Impact of Tariffs on Manufacturing

Impact of Tariffs on Manufacturing

This article is adapted from the BCA Technologies podcast, Episode 1, featuring BCA Technologies CEO Brian Cumming. Access the full audio version by clicking the play button.

What are tariffs?

Basically, a tariff is a tax and it’s imposed by one country on specific goods and services that are imported from another country. And why would they do that it’s because it’s a source of income for the country. The tariffs can be fixed or variable and they can be limited to certain goods and services. It just depends on the tariff that the government wants to impose. There’s a unit tariff that’s a fixed charge for each unit of good that’s imported. For example, it may be on an iPhone. There could be a twenty-dollar tariff that’s put on that as it’s brought into the country. There are also ad valorem tariffs which are typically a percentage of the value of a good imported. The other thing is the tariffs are used to protect domestic industries from foreign competition in addition to raising revenue.

Discussing the Impact of Tariffs on Manufacturing

by BCA Technologies, Inc. | Episode One

What types of products are typically subjected to tariffs?

Tariffs can be imposed on any product or service. For example, in the past the United States had little or no tariffs on China’s products. About 30 years ago when China started really exporting a lot to the United States, they did not produce many refined goods. It was mostly plastic toys and very low-tech objects. Today it’s all changed. China’s one of the leaders in technology. So, it’s kind of a different ballgame.

China in the past has had, on average, about 25 percent tariffs on U.S. goods they imported. Of course, this is changing now as negotiations are going on to equalize the playing field not just between the United States and China but other countries as well.

How will ongoing trade negotiations impact manufacturers in the US?

Manufacturers may not be able to get the products they need to make their own stock. They buy materials and goods from other countries like China, Germany, Mexico, Europe and Southeast Asia to manufacture products. These materials could impact their entire product line, or it could be just certain parts or components that they put into their final products as part of their manufacturing process or it could be raw materials like rubber aluminum or steel. The tariffs increase the price of these products and materials. And that impacts the cost of the manufactured product which is then passed on to their consumer.

How does a tariff increase impact the supply chain?

Obviously, increases in tariffs increases costs for the manufacturer on anything that they put into their product that is affected by a tariff. A good analogy to think about this is like when OPEC announces they’re going to increase the price of oil the market, crude oil price reacts immediately. And the guy at the 7-Eleven store goes out and immediately increases the price of gas the next day even though he’s still pumping gas that he bought at the old prices. And it can take weeks or sometimes months to get the OPEC oil out of the ground, shipped, and refined so that consumers can finally purchase it at the gas pump. But the sales channel is already charging the consumer the higher prices just based on the announcement that there’s going to be an increase in price. This is very similar to a tariff announcement. Unfortunately, the supply chain to manufacturers is not much different from what I just explained with the oil prices.

However, the price of the final product usually doesn’t get increased the next day because the effect on the pricing of a manufactured product is much more complex. It’s not tied directly to the price of one particular item. But what ends up happening for many manufacturers is they’ll try and stock up on the products, parts or components before the tariffs go into effect to minimize the cost impact for a short amount of time. The supply chain reacts quickly because the products have become more valuable since the future cost just went up. The sales channels react in different ways because unlike how the price of oil is tied to the price of gas, the manufacturer’s price is more complex unless the product is manufactured one hundred percent in the other country like an iPhone is for example.

How can manufacturers and their sales channels avoid the chaos of tariffs?

Certainly, a tariff announcement does create chaos because the salespeople on the front lines who are doing the quotes on a daily basis are significantly impacted. When manufacturers’ rep firms hear about these tariff increases, they are putting out quotes every day based upon the current pricing, yet they don’t know how much it’s going to affect the price because the manufacturer they’re representing has not figured that out yet. This confusion leads rep firms to not know how much extra markup to put to cover themselves if the quote is approved in the future. So, they must honor their price for a specified period, sometimes, 30, 60, or 90 days from the time that the initial quote was given. Many times, the padding of the quote because an emotional decision, or a gut-feeling they have to make because they really don’t have the information on how much the true impact of the price increase is going to affect them or their quotes. And in addition to that, they’re up against with other competitor sales teams who may or may not be doing the same thing to their quotes and pricing.

What is the most effective way to update pricing with different sales channels?

