With Shortages Nearing, Dreaded Conversations Begin

It’s one of the most uncomfortable conversations a leader can have with a customer: telling them that the product that they need is going to be more expensive, or worse, is out of stock. And experts say there’s no real playbook for how to have this talk.

But it’s a dialogue that organizations—from auto makers to hospital suppliers to retailers—might be having sooner rather than later, with trade wars already reducing exports to the United States significantly. The Port of Los Angeles, the nation’s largest, expects scheduled vessels to be down more than 35% this week versus the same week in 2024, with further declines coming. An executive for the port says that shipments from China for manufacturers and retailers have essentially stopped. Already, some companies have begun telling customers, with varying degrees of success, that they soon won’t be able to get what they want at the price that they’re used to. “There’s no best practice on this, so there’s going to be a lot of trial and error,” says Richard Marshall, global managing director for Korn Ferry’s Corporate Affairs and Investor Relations Center of Expertise.

Some organizations tried to stock up on inventory before the tariffs went into effect. Indeed, January saw a 34% year-over-year increase in the import of industrial supplies, along with an 8.3% increase in consumer goods and a 5.5% increase in capital goods, according to US government data. But even with that front-loading, many organizations are looking at their inventory and wondering how long it’ll last. According to the Port of Los Angeles, major retailers have about 90 days’ worth of inventory on hand. But many other organizations have far less.

Most major retailers have been low-key with customers about the tariff impacts, mostly because they don’t know how the situation will play out, says Craig Rowley, a Korn Ferry senior client partner specializing in retail. “Most of the communication has been to the investment community who wants to know how business will perform,” he says.

Still, at some point, if inventory runs low, companies are going to think about what to tell customers. Experts say that the organizations should lean towards being transparent and explain that the situation is uncertain. They’ll have to decide how much of a given tariff they’re willing to absorb and how much they’ll pass along to their customers. Regardless of their strategy, companies should be clear about both the process and their actions. An added wrinkle to consider: blowback from either customers or government officials. When a report emerged this week that a major retailer would display the cost of US tariffs for individual products, a US government official blasted the move (the retailer denied it was taking such an action). “If you’re called out, that might change the calculus to your customers,” Marshall says.

Sam Tepper, a Korn Ferry senior client partner and Sales Effectiveness advisory practice leader, says the right approach to customers depends on the type of relationship an organization—or individual salesperson—has with them. In business-to-business relationships, phoning the customer to keep them abreast of inventory issues might go over much better than sending an email, or not saying anything at all. “Proactively get ahead of this. You don’t want to blow up their budgets without warning,” Tepper says.

Savvy salespeople also can try to use this conversation to enhance their relationship with customers. Instead of just reporting that there’s a shortage, consider offering potential alternative products, rearranging ordering times, or other potential solutions. “You can co-own the problem with them and help build a trusted partner relationship,” Tepper says.

The situation is similar to the COVID-19 lockdowns five years ago, when quarantines around the world delayed the delivery of goods. But while the pandemic itself was tragic, few doubted that it would eventually pass and global trade would return to normal. Now, however, no one knows what the future of global trade will look like. The disputes could end this week and things could resume as before, or it could take years for manufacturers and retailers to reshore production facilities to areas with lower or no tariffs.

That means that this awkward talk might not be a one-off. Marshall says that companies may need to regularly update customers on developments within their own supply chain, especially where essential products, such as medical supplies, are concerned. 

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