Parts Distributor
Turning Tariff Risk into Margin Opportunity
Uncovering Hidden Tariff Risk in a Global Supply Chain
A parts distributor faced significant cost exposure with limited visibility and few strategies in place to protect margins.
The client sourced approximately $40M in cost of goods sold from international suppliers, including high-impact categories like steel, aluminum, and technical equipment—primarily from China. Despite the scale of their global procurement, the business lacked a clear understanding of its total tariff exposure and had no formal mitigation strategies in place. INSIGHT’s assessment uncovered approximately $20M in unrecognized tariff cost exposure, giving the client critical visibility into their risk. As a result, they were able to take immediate action laying the groundwork for stronger margin protection amid continued tariff volatility.
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Situation
Limited Visibility, Growing Tariff Risk
- The client sourced ~$40M of COGS from international suppliers
- Key purchases included steel, aluminum products, and technical equipment, primarily from China
- Lacked visibility into their total tariff exposure and had limited strategies in place to protect margins
- Client was able to negotiate with one large Chinese supplier to guarantee some cost-sharing
Approach
Quantified Tariff Exposure to Protect Margins
- INSIGHT uncovered incremental tariff exposure by analyzing source country and HTS codes at a product family level
- Developed a scenario-based tariff mitigation strategy to model the financial impact of potential new tariffs, factoring in varying client responses on cost absorption and price adjustment
- Scenarios included:
- Pricing based on the true internal costs incurred after tariff slitting
- Pricing based on perceived tariff rates, meaning without regard to true internal cost changes and passing on price based on incremental tariff rate
Market Intelligence Excerpt
Market research revealed distributors expect a sizeable impact on price due to tariffs and plan to pass increases on to their customers
We are speaking to our customers about the tariffs and the possibility of higher prices. They watch the news so they will be accepting if it happens.
— Customer #1
The plan is to pass the price increases along to the customers. There are no plans to absorb the price increases and negatively impact margins.
— Customer #2
We buy steel and expect a 6% price increase…If you read the news, you know the tariffs might have impact on future pricing and our customers understand this.
— Customer #3
Price adjustments of 20% were announced on March 10th and thus the price is going up based on the tariffs on aluminum and steel.
— Customer #4
Built Country Product Incremental Tariff Exposure Calculator
Developed Tariff Mitigation Scenario Forecast
Impact to Gross Margin $s
