Tariffs are on... then off, rising... then falling. As supply chain disruptions grow, end-to-end supply chain management, demand planning, and financial forecasting become considerably more complex.
Even companies with advanced Sales and Operations Planning (S&OP) capabilities find that traditional processes alone can't keep up. The problem isn't just speed—it's accuracy. When fundamental demand and supply inputs constantly shift, even the most rigorous S&OP models begin to erode.
To succeed, executives must ensure their organizations move beyond reactive adjustments. By embedding supply chain disruption and tariff impact modeling, real-time visibility, and data-driven analytics into their S&OP process, companies can turn volatility into a competitive advantage through planning and forecasting agility.
Laying the foundation: Fixing data at the core of S&OP
In our experience, many companies have focused on processes and technology to address supply chain disruptions. Current conditions are exposing the limits of these levers. At its core, S&OP requires a robust, wide, and accurate data foundation to unlock value.
Even with the best planning tools and processes, companies will struggle if the data feeding those systems is unreliable. Companies that shift their investments to address demand and supply data challenges can expect rapid and tangible financial improvements.
Demand data cleanup
One of the biggest obstacles in demand planning is noise, especially from one-time purchases such as promotions, project orders, or new product launches. By separating these from recurring demand, companies can improve forecast accuracy and reduce inventory bloat.
For example, we helped a large manufacturer significantly reduce excess inventory by distinguishing between recurring business and unique project orders using CRM and sales data analysis. Separating this demand into buckets allowed forecasting on recurring business only, significantly reducing excess inventory by eliminating forecasts from one-time purchases.
In another case, a company producing highly engineered products began aggregating demand by common component units, enabling forecasting for the first time and improving stock availability on major project orders.
Supply data accuracy
Clean Bills of Material (BOM) are essential to accurate supply
planning.
We build tools to compare consumption to projected usage and drive
improvements in BOM quality. This process helps quickly balance
working capital by identifying excess purchases for raw materials.
We used this method for a food processing company to highlight
shortages of packaging materials that were causing line
stoppages.
For capacity planning and routing, modeling actual production output compared to the projected production output can identify gaps in the rates/routes used. This data can be used to quickly find the real bottlenecks in the manufacturing process and drive improvements. For an industrial manufacturer, we used this approach to help demonstrate an overloaded work center. We highlighted options for relieving backlogs in their production through outsourcing and updated routings. Within months, the backlog was eliminated, production was opened up, and the customer fill rate improved.
Companies typically understate the cost of extra inventory they hold due to a supplier's poor performance. Integrating ERP, WMS, and TMS data gives a clearer picture of supplier reliability and enables smarter sourcing decisions.
These examples are meant to illustrate some of the moves companies can make, but the headline is that the best S&OP processes in the world can't address volatility without validated and clean data.
With this in mind, we can now examine key demand and supply strategies to mitigate disruption while considering the pivotal role that data can play in the success of these approaches.
Rethinking demand planning: From forecasting to sensing
Traditional demand planning relies heavily on historical data. But in a tariff-driven world, yesterday's data may not predict tomorrow's outcomes. Demand becomes increasingly volatile as customers pull forward orders or shift preferences, particularly for mature products. Supply shortages can trigger significant product mix changes as buyers turn to alternative vendors, disrupting production plans. Traditional demand signals, like interest rate changes, may also lose reliability as consumer behavior becomes harder to predict.
Demand planners must shift toward a more dynamic, real-time, scenario-driven, and data-driven approach.
Key demand strategies:
- Increase planning cadence
In volatile environments, static quarterly or annual plans aren't sufficient. Agile organizations are moving to bi-weekly or monthly planning cycles that can adapt quickly to evolving conditions. - Proactive customer engagement Communicate early and often with customers about potential delays or shortages. This allows time to shape demand through promotions, substitutions, or early ordering strategies that align with operational constraints.
