EJ Tavella 0:00:03:5:

I'm very pleased and excited to have Drew here, who is the lead analyst for tariffs at Kearney. Drew, give your background and your introduction. 

Drew Delong 0:00:12:9:

Yes. Well, thank you all for having me. Thank you for having me. Drew Delong. I'm based out of our Dallas office and lead what we call our geopolitical dynamics team. It was launched about three years ago. It's the group intended within Kearney to help clients navigate geopolitical headwinds in the immediate horizon. Right? You could think about geopoliticals like longer-term, long-term scenario planning, things like that, or what do you do in the operating horizon? What do you do in 6 to 24 months, right, when things are going to be impacting you on a quarterly-by-quarterly basis? That's what we do. Prior to coming into the firm about six years ago, I served in the first Trump administration. I was a political appointee in the State Department, working with Secretary of State Pompeo in a group called the Policy Planning Staff. I was also in the White House. I was on Capitol Hill. My first role ever was with a... I was an intern with Speaker, Paul Ryan, which was quite a way to learn the hill, and then jumped around a number of other three-letter agencies, so certainly have lived and breathed all things trade policy, US policy, and now sit within the geopolitical dynamics team, but excited to be here. 

EJ Tavella 0:01:16:3:

It's a perfect definition for what we're dealing with right now in geopolitical analytics, so an interesting dynamic. Look, today's going to be an open conversation. Drew's going to share some of his experiences and the key questions that we're seeing out in the field, and then we're going to open it up for a conversation. Right? The key point here is really to engage all of you. What are you dealing with today? What are the key questions that you're facing? What are the kinds of challenges that you guys are trying to solve for, etc? We'll jump in. Drew will give us a bit of a perspective on how Kearney's thinking about tariffs and the key pieces that they're struggling with with their customers, and then we'll jump in and open it up. With that, yes, jump in. 

 

Drew Delong 0:01:58:6:

Awesome. Thank you. Whenever we talk tariffs, I think it's important as a starting point to do a bit of a state of play. Right? We just crossed the 100-day mark with this administration, and I would be remiss if I didn't, when I kicked off, do a quick show of hands. Who's either heard of or already been impacted by tariffs in some way? Show of hands. Okay, a follow-up question to that. Who's tired of tariffs already? Okay. Got it. The Trump team… I just want to contextualize this. While this is the second term, right, we're starting what is technically year five of the Trump presidency. In functionality, this is year nine. What I mean by that is the Trump team sat down in Mar a Lago during the Biden administration and watched and waited and planned what they would do if they won again. They made the bet of, okay, we're going to plan as if we are going to win, and what will we do? Right? Some of the pain points of the first administration was the fact, frankly, that they moved too slow and they burned too much time in year one. 

 

Drew Delong 0:03:03:5:

They were learning where things were, and none of them really were in government before and they were trying to figure things out, and so they wanted to be able to move quickly. For the better part of three years, they planned, I can tell you, at a policy binder level about… Policy binders about yay thick of, okay, you're in the cabinet. This is your binder. This is what you go and do. That speaks to the pace and the level of disruption of what we've seen in the first 100 days. There's been over 140 executive orders. There's a graph in another slide somewhere that shows and compares that to all the presidents since the mid-90s. It's not even close. By most presidential historian standards, this has been the most disruptive first 100 days since Roosevelt. With that, is the context. Important to say. This is disruption by design. This is a re-shifting, a recalibration of 40 years of globalization of trade. It's not because they want to deglobalize. It's because, in their own words, they want to re-globalize. They want to reset a lot of the equilibriums and a lot of the variables of which have underpinned, largely, manufacturing trends since the 1980s. 

