Joanna Rangarajan, managing director and partner with Alvarez & Marsal’s Consumer and Retail Group, advises how retail supply chains can become more balanced and resilient in the face of constant disruptions and global crises.
“Balanced and resilient” supply chains possess a number of qualities that strengthen their ability to cope with disruption. One is the use of “intentional redundancies,” in which retailers look to manufacture the same product in different places. There, says Rangarajan, the focus should be on the biggest products — the “margin movers” — to ensure that there’s no single point of failure within the supply chain. In adopting that strategy, retailers must make sure that product quality is identical regardless of sourcing.
It's equally important to focus on countries where specific capabilities and technical expertise exist for the manufacturing of a given product. “That’s about being fit for purpose,” Rangarajan says. The key is to identify the appropriate skillsets, while being able to flex product levels up or down, in line with customer needs of the moment.
Resilient supply chains also seek to renegotiate contracts with existing partners while simultaneously seeking new ones. “This should not be transactional,” Rangarajan says. “It’s about creating a partnership that is lasting.” In the process, retailers can shift some production to countries that aren’t subject to punishing tariffs — as long as the chosen partners are sufficiently innovative and reliable.
In recent years, Mexico has emerged as a strong candidate for manufacturing close to U.S. markets — the so-called “nearshoring” play. But that option might be jeopardized if President Trump follows through on his threat to broadly impose a 25% tariff on imports from Mexico.
Regardless of strategy, she says, the key is to create a retail supply chain “that can withstand and quickly recover from disruption, and be able to adopt to changing markets and conditions — whatever the crisis of the moment is. That’s really what this is about.”
