Leveraging moving average cost to mitigate the impact of tariffs

One of the most powerful tools available to manufacturers during this period of cost fluctuations is moving average cost (MAC) — a system that Katana seamlessly integrates into its real-time inventory and cost management.

Why moving average cost is an advantage

When it comes to managing the unpredictable nature of costs, moving average cost (MAC) serves as a trusty companion for businesses. By averaging out expenses over time, MAC provides a clearer picture of financial health, helping companies stay on course even when individual costs fluctuate. This method offers several perks that can make a significant difference in day-to-day operations:

• Blends cost fluctuations over time: As the older, tariff-free stock is utilized, newer inventory subject to tariffs is gradually factored into expense calculations.
• Ensures accurate profit margin tracking: Real-time manufacturing order costing enables businesses to keep an eye on profit margins as expenses change.
• Supports strategic pricing updates: Companies can proactively adjust pricing to prevent losses and maintain healthy profit margins.

Navigating Tariffs: Inventory Insights From 1500 SMBs

Join us for a webinar on February 13, 11:00 AM ET, as we explore how tariffs change the game specifically for SMBs, and what you can do now to remain competitive and protect your bottom line.

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How Katana helps you adapt to tariff-driven cost increases

Facing the challenges posed by tariff-induced cost hikes can feel like navigating a maze. However, Katana offers a suite of features designed to guide businesses through these obstacles with greater ease. By leveraging these tools, companies can better manage the financial impact of tariffs and maintain operational efficiency:

1. Estimating profitability in real-time
   • Katana’s Item Cards allow you to manually increase material costs and simulate profit margins before placing new orders.
   • Users can update purchase prices via import, ensuring that all goods procured outside the US reflect tariff-adjusted costs.
2. Adjusting pricing to reflect new costs
   • Use Katana’s Price Lists to ensure that customers receive updated pricing that reflects increased manufacturing costs.
   • Businesses can assign different price groups for B2B customers, ensuring tailored pricing strategies to match cost structures.
   • Avoid selling at a loss by automatically incorporating MAC-based cost changes into BOM pricing.
3. Optimizing inventory and purchasing strategies
   • Monitor inventory in real time to see how much tariff-free stock you have left before transitioning to higher-cost materials.
   • Re-evaluate supplier strategies. If necessary, find alternative suppliers or adjust order volumes to reduce financial strain.
   • Import cost-adjusted pricing for materials sourced from affected countries, ensuring all profitability insights remain accurate.
4. Expanding sales channels to offset tariff impact
   • With Katana’s unlimited sales channels, manufacturers can focus on stronger domestic sales and mitigate profit erosion due to tariffs.
   • Adjust pricing across multiple platforms simultaneously, ensuring uniform price updates across different markets.

Next steps: Take control of your tariff strategy with Katana

To effectively manage tariff-related cost changes, consider the following actions:

• Update material costs in Katana’s Item Cards and BOMs to reflect tariff-adjusted purchase prices.
• Ensure profitability with real-time pricing adjustments through Katana’s Price Lists feature.
• Optimize procurement and inventory decisions using MAC-driven insights to balance old vs. new cost structures.
• Diversify sales strategies to minimize exposure to heavily impacted markets while maintaining a competitive edge.

By leveraging moving average cost and Katana’s real-time cost tracking, manufacturers can navigate unpredictable tariff changes without losing sight of profitability.

Stay ahead of cost fluctuations and protect your margins — book a demo today!

Henry Kivimaa

Content Manager

Henry is an avid traveler with a passion for writing. Having lived most of his adult life abroad, he’s amassed a variety of experiences from many different fields. From ForEx trading to compliance to mobile engineering to demolition, he’s definitely not afraid to test out new things.