Typically, there’s a delay of when a tariff is announced and when it actually goes into effect. Getting the facts and letting the sales channels know as soon as possible is the best way to avoid emotional decisions from coming into play. Starting day one, I would recommend talk talking to the manufacturers’ sales managers to start resisting special discounts that are provided until more information is given. Then the manufacturer has to analyze what the price increase is going to do to their list prices. And the problem is that many ERP systems don’t let you do that type of what-if cost analysis. Cost calculations often have to be calculated by some sort of spreadsheet analysis. From what I’ve seen, this can be tricky because the tariffs only apply to certain products or components or even materials. Once the cost impact is known for the products the manufacturer must get the new pricing out to the sales channels as quickly as possible. New quotes have to be generated with the new pricing, and the manufacturer should have a quoting system that the salespeople are using that includes a feature where the quote is only good for a certain amount of time. That way, if the price needs to change in the future, it can be accounted for.

Recommendation for manufacturers to be able to future proof themselves against other future tariffs or external price changes.

One thing is for sure tariffs, taxes, labor and price changes are never going to go away. In fact, many economists believe that there will be more not less tariff changes in the future. To protect sales and margins a manufacturer needs to have systems in place to quickly and efficiently analyze the impact of cost changes like tariffs on their pricing and margins, then be able to adjust pricing to those changes quickly and efficiently not only for themselves but also for their sales channels. Price changes have to be distributed instantly to the sales channels and avoid selling disruption processes. Everyone needs to be confident that the prices being quoted and ordered are up to date and 100 percent accurate. Using a web-based quoting tool is the most efficient way to adjust and protect margins while changing prices.

My company has talked to a lot of manufacturers who are still using the spreadsheet pricing pages and they just send out an announcement in emails to their sales channels. The problem with this is that it causes many salespeople to not use the new spreadsheet or the pricing increase because they’re busy selling all day long. The manufacturer’s announcement just goes into their email inbox and it kind of gets ignored. And so they continue to do quotes with old pricing or old spreadsheets and this causes the quotes to become inaccurate which leads to inaccurate orders when those quotes are finally converted into orders. In this type of system, the manufacturers have a very difficult time to properly invoice or enforce the use of the new price increase with these manual methods.

When a CPQ solution is used that’s web based, manufacturers can push out the price updates all at one time. This type of solution ensures that all quotes and orders created within this software are accurate from the moment they start using it. Even better, the pricing team and the salespeople don’t have to worry about updating price sheets or adding extra percentages or things like that because the pricing quoting tool does that for them automatically.

What is a CPQ solution?

CPQ stands for a configuration pricing and quoting solution. Basically, what it does is that there’s a lot of products that have options and accessories on them and they require a bit of configuration where you pick certain options with other options and then there’s rules that some options don’t go with other options. And then some accessories can go with certain products with certain options and all this is essentially rules-based pricing. So that’s what CPQ means: configuration, pricing, and developing a quote accordingly. Then being able to send the order into the manufacturer with a 100% accurate product that can be built for a given price.

Does BCA Technologies offer a CPQ solution?

Yes, BCA Technologies offers a product called eRep which is used by over 30,000 users to do their quotes and configuration pricing, generate technical submittals and do engineering selections as well for some of our clients.

Dramatically Increase Sales with eRep Sales Automation Software

Build vs Buy CPQ Software

Should Businesses Create Their Own CPQ Solutions?

A company could hire employees to build it’s own buildings, make their own furniture, and fix their own air conditioners.  They could – but they don’t.  There are professional contractors, furniture manufacturers, service contractors, and other experts who can build, fix and support these things much faster, easier and more cost-effectively.

The choice to build or subscribe to a cloud quoting software application is another crucial point of consideration for decision makers.   Some business decision makers think (or are convinced by others) that they should hire an internal staff to build software for the desired purposes.  Some manufacturing professionals believe that they will have a competitive advantage if they build their own software as they expect to have a secret answer that will elevate them above the rest of the companies competing for their target customers.

However, there are software companies that have pre-built cloud software solutions that can be configured and customized to meet a company’s exact needs in much less time and money than designing, developing, and supporting in-house software.  These manufacturing companies hire many experts to build software that is designed to solve specific sets of problems faced by their customers.  The solutions generally are either:

  • Horizontal – the solution solves common problem areas across many different types of industries


  • Vertical – the solution solves problem areas specific to an particular type of industry.

What Does It Take to Build a Software Quoting System?

Just as building a home requires a fairly complex orchestration by a team of experts to complete, building a software quoting system necessitates much more than just hiring a programmer.

You need the following key people, each with specific skills:

Business Analyst

Specializes in gathering software requirements and preparing a detailed document for the software architect and programming team including plans for a graphical user interface and report design elements.

