COOs Brace for Margin Pressure as Supply Costs Surge Beyond Inflation

Inflation pressures are no longer just macroeconomic; they’re deeply embedded in the supply chain itself. According to a new Supply Chain Navigator report from Kearney, companies that stocked up ahead of tariff deadlines are now depleting buffers and restocking at higher cost, compressing margins before goods even reach customers. When tariffs, sentiment, and risk-based factors are included, supply chain costs might rise as much as 4–7% above inflation by late 2025, posing a structural risk for pricing and profitability.

What’s alarming is that many organizations may not be prepared. Although most firms claim they have supply chain strategies, few test them under stress or revisit them often. Below is a representative excerpt illustrating the drivers and warning signs.

As reported by in “Global Supply Chain Costs Could Rise to 7% Above Inflation” on MH&L:

“Several factors are expected to cause the supply chain to experience a high rate of inflation by the fourth quarter of 2025.

‘Inventories stockpiled ahead of tariff deadlines are now being depleted, forcing companies to restock at higher prices,’ said  Suketu Gandhi, a partner at Kearney. ‘This is an early signal that the cost of goods and materials is rising before they reach store shelves, creating intensifying margin pressure.’

A new Supply Chain Navigator report from Kearney concludes that, looking purely at economic factors, supply chain costs are expected to rise about 2% above inflation. However, when accounting for tariffs, sentiment, and other risk-based factors, that increase could reach 4% to 7% above inflation.” 

Continue reading “Global Supply Chain Costs Could Rise to 7% Above Inflation” on MH&L.  

Why It Matters to You 

For executive leaders, this is a signal: margin compression will not wait for the market, it’s hitting upstream. Firms relying on low-cost imports or lean buffers are particularly exposed. Planning, sourcing, and pricing must adapt aggressively.

Companies that proactively stress-test supply sensitivity, realign vendor portfolios, and leverage demand-based flexibility will outperform those caught in late-cycle surprise squeezes. The report suggests that cost pressure isn’t transient — it’s structural.

Next Steps 

• CEO/COO: Run sensitivity models to quantify margin impact if supply costs surge 4–7%. 
  
• Supply Chain/Procurement: Reassess supplier mix and tariff exposure; shift more volume toward lower-risk/nearshore sources. 
  
• Operations/Planning: Integrate scenario planning across demand, inventory, and lead-time disruption models. 
  
• Technology/Digital: Accelerate AI-driven real-time supply monitoring and cost anomaly detection. 
  
• Finance/Pricing: Adjust pricing levers and contracts to reflect forward cost risks, not just spot margins.