RBI’s Approach to Managing the Tariffs and Our Cost Saving Solution.
By: Michael Kenney
With 95 percent of RBI’s latest shipments of product affected by the tariffs, we have been reviewing the impact on the company’s inventory and working with our customers to determine what’s in stock and which products might need to be ordered again in the near future while tariffs are likely to still be in place.
The majority of our customers are understanding as we begin implementing new strategies to counter the tariffs, including meeting competitor prices and slowing down on inventory purchasing.
Supply Chain Issues in China
Being in the bearing business nearly 40 years, I’ve witnessed a lot of industry disruption. I’ve been traveling to China since the 90’s to visit manufacturing factories and I’ve seen the country go from third-world to modern — and now manufacturing products that are no longer made in the United States. This creates supply chain issues. What concerns me with the U.S. government’s additional tariffs on these products is lack of understanding the U.S./China supply chain.
Chinese factories often don’t have long-term business plans like those in the U.S. The big factories will take the bearing orders that are profitable for them, then pass lower profit orders to smaller feeder factories. In China, they live every day to live every day. The result of that day-to-day mentality for factory owners is to simply walk away from their business when there’s a shortage of orders. We’re seeing that already happen – the supply chain is being diminished.
The longer these tariffs continue we will begin to see larger companies that have products made in China start to look to other low-cost countries such as Vietnam and Twain to make their products and, ultimately, they will move out of China.
Completed Assemblies – One Way to Save on Tariffs
There are many advantages to bringing in assembled pieces — now more than ever is the tariff savings. When customers purchase separate components from RBI to be assembled here each separate component is subject to an additional 25 percent tariff. But if those pieces are assembled in China and brought in as one complete assembly, our customers would only pay a 10% tariff on the value of the complete assembly. For volume users, importing assemblies from China can result in substantial savings versus importing the individual components.