Software Architect

Select the appropriate technologies, development tools and third-party tools to use.  The software architect also determines how the software will be layered into sections for future maintenance.  He or she also decides the database objects, storage procedures and coding design for the programming team.

Programming Team

Developers who specialize in the technologies selected by the software architect.  This team typically includes a UX designer, lead developer, and programmers.   Just like carpenters framing walls, they will program what was designed by the business analyst and software architect.  Expect a lot of re-do costs and schedule delays if the correct design decisions are not made up front.

Software QA Engineer

Performs manual and regression testing as the programming process unfolds.  This is mandatory to meet the objectives.

For configuration pricing, it takes designing and developing a complex rules engine that can handle any pricing, discount, image, and proposal rules that sales comes up with now and in the future.

BCA Technologies has had customers who have shelved entire programs after one or more years of development because sales needs something that will require re-programming the pricing engine.  One of our clients hired an India team and spent just under $500k – then had to abandon the solution because it could only price 75% of the products and was too slow to get a price.   Another company spent over $20 million into their quoting solution – and abandoned it because their dream development team had no idea how complex the solution is – wasting 4 years in the process.

Software Roll-Out Is Critical

If the team programs perfect software, it takes experience to roll out quoting software to a sales channel that may be resistant to change.  This takes experience and expertise that most software teams are not going to have.

Successful roll-outs require great software UX design because nobody has the time to read documentation anymore.   Live and video training is a must and customer support is required to help those that don’t pick up software quickly.

Our experience is that if the sales reps cannot figure out what to do on the first or second try, and the solution requires more time to do a quote than what they are used to instead of saving them time, they are going to resist the change.

A software solution that is already been used by thousands of sales reps in the same industry has received the feedback necessary to avoid a bad roll-out.

Maintaining Software – It’s Not Over after Day One Roll-out

To properly support and maintain software effectively, you must also build a Helpdesk system to receive feedback from customers and quickly respond to bugs, problems, and new feature requests.  Typically, maintaining software requires a team also:

  • Software product manager
  • Customer support trained on the software to support customer questions
  • Programming team
  • QA Person to program and run regression and manual testing as the software is changed and updated. 

Budget for 3-5 full-time employees to adequately support a home-grown software CPQ system.

Don’t forget that programmers are typically more interested in keeping up with their technology knowledge and programming new code rather than supporting software bugs.  Technology recruiters will tell you that the average time for a programmer to change jobs is every 1.5 to 3 years.  So, companies considering building software themselves must plan to then have resources and money to hire, train, and manage these high-turnover positions.  

Subscribing to cloud software is so popular now because it can be deployed in days, it works out of the box, and can be configured for your products and services quickly to return immediate results.  IT, hardware, software, upgrades, and support is included in a price that is typically less cost than hiring even one software developer – let alone an entire team.

Cloud software can be deployed in days, works out of the box, and can be configured for your products and services quickly to return immediate results.

Bottom Line: Focus On What You Do Best

The bottom line is that manufacturing companies excel at producing products.  They buy or finance machines like laser cutters, sheet metal and drill presses that help them make their products faster and more cost effective.  Manufacturers should consider evaluating decisions about software building or buying the same way.  Software development is not a manufacturing company’s core business. So, it makes solid business sense to rely on a company that specializes in developing manufacturing software dedicated to improving the quoting process.

eRep CPQ spreads its design, development, and support costs over many companies, providing million-dollar CPQ application features for less than the cost of a single developer.  Plus, you get the benefit of a proven, well-liked software application rolled out in weeks, not years – without the risk of failure.

Start Reducing Lead Time and Increase Your Sales Today

Companies with the best information win all the time

If a sales manager could click and see the opportunities, quoting and sales activities of their sales channels this week, and drill down to the sales rep offices that were not quoting, and know what large quotes they were working on, would that help the sales manager?

Most companies only see orders and their sales managers “sortof know” what their sales pipeline is, but its hard to get an accurate data of who is quoting and who is not – and what they are quoting – and when.

Why? Because the sales reps are using spreadsheets, Word documents, or other systems to do their quotes. The sales data is all over the place.

Creating a forecast based on this incomplete pipeline information becomes a guessing game.

sales dashboard and reporting

Companies that have real-time information can make decisions faster.

  • Seeing if new sales reps are on boarding quickly
  • Identifying sales reps that are not quoting and help them
  • Seeing sales activity data in visualizations and graphs
  • Production planning based on pipeline before orders come in

All this is possible if your company has the right software platform that makes it fast and easy for your sales channels to get pricing for your products and the company can have access to the real time sales activity…

You can….with eRep CPQ BINOC business intelligence reporting that lets you design, create, and modify your own reports and dashboards.