 

Drew Delong 0:04:17:0:

Underneath that context brings us to where we're at today, and so what we've seen is a bit of a recap here. First and foremost, it was a surprise to a lot of people, the tariffs on Canada/Mexico right out of the opening gate. Right? I think everybody was thinking, okay, 10 per cent universal. 60 per cent on China was what was discussed prior to Election Day. Right out of the gate, you had Canada/Mexico at 25. That was walked back a little bit for USMCA-compliant goods. Then you had more Section 232 tariffs, or what are called basically product sectoral tariffs, so steel and aluminum were revamped. We're underway of doing Section 232s on timber, lumber, critical minerals, semiconductors, pharmaceutical products, heavy trucks, and, as of this weekend, airplane parts. Okay. Really confusing. Right? All of those are going to have immediate impacts, and then there's a question of what is a semiconductor derivative. What is a pharmaceutical derivative? Is it everything from the chip that sits in that projector right there, okay, now we're going to put a tariff on that, or does it just stop at phones and laptops? Okay. 

 

Drew Delong 0:05:30:3:

Then you had Liberation Day. What April 2nd brought, truly, was the most disruptive day of trade policy change in the US in over 100 years. The average effective tariff rate in the US went from about 3 per cent to 25-plus per cent in the span of a week. Obviously, that's been paused, but just in terms of the severity of where those rates went and where we could go back to, depending on what happens after July 9th. Now, we'll see where negotiations go. We've got some early, good positive data points with the UK deal that's been announced, with the China pause reconciliation that we find ourselves in, but I go through this process because that was so much information, and that was by design because that's just complexity. Right? If you're a business right now, what are you bringing in? What are the HTS codes of it? Are they all mapped? Do we know? If you look at the ACE data or the receipt from Customs and Border, is it mapped all the way through? We consistently hear when we're talking with clients, 'Well, only 20 per cent of our stuff is actually mapped out. We need to figure out what the 80 per cent is.' 

 

Drew Delong 0:06:38:9:

We're like, 'How is that possible?' but it's never really been a consideration before. Even for companies who may have only a US supply base, then there's a question of, okay, well, who's their supply base? How much of a pricing premium are you about to be asked for here in the next two months as you're getting letters saying there's tariff increases and so forth and have that notice? Then you need to have the pricing discussion and ask the question of, okay, if you're impacted by X, how much can you realistically pass to your customers based on elasticity of your categories, what your competitors are doing? If your competitors are less exposed or more exposed than you, what does that mean? This full chain, the end-to-end tariff management is what we find ourselves in, and that's just on tariffs. There's more changes coming from this administration that, frankly, for everybody here in the room… It puts an ultra-premium on platforms like Anaplan to be able to have this data visibility, right, to be able to get speed to insight faster. As you're working with executive teams, as you're working with individuals to say, 'Okay, look, this is worth the time because this isn't going anywhere. This isn't going to change.' 

 

Drew Delong 0:07:50:7:

Once we start to have more trade agreements announced, right, reportedly there could be India, South Korea, Japan, UAE, and I think Vietnam's fallen off the wayside a little bit here, but all of those are going to have their own wrinkles. Right? What does that mean for the supply base? What does that mean for the supply chain and the demand chain? Then you're going to have shifts that are non-tariff related, so export controls. What happens when those fall into the chain? Do you have visibility on that at the multi-tier level? All of these complexities, we find ourselves stacking up right now. The last thing I would say just in terms of the context, and I'll talk about a couple of case studies here to the degree that it's of interest for everybody, but everything we're talking about is a first-order impact. What's the impact by tariffs? What are you going to do on pricing? How much can you put in a warehouse? Those are all first-order implications. What needs to be thought about is the second and third-order stuff. What happens if inflation does return and it's worse? 

 

Drew Delong 0:08:52:0:

What happens if we go to 6 per cent inflation? What if GDP drops from… Right now, estimates are between 1.8 to 2.3 per cent. What if that drops into less than 1? What if we go into a recession? What does that mean? What if we get supply availability on the shelves, which I think the probability of that dropped yesterday but certainly you could still see a bit of a whiplash effect if inventory levels get low. We've already seen some of the port shipment data out of LA. I believe it was down 35 per cent year over year, but yesterday, bookings were up by 30 per cent, yesterday's news, so there's a bit of a whiplash effect there, so what happens there? All those are second-order effects. Then you go into the third-order effects of what does it mean to make big strategic bets in this environment. How do you make big CapEx decisions in this environment? Right? What is that view? In summary, there's a lot of stuff happening on the tariff front. There's a lot of stuff happening on the tariff front. There's more that's going to happen. 

