Planning Without Predictions: How Apple Navigates Supply Chain Uncertainty

This Week’s Focus: Navigating Radical Uncertainty

Apple recently faced significant challenges when new U.S. tariffs caused a sudden jump in costs for its China-made iPhones, prompting the company to temporarily shift production to lower-tariff regions like India. Yet, due to substantial long-term investments in China’s manufacturing infrastructure, fully moving production, including reshoring to the U.S., would drastically raise prices and may not be financially sound. Apple’s experience underscores the broader struggle many businesses face today—decision-making amidst unpredictable trade conditions and geopolitical turmoil. In this week’s article, we examine strategies managers and individuals can use to prepare for a future that’s impossible to predict.

When President Trump abruptly announced substantial new tariffs on China, Apple found itself in a tight spot: tariffs surged overnight to over 50%, threatening to increase the cost of every Chinese-made iPhone by hundreds of dollars.

Apple quickly reacted by shipping more iPhones from its factories in India, where tariffs were lower (and not yet put into effect), as a short term fix.

But the company stopped short of fully reshaping its supply chain away from China, where decades of investment have created a deeply integrated production network. As analysts pointed out, reshoring iPhone production to the U.S. entirely would be prohibitively expensive, potentially pushing prices up to $3,500 or more per device!

Apple’s predicament highlights a bigger issue for firms today: How to make good decisions when the future feels impossible to predict? Trade wars, tariffs, geopolitical shocks, and sudden policy changes create a world difficult to navigate.

In today’s article, we’ll explore practical, analytical ways for managers and individuals to navigate difficult choices, because in a world where even Apple must improvise, preparing for uncertainty isn’t just strategic—it’s essential.

Radical Uncertainty and Business Decision-Making

Almost a century ago, economist Frank Knight famously distinguished risk (where probabilities of outcomes are knowable) from uncertainty (where outcomes are unknown).

Today’s executives face an extreme form—radical uncertainty—described by John Kay and Mervyn King in their same-name book, Radical Uncertainty: Decision-Making Beyond the Numbers, as a state “closer to pure guesswork” where all possible outcomes and their odds are entirely unknown. In Las Vegas, the odds are more or less known; in global business, the “game” keeps shifting.

Under radical uncertainty, traditional forecasting doesn’t work. Consider the current U.S.–China trade war: tariff rates fluctuating wildly and unpredictably, severely complicating long-term investment planning, which normally relies on stable expectations about the future. When tariffs on essential imports suddenly spike from 10% to 25% or more within weeks, CEOs and shareholders naturally hesitate before making substantial capital commitments. Even worse, as I write this, Trump has announced that tariffs are paused for all countries except China—and has, in fact, introduced additional retaliatory tariffs on China.

Businesses don’t like making costly decisions when facing significant uncertainty, and usually resort to simpler and safer tools, i.e., holding more inventory, buying shares back, or issuing short-term dividends—rather than risking large factory investments. Simply put, if the rules of the game are not clear—or change overnight—it’s best to avoid placing big bets.

Radical uncertainty is NOT just “more risk”—it’s a different beast altogether. Managers often deal with risk via probabilities (10% chance demand falls, 90% chance it increases), but radical uncertainty means not being able to even confidently assign probabilities. In early 2020 no one could quantify “the probability of a global pandemic” or how trade policy might shift after an election. In such an environment, managers must shift from optimizing based on likely scenarios to robust planning that can withstand or adapt to unforeseen events. Kay and King argue that clinging to spurious precise forecasts in these conditions is futile; instead, they advocate for embracing narratives and qualitative reasoning to guide decisions.

The key is to accept that we live in a world of mysteries rather than predictable puzzles and to find ways that don’t rely on false precision to cope.

The answer isn’t obvious when the ground underfoot is constantly shifting, and that’s why acquiring better information and “waiting for the dust to settle” can be valuable tactics. To navigate this uncertainty, instead of trying to guess the future, firms should turn to structured decision-making approaches, meaning they should prepare for multiple futures.

Scenario Planning and Narrative Thinking

When probabilities are unknowable, managers need to re-frame how they make decisions.

Rather than ask, “What’s the most likely outcome or its expected payoff?,” it’s better to ask, “What is the range of plausible outcomes, and how can we remain successful across that range?”

Several analytical tools can aid in this re-framing, but scenario planning is probably the most appropriate.

Scenario planning is a qualitative technique that has gained prominence for dealing with radical uncertainty. The idea is to construct a set of divergent but plausible future scenarios—essentially, narrative-based projections of the future business environment—and then examine how a strategy would fare in each one. The goal is not to predict which scenario will occur, but to broaden a team’s thinking and reveal vulnerabilities or opportunities across scenarios. Kay and King note that:

“Scenarios are useful ways of beginning to come to terms with an uncertain future. But to ascribe a probability to any particular scenario is misconceived… Scenario planning is a way of ordering thoughts about the future, not of predicting it.”