Inside sales, outside sales, OEM, whatever sales channels you have – you get full visibility of the leads, opportunities, quotes, and orders in process before they become orders.

No more aggravation preparing manual Excel reports that take hours to prepare…

No more wasted time begging sales reps to send in their forecasts and reports

Just select a report, and get the data you need when you need it. No other CPQ has such a powerful reporting and analytics tool.

Want to see how powerful it is? Or how easy it is to create reports and dashboards?

Make Customers Wait for a Quote, and Pay the Price

In the HVAC industry, making  your reps and distributors have to wait for a quote from the factory causes opportunities to not close to sales.  That is a fact I have heard over and over again in my 20 year experience from independent sales reps.

Last week, Tom, a VP of Sales for a very large independent manufacturer’s rep firm (they represent over 40 manufacturers products in 3 offices) shared with me that they picked up a new line of products with a manufacturer. They like the products and the manufacturer, but their sales reps have to call the manufacturer to get pricing and selections. They usually get the quotes within 2-3 days from the manufacturer.

Tom told me that if they have to wait even 24 hours for a quote from the manufacturer, that is too late.  Tom’s customers, typically contractors, expect a price the same day and sometimes the same hour – or they start asking others for pricing.

In the HVAC business and in other industries, time is critical because people have choices. And in today’s world, people don’t like to wait.

In Tom’s case, the sales rep’s quoting activity for this product line has diminished to minimal because they know they can’t respond timely. This one Rep firm could add 40% more sales to this manufacturer this year alone – and that is only one rep firm!

eRep CPQ solves this problem by putting the product selection, quoting and submittal tools in the hands of sales reps so selecting the right product and providing a quotes get done in minutes – not days.   This translates to win for the sales rep and huge wins for the manufacturer.

  See the video

Why Distributors want eRep CPQ instead of a CRM

I just did a very interesting software demo for a manufacturer’s rep firm who sells boilers, pumps, valves, tanks, and other products.  They have 5 offices and represent 35 manufacturers.   They need software to manage their opportunities and do quoting.  I spent about 30 minutes showing them Dynamics365.  They stopped me in the middle of the demo and said “this is kinda what we already have.  My boss really liked your eRep program we saw at your booth the AHR Expo.  Can you show us that instead?”  

So I switched the demo to eRep CPQ.   The rep firm committee told me within 15 minutes “…we are totally blown away.  By far, this is the best solution we have seen anywhere… its exactly what we need….”

I told them that to enter configuration pricing rules for all 35 manufacturers products takes time – its not like just uploading a item price list.  Their reply: “the time savings is worth it!”

Wow!  Before today, we always told reps that, no, we only sell it to manufacturers.

So – as of today – we are going to start offering eRep CPQ to distributors and manufacturer’s rep firms and train them how to enter pricing from their manufacturers price lists and spreadsheets.

See the demo video

Don’t Drive Your Customers to Competitors

Customers no longer have the patience for slow sales responses. They’ll seek out manufacturers and vendors who can meet their needs across all sales channels.

If you’ve got a complicated or slow response sales process, don’t offer online options, or are still using manual processes for pricing, you are probably driving your customers away. Learn what you could be doing to keep your customer base from shrinking.

The dynamics of B2B sales has changed and changed quickly.

Customers now demand to be served when and how they prefer. Any of these issues just might send them to your competition:

  • Have to call or email then wait to get pricing
  • Friction in the sales process, including limited buying options.
  • Prolonged, inefficient buying processes.
  • Lack of transparency in pricing.
  • Inability to control the buying experience.

According to Forrester, 93% of buyers prefer to buy online.

Why? Because its faster and easier.  The process can be done fast, and when and where the buyer is located.

Think of your own experience – would you rather search and buy something on Amazon, or call a salesman, tell them what you want, wait for a quote, then get an email quote, develop a PO, etc, etc.

eRep solves the problem by giving manufacturers a online platform that lets their customers (reps, distributors, and end users) log in from the manufacturer’s website and find and develop quotes themselves at the price discounts that are set up for that customer.  This platform can be set up and have customers placing orders in a couple of weeks – not years.