 

Drew Delong 0:09:48:7:

You have to think through first, second, and third-order effects, and frankly, it puts an ultra-premium on the value of having that end-to-end visibility from the supply chain to the demand chain to be able to bring everything in the middle. That, frankly, those who are driving that value are just ultra-premium on that right now. A couple of quick case studies to the degree that it's valuable. We've worked with clients directly within… The 'tariff impact model cockpit', if you will, is the going term right now within the nexus of Anaplan and Kearney. We've done instances where we've built CEOs an enterprise tariff model that the CEO can play with, and it is - I can tell you, firsthand experience, that CEO uses that thing every single day. Auto part tariff relief comes in. What does it mean to go through and jig it out? We're actively working right now with agricultural equipment providers, with automotive players, I'm probably missing some, electronic battery manufacturers as well. All of these types of… I'm trying to make sure I'm thinking through all of these, but the shared commonality across the board is, get your data in check because you're going to have to go chase all this stuff down. 

 

Drew Delong 0:11:05:0:

Get the supply chain view in check at the first tier first. Right? Then get the part to SKU mapping, so that you can get the demand chain view there, and then you can start to think about the modules. Right? How do you optimize your tariff impact? How do you have the pricing discussions? Right? All those get added on once you have that base fundamental. Yes.

 

EJ Tavella 0:11:24:0:

Okay, Drew. A phenomenal starting point. Super easy. Everybody… There's going to be no problem. I was…

 

Drew Delong 0:11:33:6:

Another tariff just got announced.

 

EJ Tavella 0:11:34:9:

Yes, exactly. Yes, we can just keep doing that. Right? Like, have a tick here on the board.

 

Drew Delong 0:11:38:2: 

Yes.

 

EJ Tavella 0:11:38:8:

I was on the phone last week with a customer, and this guy runs engineering for his company. They make golf clubs. He was saying, 'Look, like we're just trying to get our head wrapped around the supply side.' You talked about the supply side. Obviously, there's a cost component to it, and then there's all that second and third-tier challenge. Focus on the supply side. Right? What's the cost drivers? Right? I think that the question that I hear all the time is, 'Great. How do I actually understand what the cost implication is going to be? How do I…? What level of detail do I have to go to? Can I get down to the first level? Is that enough? Or do I need to know actually how it gets routed, where it gets finished? How do I do that 232-derivative modeling, etc?' Like, give us an example or explain to the audience what level of detail you, minimum, need to get to, and then, if you really want to get advanced, like where are people going?

 

Drew Delong 0:12:29:7:

Yes, so two instances just on the supply chain discussion side. If you're importing everything right now, let's say 90 per cent plus of your supply base or your supply spend is foreign imports into the US, just worry about tier one. Just get that figured out right now. Right? Get your HTS codes put in place. Figure out how many are hit by Section 232s. Go pull up the document and say, 'Okay, here's the list of the codes. What…?' You can do a quick grid, right, of, okay, we've got 100 codes. 40 are hit by 232s. They're not hit by reciprocal rates. Got it.

 

EJ Tavella 0:13:06:0:

Are those codes changing, too, as much as the tariffs are changing?

 

Drew Delong 0:13:09:0:

The list of 232 codes typically are pretty static. Once they get updated, it goes to a federal register. You can see how it ebbs and flows. There's that. Then, the next step there is, okay, what's coming from China? What's coming from the US? Or what's coming from Canada/Mexico? On China, there's a laundry list of tariffs. If anybody wants to talk about it, we can talk after this, or it can be a Q&A discussion. On Canada/Mexico, is it USMCA-compliant or is it not? If it's not, 25. If it is, you have a shield. Right? Things that are hit by 232s, a bit of a wrinkle. That's option one.

