demand.
In addition to domestic cost pressures, there is the risk that trading partners will impose retaliatory tariffs. For a small manufacturer that also depends on exports, this means that not only are input costs rising, but future overseas markets could potentially shrink as foreign buyers face their own cost hikes.
Faced with rising costs and supply chain upheaval, many small and mid-market manufacturers may need to invest in new technology or alternative sourcing strategies. Access to capital and shorter cash conversion cycles become paramount.
The unpredictable nature of tariff policy—and the potential for further changes or retaliatory measures—makes it difficult for smaller firms to plan long-term investments. This uncertainty can lead to delayed production, cautious hiring, or even reduced output, which could hamper companies’ competitive positioning in the larger marketplace.
While the challenges are significant, some small and mid-market manufacturers are exploring strategies to lessen the impact. Others are using their smaller size and innovative use of technology to their advantage, leveraging the agility to respond more quickly than their larger peers—especially when using modern, cloud-based supply chain and manufacturing solutions. Any dynamic change in the core supply chain presents an opportunity to leapfrog the competition.
Efforts to source more components domestically or from lower-tariff countries are already underway. Technologies such as EDI and supplier sourcing portals can help ensure that sourcing is diverted to non-impacted trading partners rapidly and efficiently. These technologies also help manage supplier performance while minimizing the risk of delayed shipments. Using ERP providers that focus on a specific set of trading partners within your ecosystem—in this case, makers, movers, and sellers—helps to rapidly connect and exchange supply and demand data with an already established supply chain network.
Just as you diversify your upstream supply chain, it’s important to expand and diversify your downstream clientele. Enhance your existing sales with eCommerce solutions, interactive configure/price/quote (CPQ) solutions, and dynamic, content-driven sales platforms. Tap into potential new revenue streams by offering field services, which also drive brand loyalty.
Investing in automation or streamlining operations can help offset rising input costs. The need for traditional yet modern, advanced MES solutions is critical. Choose solutions that optimize materials use and drive compliance (including with ESG mandates), creating new sources of competitive differentiation. Optimize supply with advanced inventory planning solutions and help ensure solid financial controls with financial planning and analysis offerings. It’s also vital to seek out ways to improve quality, such as guided worker instruction solutions. These strategies minimize the costs of redoing work, while underscoring the link between quality products and brand loyalty. Taking it one step further, loyal customers are often willing to pay higher prices for products and services they trust to deliver value every time.
Maintaining a stable workforce and helping ensure rapid time to productivity, quality, and safety are also critical to overall efficiency and cost reduction. Evaluate connected worker solutions that are proven to reduce onboarding time while enhancing job satisfaction, safety, and worker retention. Minimizing workforce churn will have a significant impact on the end cost and price of your solutions. By leveraging modern, cognitive ERP solutions that embed AI to automate and accelerate the mundane tasks, you empower your workers to focus on higher value tasks and strategies.
Passing a portion of the cost increases on to consumers might be necessary, but doing so without losing market share is a delicate balance. Build price elasticity with solutions that reduce cost and improve efficiency while driving quality and fostering brand loyalty.
The new tariffs are a double-edged sword. Designed to protect domestic manufacturing, they nonetheless impose significant additional costs on smaller manufacturers that may lack the flexibility and resources of larger corporations. For these firms, the increased input costs, supply chain disruptions, and market uncertainty may translate into tighter margins, higher retail prices, and the risk of losing ground at home and abroad.
However, these same small and midsized manufacturers often leapfrog larger competitors thanks to their innovative use of cloud-based technologies. These capabilities make them more adaptable and agile when responding to changing market dynamics. As a result, those that adopt smart technologies in the supply chain and the production process can find new sources of competitive differentiation and pricing flexibility.
This article contains Epicor’s views regarding tariffs. You should contact your counsel for application of any tariffs to your business and their potential impact. Nothing in this article is a representation or warranty of any kind. Epicor does not undertake to update this article. All Epicor Products and services are furnished subject to Epicor’s standard Customer Agreements.
