In Part 2 of Conversations with the Experts: Future-Proofing Your Supply Chain, host Dan reconnects with Eleven Canterbury Consultant and former Shell executive Derek Aranda for a timely deep dive into how recent tariff hikes are reshaping global supply chains.
Just weeks after the initial conversation in Part 1, shifting trade policies have triggered new disruptions. Derek returns to break down the real-world impact of these changes—from uncertainty in sourcing to ripple effects across operations. With firsthand experience leading global supply chain strategy at Shell, he shares actionable strategies companies can use right now to stay agile and competitive.
In this episode, Derek emphasizes the importance of scenario planning, cross-functional collaboration, and balancing short-term sales and operations planning (S&OP) with long-term strategic goals. Whether you’re in manufacturing, logistics, or procurement, this conversation is packed with practical insights on how to navigate volatility and build a resilient, future-ready supply chain.
Transcript
Dan Martin: Welcome to another edition of Conversations with the Experts. I’m delighted to have a follow-up conversation with Derek Aranda about the supply chain. After we recorded our first conversation, there were a few tariff adjustments started by the United States that will influence on the supply chain.
Derek, as you recall, was most recently the general manager of Global Supply Chain Strategy at Shell, and he is an expert consultant in the Eleven Canterbury network. So, Derek, as we talked about, tariffs are creating a lot of uncertainty. What general impact have they had on the supply chain?
Derek Aranda: Well, Dan, first of all, thank you for having me back. I enjoyed the first conversation and am looking forward to continuing that dialogue here with you today. I think you’re right. The tariffs have really introduced a significant amount of uncertainty into organizations in the supply chain, in particular.
You asked what some of the things are that we can do. I want to preface this by saying that tariffs are a disruption, absolutely, and we’re going to have to respond and adjust to the tariffs. But as supply chains, we’ve long had to deal with disruptions.
So, I think the first thing we need to do is really step back and assess what this particular disruption, these tariffs, mean for us and our organizations. It reminds us of the old adage, keep calm and carry on, which is probably the most important thing that we need to do in this situation. But make no mistake, I think the tariffs that we have seen over the past several months really are having a material impact on a lot of organizations in a lot of ways, not just here in the US, but around the world. These tariffs are hitting just about everything everywhere, all at the same time.
I think that the first step is to step back and think, assess, and understand what these tariffs mean for me. We’re at a point now where it’s very difficult to make decisions because there is so much forward-looking, and uncertainty for organizations. But now is the time to step back and think about what those milestones, those thresholds, those decision points are that as an organization you are going to be looking for that allow you to then make a decision when those things become clearer. So, things like making sure you have a working group together, a cross-functional working group, or cross-sales, marketing, your supply chain functions, procurement, planning, manufacturing, and logistics. Are you huddling together? Are you thinking about what products we have? Where do we source those products from? Where do we source the components? Where are we selling those products into? What are the markets that we’re, we’re participating in? And then having a view of prioritizing those products, those markets, and your customers. Where do those land in priorities? That allows you to start thinking about scenarios where, okay, we used to get this product out of China. Yes, there’s a 145% tariff on that product today. I don’t know if I can move that to Thailand or India because maybe it’s 46% in Thailand and 22% in India, or maybe it’s something else.
But at least now I start having thresholds; okay, it’s 145% in China. I can or cannot be in that business. Where else are my options? I have Thailand and I have India. Okay, so now I’m looking for a tariff that needs to be no more than 50% for you to make a decision to move. Or if it’s 30%, it’s an automatic decision to move, but you don’t know the answer to where that tariff is going to end up. But you now start having some decision criteria that you can apply. And I think that’s a really important step. Because of that forward uncertainty, organizations really need to make sure they’re huddling on and thinking through today.
Dan Martin: It seems challenging. It does seem to me that there’s always an uncertainty in the supply chain arena.
Derek Aranda: Yes, indeed.
Dan Martin: You never know what’s going to happen. Covid messed things up dramatically. The iPad that I bought during COVID spent months sitting in a ship in Long Beach Harbor, waiting for it to be unloaded. It does seem to me that some of the fundamental foundations of international business have been tampered with. It’s a bit like if you’re a physicist discovering that gravity was decaying, or maybe a bit more to the point, in quantum physics, you have the Heisenberg uncertainty principle, where you can’t tell where something is going. We have a whole lot more uncertainty on the foundation of the way the world has worked for the last 40 or 50 years.