 

EJ Tavella 0:13:44:7:

That's the easy case when 90 per cent is imported.

 

Drew Delong 0:13:46:5:

Yes, for sure.

 

EJ Tavella 0:13:46:5:

You're going to get hit by everything, but that's the easy case.

 

Drew Delong 0:13:48:9:

Yes. What's really opaque is if you go… Let's say somebody in the room here has - 95 per cent of their supply spend is in the US. Then you have to go to the tier two level, and you need to have a conversation to be able to get to an understanding of, okay, what portion of their supply base is impacted. What you're not going to get there is their full list of HTS codes that are coming to them before they turn it from 15 HTS codes into 1 HTS code that you're not getting a tariff on. Right? You're not going to get that. There's a lot of platforms that are out there right now that can give you multi-tier supply visibility. How you actually use it is a function of having good platforms, like what we're talking about here, to be able to take all of that data and aggregate it in a way that is useful. Right? Let's say 60 per cent of your spend comes from one US-based supplier. What is their view of the last three years of imports into the US, generally speaking? If 80 per cent of it is from China, you generally have an idea of what the average effective tariff rate on China has gone from since January until now. You can do some estimates to see what the general impact is going to be. Versus if none of it's from China and it's all from Canada/Mexico, you need to go have a conversation with that supplier and say, 'Hey, look, is this USMCA-compliant?' If it is, you're probably okay. If the Pareto is massively long, then it turns into more of a calculus equation.

 

EJ Tavella 0:15:15:3:

Yes, it's one of these things. Look, in supply chain, I think a lot of times when you're in execution mode, like you've got to get strong precision on what the numbers are and how you're going to have the right inventory in the right place at the right time, etc. For strategic decisions, often you hear this expression of 'Roughly right'. The 80:20 rule. Like, 'Let's get it roughly right. Let's make some decisions going forward.' Everything you just said, like can we get to roughly right? Is it viable to do relatively quickly or do you need to get to 'pretty darn right' versus 'roughly right' to make decisions?

 

Drew Delong 0:15:46:0:

Yes, well, if there are any companies in here who don't have a model that's somewhat like this, just get to roughly right. Like, just get to the 80:20 model first. Right? The majority of companies that we work with right now have their tariff number. Right? The question is, is it napkin math? Is it something a little bit more sophisticated? Is it tier one? Is it multi-tier? It always varies. If you don't have that, get that first. If you do have that, now, you can start to invest in closing the gap on that other 20. Right? Very few have the full connectivity from supply chain to demand chain to be able to have the pricing discussion.

 

EJ Tavella 0:16:24:8:

For sure.

 

Drew Delong 0:16:25:2:

That's the final like five, but as the impacts start to stack up, you have to have those pricing decisions. Frankly, what we've seen lately is, especially on B2B sales… In RFP processes, they'll say, 'Okay, look, like if you're going to take pricing, show us the impact. Show us the proof. Don't just send us a note saying, "Hey, tariff increases are coming"'. Right? They're actually coming back now and saying, 'Show us the HTS codes. Show us where it's hitting,' and that then demands this type of visibility. B2C, a little bit different. Right? If you're going into Walmart, it's not like you're going to walk up to the cashier and be like, 'Show me your tariff impact.' Right? It's not going to happen, so…

 

EJ Tavella 0:17:00:1:

You bring up a good point, and like we were talking about this as we were riffing on the presentation before about, great, we need to have this kind of analysis in place for our businesses to be able to make intelligent decisions and understand the impact and look at trade-offs. Do you foresee or is there talk of compliance that's going to happen? Great. We need to do it now because we need to have intelligent decision-making, but like will there be a Sarbanes-Oxley or SOX compliance type of thing where you have to prove what your calculation is to the government?

