Many owners of mid-size businesses are discovering that the supply chain structures that have successfully served them for more than a decade are suddenly fragile when exposed to world events. With these companies now in a race against time to react — whether by finding new suppliers, altering terms, or getting a grip on the effects of tariffs on working capital, pricing and profitability — there is a danger they will confront the current challenges as a triage exercise rather than as strategic inflection point. 

By thinking big and creating a roadmap for the immediate, intermediate and long-term, middle-market firms can seize the moment and use the current supply chain volatility as a catalyst for long-overdue evolution.

The Visibility Gap

If you were to ask a middle-market executive who their top suppliers were, they could probably tell you. Ask them about their Tier 2 suppliers, landed costs, or tariff exposures, and the answers almost always get fuzzier. Though it can seem basic, accessing this kind of information can be a Herculean effort.

Often, businesses simply do not have the capacity, systems, people, or sophistication to capture and scrutinize granular supplier information. Sometimes it’s just a matter of institutional inertia. I spoke with an executive recently who had just created his first-ever landed cost model in Excel, but only after tariffs had already started to eat into margins. 

Supplier visibility is not just a matter of understanding the company’s current state. It’s the linchpin that sets the stage for being able to model, simulate and respond. Without a detailed understanding of external relationships and contractual terms, making decisions — let alone strategic ones — is guesswork.

Warning Signs of Supply Chain Trouble

• No unified list of suppliers and associated spend
• No formal relationship with key vendors
• Lack of transparency regarding landed costs (tariffs, freight, duties)
• Over-dependence on a single supplier or geography
• On-the-fly firefighting instead of proactive planning

The Informality Trap                 

Many mid-market companies have operated for years based on handshake relationships with their suppliers that have never been formally codified. That’s fine, until it’s not. When disruption comes, companies without agreements can be left helpless, with no remedy and little leverage. One firm we talked to reported that it had obtained more than half its goods from a Chinese supplier, but had no written agreements in place. This lack of formal contracts can leave companies with little wiggle room to negotiate terms when the market shifts.

Lack of formality in supplier contracts can also have long-term ramifications for companies, as it creates risk, which in turn dilutes enterprise value. Exit or acquisition-bound companies can find their valuations questioned when buyers find out key supply lines are based on relationships and goodwill, rather than contracts.

Beyond Pricing

Another common mistake we see companies make is thinking about tariffs as a simple pricing issue: When your costs go up, you raise your prices. But that’s not a strategy; it’s a reaction. The impact of higher tariffs extends well beyond the sticker price of goods. Tariffs have implications for stock levels, cash flow and customer relationships. Reflexively raising prices can lead to a detrimental ripple effect across all of these areas. 

Instead of making sweeping, one-size-fits-all pricing decisions, companies should consider all the options they have at their disposal, whether it’s renegotiating freight terms, rearranging billing cycles, reconsidering unprofitable SKUs, or adjusting the product mix to offset higher sourced costs.

Creating a Playbook

For middle-market businesses that are having difficulty maneuvering through the haze of uncertainty surrounding tariffs, building out a robust 30/60/90-day plan is the first step to stabilizing the supply chain and operating from more of a strategic vantage point. Below is a recommended framework.

First 30 days. Identify Tier 1 and Tier 2 suppliers. Summarize contract summarization terms and baseline total landed cost. 

60-90 days. Create lightweight tools, such as spreadsheets, to model tariff fluctuations, freight and lead times. 

Ongoing. Look for opportunities to diversify. If feasible, explore nearshoring, and determine whether customer pricing models are appropriate given a full-margin picture.

Companies with larger dedicated procurement or logistics teams might be able to execute this work without external help, but many mid-market organizations simply don’t have the analytical modeling skills or workforce to drive the plan, and end up getting stuck in firefighting mode. For these firms, leveraging external expertise can cut down on delays, bring in tried and tested methodologies, and save them from expensive mistakes. Although it is technically possible to go it alone, organizations need to ask themselves how much it will it cost internally to execute the plan, whether staff have the required skill sets to do the job, and whether the company can afford the potential delays involved.

From Survival to Scaling

The strongest companies don’t just absorb shocks, but instead use them as turning points and drivers of growth. Disruption to supply chains is creating instability across industries and companies of all sizes, but it’s also a rare opportunity to reset relationships with suppliers, rethink pricing strategies and, in some instances, even grab market share from weakened competitors. 

While middle-market companies may not have the resources and bargaining clout that their peers in the Fortune 500 enjoy, by concentrating on improved visibility, adding structure to relationships and thinking creatively about costs and pricing, they can turn today’s challenges into tomorrow’s competitive edge.

Peter Keogh & Lance Dowden are managing directors at Carl Marks Advisors.