How a Manufacturer’s Parts Division Increased Parts Sales 60% in One Year

One of our clients was selling parts to their sales channels and customers in a traditional way.  The manufacturer’s parts department had 4 full-time employees taking calls and emails for people looking for replacement parts.  Most requests were from contractors that needed the parts right away because air conditioning equipment needed repair.  These 4 people looked up the parts in the ERP system using difficult search process.  They would either stay on the call, call back or email back the customer the quote.  Their customer would then need to generate a purchase order and send to the manufacturer.

After they asked their customers – would you place your orders online – the answer was a resounding yes!   But the manufacturer had no idea how big a yes that was going to be!

They implemented eRep Parts module and did 3 email promotions.  Within the first 4 months, their part sales increased 40%.  Within 6 months, 58% of their parts sales were online.  The amount of calls and emails decreased dramatically.  The time to process parts orders decreased dramatically because the orders were going directly into the ERP system for processing.

By the end of 12 months, their parts department went from 4 people to 1 person and their part sales were up 60% from the previous 12 months.

What the manufacturer found was that prior to eRep Parts,  their own sales people were searching online sites like Grainger, Amazon, and other sites so they could find and order the right parts quickly and know when they would receive the part.  They were sometimes ordering after hours, or did not have time to wait for a quote because their customer was demanding an answer right away.

Once the eRep Parts store opened, sales could search for parts on the manufacturer’s website and know they were getting the right part and the lead time to get the part shipped.  They could enter equipment serial numbers and see the BOM list to order parts accurately.

eRep Parts can operate stand-alone or completely integrated with any ERP system.



Why eCommerce is so important to your business plan

eCommerce sales is quickly augmenting, and in many cases, replacing traditional B2C and B2B sales channels as the preferred choice of customers.  Sites like Amazon, AirBnB, have conditioned people to first look, research and purchase online because it is faster, easier, and more convenient.    Today’s customers will forgo personalized service for the convenience of shopping online.  So if you sell products or services, you need to have a way for new and current customers to purchase online.

Look at what WalMart is doing right now.  They have billions invested their physical stores but their primary focus right now is to make it even more convenient for customers to shop online, even at the expense of the same shoppers not going to their local WalMart stores.  Target and other retail stores are doing the exact same thing.  This is because they are responding to what their customers want -convenience.  Most Millennial and X-Gens buy online and don’t even think about going physically shopping.

Think about your business products and services.  Could they be sold online also?   Many companies think “our products are too complicated” or “..we rely on our sales distributors to sell..”.     My questions back are  “How many sales are your missing because there are buyers out there who are only looking to purchase online?” and “Are your distributors selling online?”

The reality is that you can sell online any complicated product with the right software.  And you can protect your B2B sales channels with the right software.

Check out BCA Technologies eRep CPQ+ software for selling products that require options and choices for B2B sales.

Check out BCA Technologies SalesPop eCommerce software for simplier product and part sales (similar to a Amazon-like shopping experience).

B2C Customization Example:

Premiere Shows Group is a trade show company that had an outdated web platform.  They needed a modern solution to sell trade show passes and classes but only to licensed, verified professionals in their industry.

BCA Technologies customized the SalesPop eCommerce platform to handle 4 different customer types and perform automated professional license verification process and validation prior to purchasing.

Premiere Shows is now using SalesPop to sell over 100,000 tickets a year for 5 trade shows.

Customers can buy tickets on their phones, computers, from sales reps, or call in.    For their distributors who promote the trade shows, Excel uploads from SAP and SalesForce automate bulk sales.

Customers can also verify their professional licenses with state license boards using automatic uploads of data from external license databases.

By automating the process using eCommerce, Premiere Shows has increased its attendence, sales and added additional trade shows.

What is the Difference between eRep CPQ and SalesPop eCommerce?

We are often asked, what is the difference between eRep CPQ+ and SalesPop eCommerce?

eRep is designed for manufacturers and other companies that have products and services that require configuration rules-based pricing (the price of a product depends upon the application, options and accessories).   The product (or service) is typically a made-to-order, engineer-to-order, and made-for-stock.  Often, these products are sold B2B through a combination of internal sales offices, independent sales rep and distribution channels.  These channels log in, create quotes, submittals, and submit orders to the manufacturer.  Typically, there are product and customer-specific discount rules to get an accurate price.

SalesPop is best for companies that have a list and sale price for the products and services they sell.   This is more of a traditional eCommerce site like Amazon.  SalesPop provides your customers a modern eCommerce shopping experience to sell products, parts, services, even digital products and can be customized and integrated with your existing systems.

The best way to see which solution is best for your company is take a quick look at the demos, talk to us or one of our partners, and discuss your specific needs.