 

Drew Delong 0:17:29:5:

Yes, 100 per cent, 100 per cent. That already happens to a degree on like USMCA compliance right now. Just a quick show of hands. Has anybody here dealt with that? Okay, cool. To be…

 

EJ Tavella 0:17:43:8:

One last topic. We can…

 

Drew Delong 0:17:45:0:

Yes. To be USMCA-compliant, right, let's say you want to bring something in from Mexico and you don't want to be hit by 25 per cent, you have to go figure out what your code is; figure out what the rule is to be USMCA-compliant for that code. It probably has a regional value content number associated with it that are RVC, so let's say 60 per cent needs to come from North America. When you're importing that into the US, you have to show a certificate that says, 'This is USMCA-compliant.' To get that certificate, you have to go through this entire process of showing the burden of compliance proof that says this. Now, the reason why this is important to call out. USMCA starts to be renegotiated this year. Now, it sunsets next year. There's like this whole deal-negotiation period. The bluff here is it's getting renegotiated and it will likely connect into these current 25 per cent tariffs that we have. The expectation is that the RVC requirements are going to go up, which is going to put more of a compliance burden in place, and that they may start to ask the question of, 'Okay,' at the bill of material level, not what is the country of origin of the product, but what is the country of ownership of that product?' If you are a Chinese supplier that has moved from Shenzhen into North Mexico, now your flag next to your name is not going to be Mexico; it will be China. The…

 

EJ Tavella 0:19:19:8:

It's a question of going back to ownership of the entity versus where it's physically been.

 

Drew Delong 0:19:23:4:

Now, this hasn't been announced yet, I can tell you, because we know people at USTR and, throughout, the folks who are going into the teams. This is something they want to do.

 

EJ Tavella 0:19:31:9:

What about if they move their plants to the US? American jobs.

 

Drew Delong 0:19:34:7:

A question of ownership. Interest of 51 per cent/49 per cent. Who owns it? Now, there's still a lot of room to be left here. Right? None of this is in the public domain, so - but we know this is something they're looking at, especially on electronics. Right? You bring in a flat-screen TV. What are the legacy node chips that are sitting in there? Who owns it? Right? Or a Lenovo laptop. What happens with that? There's a lot of questions here but to your question of what does it mean from a compliance standpoint? Immensely complex. The last data point I would offer out is, on this auto part tariff relief, if anybody was following that, immensely complicated. Immensely because you have to then be able to report to the US government what is your total tariff impact by the auto part bill. You have to then connect to and prove that you're finishing cars in the US to qualify for the reliefs, so think about that. Then you can put the credit that you get to either your tariff bill or the tariff bill of your suppliers. If you have a compliance team of three people, okay, what does that mean? As I said, this is disruption by design. This is why we started there.

 

EJ Tavella 0:20:52:5:

Yes. Well, I think that was helpful. I think it's clear as mud how we're going to solve the problem, but let's pivot to the cost. 

 

Drew Delong 0:20:57:7:

Yes.

 

EJ Tavella 0:20:58:5:

Sorry, we talked about the cost. Let's pivot to the, how do we pass this on? Like, what's this going to mean to the pricing of products? What are you seeing in the market from a creativity perspective and how people are thinking about…? You hit on a little bit, different for potentially B2B versus B2C. What kind of modeling are people doing that's helping them to make those decisions?

 

Drew Delong 0:21:20:6:

Yes, well, all the pricing discussions start with a competitor analysis right now, and so looking at, okay, how exposed are we to tariffs versus competitor A, B, C? Then, from there, it's, okay, who's taking the moves first? Right? We've had a couple of instances where there's been first-mover advantage, and then the question becomes, okay, are we going to undercut or are we going to match and just say, 'Okay, well, they took X, so we're going to take X, so cool?' 'Cool.' That's happening. Where there's a lot of channel distribution on pricing - or at least what we've seen thus far is nobody wants to go after big national accounts right now. Nobody wants to poke the big, grizzly bear right now. What they're doing effectively is trying to buy themselves time. They're going after smaller channels, right, smaller players and saying, 'Look, like you're going to take this because you have to be with us anyways,' and they're trying to buy as much time as humanly possible before they go to the national brands. What buying time means is more data points are going to pop up by more competitors who are going after pricing, and then they're going to undercut. 