Derek Aranda: I hope it’s not as bad as gravity decaying!
Yes, there’s a lot of turbulence. There is a lot of uncertainty. We use the word uncertainty over and over again. But I don’t want us to lose sight of the processes and tools that we do have that allow us to navigate the uncertainty.
Again, I think what has really changed is that we don’t know what that end game is, nor do we necessarily have a small set of possible outcomes. I think that’s something that has changed; that forward landscape is almost a completely blank slate at this point in a lot of ways. You really just don’t know, do I go left? Do I go right? And so oftentimes it’s better at this stage to look at what some short-term things are that one can do. But this is not a time necessarily for you to go ahead and start deploying large-scale capital or making long-term choices.
I think there are two foundational activities in supply chain that are complementary, but serve somewhat different purposes. The first one is your sales and operations planning activity, SoS and OP, or in some places, you might hear it referred to as sales and operations execution, S and OE. That is designed to take a short-term rule about what to do in the next zero to 12, maybe 18 months operationally. So, where are my customers? What is the customer demand going to look like for me? Where am I sourcing my products? Where do I need to get them from? How much inventory do I need to hold? Where do I hold that inventory? Those sorts of short-term operational decisions that you have to make. And some of those you can’t think about making today. I mentioned we don’t know where tariffs are going tobe at the end of 90 days from now, for example, but for the next 90 days, I know I have tariffs of 145% if I get that material out of China. I have 10% tariffs on that, which I’m using now. I’m going to have 10% if I get that material out of Thailand. So, to that extent, in the next three months, I can move what I can from China to Thailand. So let’s do so. To the extent that you can, do that, make those sorts of changes, start thinking about, well, if I don’t have that kind of optionality, where might that optionality exist in the near term? Even if I’m not getting out of Thailand, can I? How do I start thinking about being able to have that option to get it out of Thailand?
These are things that you can do today. And if you have an effective S and OP or an S and OE process, you can have these conversations now and start thinking about those types of quick fixes you can put in place.
Tied to that is the longer-range thinking, a more strategic approach, what we call integrated business planning. That is answering the question, what do I want to be? Where do I want to play 18, 24 months from now, or 2, 3, 5 years down the road? That’s a much longer-range strategic view. This is where you start getting to questions around what the markets are that you want to be in. A simple example – do I want to be in the US, or do I want to be focused on the world outside of the US? If I take that as a potential binary choice, given the tariff environment that we’re in, what types of products do I want to sell? If today I’m in textiles and I sell both socks and suits; in a highly volatile tariff world, socks may not have the margins that I need in order to stay in business. So, I might need to make a choice two years from now. I no longer want to sell socks; I just want to sell suits. That is a strategic business decision that you have to make; the type of customers you want to go after, et cetera.
Those are two activities that you really need to make sure you have buttoned down and are actively engaged in; the short term tactical response to the world as it is now and then the strategic thinking around how to start thinking about what are those choices that I need to make that might be more fundamental shifts into what I do and how I do it. Where do I deploy capital? Where do I deploy long-term contracts? That is another element that companies really need to start thinking about. And going back to that shroud of uncertainty, you may not be making decisions today, but you’re thinking about what those criteria are for those decisions. What are the thresholds at which I will then make a decision? You can start doing those things now.
Dan Martin: You really are starting to prepare with the decision criteria and the things that you’re going to have to be thinking about when things become a bit clearer.
So, it’s a fun place to be; no boredom! It’s not just watching things pop off the assembly line. There is a lot to do to be prepared.
Derek Aranda: Yes, and I think this is where supply chain and supply chain professionals are oftentimes uniquely prepared. I don’t want to downplay how impactful this world we’re living in is, but there’s never a dull day in supply chain. Something is always happening. So I think as an organization, unlike some other parts of companies, we’re used to disruption. We’re used to things going wrong. Murphy’s law lives in supply chain. The muscle of being able to and willing to respond as and when disruptions happen is something that we’ve honed, and we have to continuously get better at. And the muscle we really need to exercise in this environment is being able to step back and not necessarily respond immediately and reactively. This does require us to take a more integrated view because there are so many different moving pieces at the same time. As opposed to this being 1, 2, or 3 things that have hit us. This is 10, 15, 20 things that are hitting us at the same time.
Dan Martin: We live in interesting times. Thank you very much. I’m fairly convinced we’ll probably have another on this.
Derek Aranda: Indeed. Let’s look at what’s in the headlines in 30 minutes!