- Tighter cross-functional collaboration
Sales teams often have firsthand insights into how customers react to volatility. Embedding this qualitative feedback into S&OP meetings—such as news of early ordering, alternative sourcing, or substitutions—helps ensure plans reflect on-the-ground realities. - Scenario planning and "what-if"
analysis
Develop multiple scenarios to anticipate tariff impacts. Running what-if analysis to determine how different tariff levels or trade restrictions would alter demand can greatly enhance responsiveness. - Real-time demand sensing
Move beyond static monthly forecasts that rely only on historical data by leveraging dynamic data feeds such as POS data, distributor inventory, and online trends. This enables early detection of demand changes and faster plan updates. - Incorporate pricing elasticity
When tariffs force price changes, incorporate price elasticity into demand planning. Planners can use analytics (like regression models linking sales to price) to simulate how a 5%, 10%, or 20% price increase (from tariffs) might impact volume.
Supply planning under pressure: Managing risk and complexity
Tariffs disrupt more than just demand—they fundamentally challenge sourcing, manufacturing, and logistics operations. Many companies scramble to build inventory ahead of tariff deadlines or shift suppliers to avoid cost increases, leading to cascading effects.
Sourcing becomes volatile as new supplier relationships create temporary demand spikes followed by sharp drop-offs, straining the vendor base. Logistics slow down due to rerouted shipments, customs delays, and border inspections, just as companies try to flex capacity. Tariffs can also spike working capital needs, stressing operations. Meanwhile, regulatory complexity increases, with constant updates to documentation, HTS codes, and exclusion filings delaying critical components.
Key supply strategies:
- Expand and extend scenario planning for supply
chain:
Go deeper, and consider more variables and options for each of those variables. Model different tariff rates (e.g., 10% vs 25%) on key components to determine the impact on lead time, cost, and capacity utilization. Evaluate the effect of increased transit times and rates on your business. With disruptions like the Red Sea Crisis adding 14-21 days to transit from Asia to Europe or U.S. East Coast destinations, what impact would this have on product availability? What if key suppliers in another country (Vietnam, for example) went out of business due to trade disruptions? - Real-time visibility enabled by
technology
"Control tower" platforms that show live inventory, shipments, and capacity can enable faster response to disruptions and improve resilience, providing end-to-end visibility. -
- Digital twins can provide scenario planning to help manage fluid tariffs.
- Manufacturing network design is also critical to understand capabilities within the network and flex production to meet demand and minimize tariff impact.
- Supplier diversification and flexible
contracts
Spread sourcing risk across regions and suppliers. Where possible, negotiate contracts that allow volume flexibility or fast changes in sourcing location. - Inventory buffering with precision
While holding extra stock can mitigate disruption, it must be managed with careful monitoring to avoid costly overstock or obsolescence. - Manufacturing network optimization
Use capacity modeling and production data to identify bottlenecks or underutilized sites. Relocate or consolidate production to more tariff-favorable locations with minimal operational disruption.
What can you expect with modernized and data-driven S&OP?
Companies that closely examine the data supporting their S&OP approach to handle supply chain volatility better can expect the following benefits:
- Improved balance sheet: Effective inventory planning will reduce working capital tied up in inventory across raw, work-in-progress, and finished goods categories.
- Improved bottom line: Faster adjustments to shifting demand patterns reduce manufacturing, sourcing, and distribution disruptions. Aligning production with demand reduces costs associated with change orders, expedites, and overtime.
- Increased revenues: Effective planning can improve product availability through raw material shortage mitigation and production capacity improvements for companies facing low fill rates, turning inventory into revenue quicker.
- Improved customer satisfaction: Greater accuracy and agility enable better communication with customers, increasing trust and loyalty during uncertain times
- Faster, smarter decisions and increased transparency: A data-driven, digitally enabled S&OP process gives leadership clearer insights and more confident decision-making under pressure. Execution improves with greater transparency and open communication throughout the organization.
Turn uncertainty into a competitive advantage
Tariffs won't stop shifting anytime soon. The companies that win in this environment won't just be the fastest—they'll be the smartest. By evolving S&OP processes to include scenario modeling, real-time visibility, and clean foundational data, businesses can move from reactive firefighting to proactive planning.
Now is the time to act. AlixPartners' S&OP team helps organizations build the digital tools and processes needed to thrive in this new era of uncertainty, turning complexity into clarity and disruption into opportunity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