 

Drew Delong 0:22:21:1:

Their message to national brands is typically going to then be, 'Okay, we're less than everybody else,' and then, at that point, you then take it to the rest of the portfolio. Basically, bully the little guy right now. I'm not saying I agree with this, but bully the little guy, get more data points from your competitors who are going after national brands, and then undercut them to try to take the opportunity. Now, on a couple of instances, I've actually seen - especially where it's B2C, I've seen folks say, 'Look, we're not going to touch price. We're going to use this as a marketing ploy. We're going to understand what the market hit is or the margin hit is and we're going to ride this for as long as we possibly can.' Our top five competitors are all hit. Three out of the five have already moved. 'We're not going to do it.' You can go to their Instagram right now. I'm not going out who this is, but you can go to their Instagram right now and they have a post saying, 'Hey, our top competitors have taken price because of tariffs. We're not doing it. We're also impacted. We're not doing it.' There's, again, individual wrinkles here on B2B versus B2C, but it's the Wild West right now as everyone's sprinting to figure this out.

 

EJ Tavella 0:23:29:9:

Huge impacts in retail. Right? We've got a lot of retail customers. I'm interested in your perspective on the impact on the environment, all these other things. You look at - fast fashion gets a bad name. These companies are churning things out at super-low cost, so they can sell them at super-low cost. Ironically, the lower their cost is, the less the impact tariffs are theoretically. Right? You buy something for a dollar and you're selling it for ten bucks. If it's $1.75, yes, it's cutting your margin, but at the end of the day, like your margin is fairly large. Do you think it's going to - is that trickledown effect going to continue to happen? Like, do you think these suppliers are also going to start reducing their cost to the end brand owners and do you think it ends up being a spiral to the bottom, like let's just make stuff cheaper?

 

Drew Delong 0:24:16:3:

Well, I think two things, especially on the fast commerce stuff. One is that the removal of the de minimis threshold has blown Shein and Temu up. Let's just say who we're talking about here. We're talking about Shein and Temu. Reportedly… I saw something this morning that said their US sales are down over a quarter just since this got blown up. Now, also reportedly, they're trying to bring more vendors online in South America to try to be able to open that back up, but as of right now, they've reportedly stopped shipping from China and Hong Kong into the US. Now, how that affects as of yesterday, we're going to find out. Before this thing called the de minimis threshold was removed or the exemption was removed, if there was a port shipment under $800 that was brought into the US, you didn't have to pay tariffs on it. You could do something called informal entry. You entered faster. Shein and Temu took massive advantage of that. There's actually a report that Congress put out, I think it was two years ago, where it talked about how - the fact that they paid zero duties, gap-paid in the range of nine figures of duties, direct competitor, and so that's one headwind. The second headwind I would say is on the topic of manipulating your - the value of goods imported right now.

 

EJ Tavella 0:25:34:7:

I want to pause on the last one. Are you guys are familiar with that act I was talking about with reducing the cost? If they're shipping in from China and they're doing thousands and thousands of small $800-or-less shipments, they don't have to pay duties on it. Right? This happens a ton in retail from other countries where people might ship something for - like direct to consumer. Great. Direct-to-consumer is shipped from Canada, for example. They don't have to pay duties on it. It's an advantage. Right? 

 

Drew Delong 0:26:00:8:

Yes.

 

EJ Tavella 0:26:01:1:

They figured out how to manipulate that and send the whole boat of goods over, but all in $800 packages.

 

Drew Delong 0:26:06:8:

Yes, and the US government nullified that for China and Hong Kong and they've told this commerce secretary to figure out how to nullify it for the rest of the world. 

 

EJ Tavella 0:26:16:6:

Maybe that's good then.

 

Drew Delong 0:26:18:2:

Not if you like Shein and Temu products.

 

EJ Tavella 0:26:20:8:

Fair enough. Fair enough.

 

Drew Delong 0:26:22:2:

Yes.

