How Multi-Tier Traceability Helps in Vetting Suppliers as Tariffs Rise

With rising geopolitical tensions and shifting tariffs, it's no longer enough for businesses to know who they buy from. It is crucial for businesses to uncover:

• Who are the supplier's suppliers?
• Where are they located?
• What risks are tied to their operations-sanctions, trade barriers, or political scenario?

Tariffs vary widely across countries and suppliers, making end-to-end visibility across every tier a strategic imperative.

This is where multi-tier traceability becomes essential. It's no longer just about tracking direct suppliers; companies need to systematically map the entire supply chain network to uncover dependencies, anticipate disruptions, and make informed decisions.

Understanding Multi-Tier Traceability

A McKinsey study reveals a critical visibility gap: 45% of the respondents say they either lack visibility into their upstream supply chain or can only monitor as far as Tier 1 suppliers. To effectively manage risk, businesses must extend visibility beyond Tier 1 suppliers to Tier 2 and Tier 3 suppliers. These upstream suppliers, typically not maintained in ERP systems, can create ripple effects that impact cost, quality, and delivery timelines.

Why Multi-Tier Visibility Matters Now More Than Ever

• Tariff Volatility: According to the National Association of Manufacturers' first-quarter 2025 outlook survey, 73% of manufacturers identified trade uncertainties - including tariffs and trade negotiations as their most significant business challenge. Frequent and unpredictable changes in tariff rates and trade policies can create uncertainty for businesses. When these costs cascade to Tier 1, tariff volatility can erode margins and delay critical deliveries.
• Regional Concentration: Multiple suppliers clustered in the same region can form a single point of failure. A natural disaster, political shift, or regulatory change affecting that region can disrupt operations across all tiers, magnifying financial and operational risks. For example, in 2022, the Russia-Ukraine conflict disrupted semiconductor supply chains , prompting swift supplier pivots.
• Unsanctioned Subcontractors: Tier 1 suppliers often rely on undisclosed or unvetted subcontractors. These untracked third-party suppliers can introduce regulatory, quality, or ethical risks, threats that remain invisible without multi-tier visibility.
• Raw Material Constraints: Disruptions in specialized materials such as rare earth minerals typically originate far upstream. Without visibility, businesses are blindsided by cost increases and shortages that cascade through the supply chain.

Using traceability to evaluate suppliers goes far beyond checking price and lead time, it enables businesses to assess deeper factors that directly impact risk, cost, and compliance across the entire supply chain.

How Multi-Tier Traceability Enhances Supplier Evaluation

1. End-to-End Visibility (Including Tariffs and Compliance)

Multi-tier traceability can provide granular data on supplier geography and sourcing practices, allowing companies to calculate the true cost of goods, including tariffs, duties, and regulatory fees that may be hidden in traditional supplier comparisons.

Case Example: Tariff Impact

In the above scenario, Supplier A and Supplier B provide the same raw material at the same base price and lead time. Supplier B's total landed cost is significantly higher due to a steeper tariff rate in their sourcing region. Multi-tier traceability uncovers such hidden costs, empowering businesses to make smarter, more cost-effective sourcing decisions.

2. Risk and Resilience Management

Multi-tier traceability uncovers risks buried deep in the supply chain, such as reliance on suppliers in politically unstable regions or those with poor labor practices. This visibility allows businesses to proactively address vulnerabilities, switch suppliers quickly during disruptions, and ensure business continuity. Alternatively, multi-tier traceability can facilitate rapid response to disruptions like product recalls.

3. ESG and Regulatory Compliance

Traceability lets companies track and verify that suppliers at every tier comply with environmental, social, and governance (ESG) standards and local regulations. Even when brands have little knowledge of supplier misconduct, unethical practices deep in their supply chains can severely damage their reputation and financial health. In 2022, investigations revealed that children as young as ten were involved in hazardous cocoa harvesting in Ghana, despite industry commitments to ethical sourcing .

Business Impact

• Reduced Landed Costs : Multi-tier traceability helps businesses identify suppliers that minimize tariff impacts, reducing the landed cost of goods through smarter sourcing decisions.
• Better Risk Mitigation : By identifying potential tariff issues early, businesses can proactively avoid costly surprises and improve compliance with changing trade regulations.
• Stronger Negotiation Power : Transparent, multi-tier supply chain data puts companies in a better position to negotiate terms with suppliers. This data-driven approach can strengthen supplier relationships through informed, mutually beneficial negotiations.

Multi-Tier Traceability, the New Tariff Strategy

The best defense against tariff uncertainty is visibility. And that visibility starts beyond Tier 1. The ability to see beyond Tier 1 suppliers and into the deeper layers of the supply chain gives businesses a critical edge: the power to choose suppliers not just by cost or lead time, but by tariff exposure and geographic resilience.

Contact CTG to unlock full-spectrum supply chain visibility. Our Supply Chain Data and Traceability services can help you gain deep-tier supply chain visibility to outmaneuver tariff volatility, supplier risk, and strengthen your negotiation power.