Constraints Are the Engine of Innovation
Finally, the supply chain press is starting to look at tariffs in a strategic way.
This comes years after I first wrote that disruption is the new normal – and an opportunity. And long after I pointed out that tariffs and trade wars “will force supply chain redesign, whether you want it or not.”
Over the last few months, everyone from large consultancies to Supply Chain Management Review has been looking at tariffs as an opportunity.
They’re getting what our clients have been doing for quite a while now. While perceived as disruptive – and they are – tariffs also are a catalyst for better decision-making.
Tariffs destroy the illusion that inexpensive means resilient. Tariffs accelerate supplier and geographic optionality. And they demand scenario planning discipline.
Every System Has a Constraint – Tariffs Are Just the Latest
In 50-plus years in supply chain, I have noticed an important thing: Constraints often drive the most meaningful innovation. That fact has remained true from my early days designing warehouses to later years designing global supply chains.
Unlike many in supply chain, I was introduced to constraints early. My industrial engineering professors at Purdue brought constraints to my attention at every step of my education: undergraduate, master’s and Ph.D.
Industrial engineers spend a lot of time finding constraints and fixing them to improve system performance.
After I started my career, I read Eli Goldratt’s “The Goal.” His Theory of Constraints philosophy says that at least one constraint limits every system. So, like industrial engineers ever since F.W. Taylor first used a stopwatch, Theory of Constraints practitioners try to identify that constraint. Then, they tackle that bottleneck to improve the rest.
It’s a continuous improvement cycle. Find the constraint, exploit it with existing resources, subordinate other activities to it, elevate it if needed and then repeat with the next emerging constraint.
Viewing tariffs as another constraint triggers innovation, not excuses. Tariffs drive meaningful innovation because they force rigor and surface inefficiencies.
Companies that lean into tariffs reduce risks, optimize cost structures and gain resilience through optionality.
How Tariffs Force Better Supply Chain Decisions
Tariffs force supply chain excellence by making costs real and requiring rigorous scenario planning – because optionality doesn’t happen by accident.
For years, companies optimized supply chains for cost. Of course, they assumed trade stability and permanently low import taxes.
Tariffs expose the fragility in that model.
When a 25% duty suddenly lands on your top-selling SKU, you quickly discover whether your sourcing strategy was resilient or merely inexpensive.
Tariffs force leaders to recalculate true total cost, incorporate geopolitical risk into sourcing decisions and re-evaluate single-country dependency.
In short, tariffs push companies from spreadsheet optimization to strategic design.
In turn, supply chain teams examine alternative suppliers and geographies. Tariff shocks immediately surface the danger of using one dominant supplier, one dominant country and one dominant trade lane.
Companies that once delayed diversification because “the math didn’t quite justify it” suddenly see the justification clearly.
Supply chain teams must qualify secondary suppliers; invest in nearshoring, friendshoring and reshoring; and develop parallel production capabilities.
That redundancy looks expensive until the next policy shift. Then it becomes survival.
And how do companies discover alternatives? Through scenario planning discipline.
You must model multiple futures. Because alongside demand shifts and currency swings, you’re going to have to model retaliatory duties and tariff levels that could be 10%, 25%, 60% or higher.
Because executive teams must understand what happens to margins, service levels and working capital.
And when you model those scenarios in advance, you make better capital allocation decisions.
Don’t Complain About Tariffs. Redesign
The idea is simple: When disruption hits, smart companies see opportunity.
“Hey! Great news! We are getting our behinds kicked on this and this. And that’s great news because now we can reinvent ourselves and get ahead of the competition.”
Because when bad things happen, smart people get it on.
Because tariffs, wars, geopolitical spats and pandemics don’t just hurt you. They hurt your competition. So instead of saying “Oh, poor me. They’ve got a new tax that’s going to ruin my sales,” we say, “boy, this stinks. And it’s going to really affect my customers – and me. But if I can redesign networks, renegotiate supplier relationships and invest in automation and digital enablement, I can get ahead.”
Disruptions (tariffs and otherwise) are simply opportunities for you to go and kick tail.
So instead of cursing tariffs and disruptions, be thankful for the opportunity. Tariffs are a forcing function, a constraint – and an opportunity.
And if my last 50 years – and history – is any guide, constraints are where the real innovation begins.
Related Reading
- Tariff Implications, Economics and Whac-A-Mole
- Tariffs, Trade Policy Can Be a Shot at Prosperity – or Miss
- Court Rulings Won’t End Tariff Disruptions
Jim Tompkins, Chairman and founder of Tompkins Ventures and Tompkins Solutions, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.