 

EJ Tavella 0:26:24:0:

Okay, pivot a little bit. Right? We're talking about some of the methodologies that you guys have and we're partnering on to deliver to customers. One of the things that I think is interesting, and I think maybe you'll… What's a tabletop exercise? What do you do? Is this like the beer game or…?

 

Drew Delong 0:26:39:8: 

Yes.

 

EJ Tavella 0:26:40:4:

It's a beer game?

 

Drew Delong 0:26:41:5:

Oh, yes, I guess you could drink beer during it, but maybe not at…

 

EJ Tavella 0:26:44:1:

Not that beer game!

 

Drew Delong 0:26:45:4:

Yes, yes, yes, the… Okay, so just to walk through this for a second. In terms of geopolitical advisory, five years ago, if you went to the market and said, 'Hey, look, I've got a problem. I want to buy a company in a certain country,' right, the typical way of doing things is you could go to somebody, probably a former secretary of state, right, Kissinger Associates, or similar firms, and you could… There's a lot of firms that do intelligence, like a lot, and then you could take that. You would have discussions at the - at C-suite level within corporate strategy, have those dialogs and say, 'Okay, what are we going to go pay attention to?' Then you may go bring in an external advisor. Right? Any number of folks there. Then, who's going to do it? Right? That's the general chain. There's a lot of people that sit in the 'anticipate' bucket, right, of what the heck is going on in the world? There's a lot of people that sit in the 'response' bucket. 

 

Drew Delong 0:27:44:4:

Almost nobody was helping filter through geopolitical intelligence into corporate priorities, and very few, almost non-existent, ourselves included, were thinking about it as geopolitical ownership. What is a geopolitical muscle in the business? What is a geopolitical operating model? What we designed about three years ago is we said, 'Well, what if there was a one-stop shop to be able to do all of those in one place?' and so that's what we now have. To your question of, 'What is a tabletop exercise?' It's effectively a Defense Department simulation of, okay, we want to bring the C-suite in the room. This is the simulation. You can't fight the game. What happens if A does B? What happens if there is a 60 per cent tariff on China? Which we were running those war games back in September of last year.

 

EJ Tavella 0:28:30:6:

That could never happen.

 

Drew Delong 0:28:31:9:

Never. Very, very alarmist.

 

EJ Tavella 0:28:34:4: 

Yes.

 

Drew Delong 0:28:35:7:

What happens in terms of the future of Russia-Ukraine? What happens in the Indo-Pacific region? What happens with India-Pakistan? What happens in the Middle East? Right? It's not that these are meant to be predictive games. This is meant to be a get your C-suite together in a room. Don't fight it. This is what you wake up and see. What do you do? Who do you call? Do you have the data visibility? Do you know what…? Again, supply chain, demand chain, your people, your capital, your IP. Right? Really thinking through and owning geopolitical management as a function and saying, 'Okay, what does that mean?' and then continuing to pressure test that on an ongoing basis.

 

EJ Tavella 0:29:16:6:

I love it. If you think about it, like this concept of integrated business planning or S&OPs going in for a long time, and really, like at its core, it's about bringing together these groups to make strategic decisions that are informed. It's not necessarily about getting it right often, too. It's about like let's all understand the information. Let's all make an intelligent decision together, so we're all running down the same path too. I think this is a very strategic version of that, where, again to your point, like we don't know. We only know what we know. There's going to be things that are changing, but how do you make decisions as a senior leadership team to move down the right path and then understand, are you hitting it or not as you go?

 

Drew Delong 0:29:54:7:

Yes, totally. I'm reminded of the old Rumsfeld framework: the knowns and unknowns. Known knowns: really easy. Known unknowns: still pretty easy. Businesses are pretty good at dealing with that. The problem with the environment right now is we have more unknown-unknowns than we ever have.

 

EJ Tavella 0:30:09:1:

How far are they through that binder?

 

Drew Delong 0:30:11:7:

Not very far.

 

EJ Tavella 0:30:13:2:

That's the unknown. Right? 

 

Drew Delong 0:30:14:4:

Not…

 

EJ Tavella 0:30:14:9:

Not far enough. 

 

Drew Delong 0:30:15:8:

Yes, I could… 

 

EJ Tavella 0:30:15:9:

Only 137 pages or whatever it is.

 

Drew Delong 0:30:18:6:

I can't tell you the page count. I can tell you I had a very good friend of mine, who was in the Oval last week, and they said, 'Look, we've got more executive orders than we know what to do with.' That was the quote that I was told. That being said, they're not all like mega-disruptive. We have an executive order on water pressure. Right?

 

EJ Tavella 0:30:37:8:

Thank God.

 

Drew Delong 0:30:37:3:

Like, make showers higher water pressure, so they're not all like 25 per cent tariffs.

 

EJ Tavella 0:30:45:1:

We're forced to have colder water for cold showers, too?

 

Drew Delong 0:30:48:1:

I don't know. Anyway, I'll relay that up the chain.

 

EJ Tavella 0:30:51:7:

We're launching a joint offering, right, with this service, plus an Anaplan application to help model tariffs. What should people expect out of that? Like, is that a month-long exercise/a few-month exercise? What do we think that looks like for a customer to…?

 

Drew Delong 0:31:09:0:

To get stood up or what?

 

EJ Tavella 0:31:10:0:

To get stood up and start that process. Like, is this something that they can do in a week? Is this something they'll hunker down for a couple of months? Roughly speaking.

 

Drew Delong 0:31:17:1:

Yes, yes, yes. Well, I think to get this stood up, this isn't going to take over a month. The idea here is to be able to build this and scale this meaningfully. Like, you don't have a month. Right? If you don't have it right now like you've got to get going, and this is being designed and is designed in a way to be able to build this very quickly. Right? The ones that we have built already, we build them in less than two weeks. The thing that I'm most excited about with this platform is really the full end-to-end visibility to go on the supply chain, to the demand chain, to be able to give the interfaces on pricing optimization on the impact piece, as well as then to eventually be able to scale it into the multi-tier level as well. I think that's a really exciting combination that, frankly, I haven't seen anywhere else. That's what makes it very exciting to be in over there.

 

EJ Tavella 0:31:57:7:

In overlay, we were talking to somebody about this. They were like, 'Look, we're not necessarily doing planning in this process, but we're bringing the plans in so we can look further out and see, well, great. What's coming up? What's going down? Where are we phasing in? When's the new product getting launched?'

 

Drew Delong 0:32:09:4:

Totally.

 

EJ Tavella 0:32:09:6:

Like, those kinds of pieces are really important to be able to do those types of things.

 

Drew Delong 0:32:13:4:

Yes, to bring this to life for everybody, I sat in a room in Fort Worth, Texas, two weeks ago, and there was a view of all of this company's major channels, basically, with all their customer channels, and they had the price-per-unit impact across the channel. The entire executive team was sitting there debating, 'Okay, where are we going to go? What are we going to do? Who are we going to…? Where are we going to push this to?' That was one of the most heated discussions I can remember in a really long time. The very next day, the tariff news changed, and 24 hours later, we had the exact same conversation. Like, the exact same one. The ability to, if this platform exists, right, be able to say, 'Okay, now you can refresh that conversation.' Otherwise, we had that conversation in that instance in less than 24 hours. If you don't have that in place, your team's going to go scramble for four, five, six days and then have the conversation, and then you have another week of data points, so…

 

EJ Tavella 0:33:15:4:

Well, and to Adam's point, I know you guys were doing a ton of data wrangling on the policy data that then feeds into that and shows you those relationships, and that changed your [unclear word 0:33:23:9].

 

Drew Delong 0:33:24:7:

Yes, 100 per cent.

 

EJ Tavella 0:33:26:0:

This was like an amazing conversation. I learned a ton, and I think the audience probably did as well, clearly. I think if the team here is interested in hearing more, please go see the Kearney team at their booth. You may have a line out the door. Very much, thank you all for joining us. We appreciate it. Again, welcome today.