In other words, managers should use scenarios to test their plans, not to pick a single “winner” future.

As tariffs have sparked discussions about offshoring vs. reshoring, to answer that question, a company might develop the following scenarios for the next five years:

Scenario A—High De-globalization: In this scenario, global tensions escalate significantly. Tariffs on goods imported from China and other low-cost countries rise sharply (up to 25% or more). Shipping disruptions become common due to geopolitical tensions and logistic bottlenecks and labor costs abroad increase as regulations tighten. Companies relying heavily on offshore manufacturing experience frequent delays, higher costs, and deteriorating customer service. Competitors that have reshored gain market share by delivering reliably despite higher initial costs.

Strategic Implications: Reshoring or regionalizing production becomes strongly advantageous.

Scenario B—Return to Free Trade: Political shifts lead to trade tensions easing dramatically. Major tariff agreements are signed, removing most barriers. Global logistics stabilize, shipping costs drop, and production costs abroad become highly competitive again. Companies that maintained offshore manufacturing benefit significantly, with lower costs and stable operations. Those who prematurely reshored face higher costs, reduced competitiveness, and struggle to compete with offshore-focused firms.

Strategic Implications: Keeping production offshore or expanding globally provides clear advantages.

Scenario C—Mixed Regionalization: Moderate tariffs remain in place, creating a fragmented trading landscape. The world splits into regional economic blocs (North America, Europe, Asia-Pacific), each imposing modest but persistent barriers on goods from outside regions (10-15% tariffs). Transportation costs stabilize, but complexity increases. Companies with flexible, hybrid supply chains—partially regionalized, partially offshore—are most successful, balancing cost and reliability effectively.

Strategic Implications: Firms should diversify and maintain flexible, modular operations to adapt rapidly.

Each scenario can be fleshed out even more as a narrative: What would customer demand look like? What would costs (labor, tariffs, transport) be? Would new competitors emerge? This narrative approach resonates with how real decisions are made—through discussions and mental models, not just spreadsheets. In fact, a business plan or strategy is often best thought of as “a narrative” translating a vision into a coherent story with numbers attached. By crafting multiple narratives, executives force themselves to imagine different “worlds” and how their operations would need to adapt.

The power of scenario planning is that it surfaces contingency plans. If in Scenario A (high barriers) reshoring clearly wins out, but in Scenario B (low barriers) offshoring remains optimal, the company knows it should remain agile and possibly hold off on irreversible moves until it sees which world is unfolding. It can also formulate trigger points: “If tariff X is still in place by 2026, we execute the reshoring plan” or “If not, we maintain offshore production but diversify to hedge.” The scenarios thus provide a framework for decision triggers even when exact probabilities are impossible to calculate.

Another benefit is communication and consensus. Discussing scenarios builds a shared understanding among the management team and stakeholders about why a certain strategy might change. It creates a reference narrative (or several) that everyone can keep in mind. These narratives should be periodically revisited—annually or when a major event happens—to see if they still hold or if an update is needed.

By thinking in stories, managers also tap into human judgment and intuition (“soft” information) that purely quantitative models might miss. As Kay and King observe, people make decisions through judgment, instinct, and stories, and narratives are the mechanism by which we build conviction to act. In a radically uncertain context, getting the narrative right (e.g., “We believe in a future where resilience is paramount, so we’ll invest in flexibility”) can guide consistent decision-making even when detailed predictions are impossible.

Balancing Volatility, Investment, and Flexibility: Apple’s iPhone Supply Chain

Traditionally, Apple’s decision to manufacture iPhones in China was driven by clear cost advantages—lower labor costs, established supplier networks, and economies of scale. However, recent radical uncertainty is forcing Apple to reconsider its reliance on offshore production.

Quantifying Risk-Adjusted Costs: Consider Apple’s scenario with a hypothetical tariff increase. An iPhone that costs $400 to manufacture offshore with an additional 25% tariff, will add $100 per device overnight. With Apple selling nearly 200 million iPhones annually, this risk could potentially increase costs by up to $20 billion per year. Even intermittent disruptions—like factory closures during COVID-19—can delay launches and cost Apple billions in lost sales. Scenario-based stress tests help quantify these worst-case costs, revealing narratives in which reshoring or diversifying production becomes economically favorable despite higher baseline costs.

Investing in Flexibility: Apple has begun building flexibility into its supply chain by diversifying production beyond China, including manufacturing in India and Vietnam. Though initially more expensive due to duplicate supplier qualifications, increased inventories, and logistical complexity, these investments provide insurance against sudden geopolitical or pandemic-related disruptions. For instance, if a disruption affects China’s production for even one month, Apple’s flexible sourcing strategy could prevent billions in lost revenue and maintain its critical product launch schedules.

Shortening Commitment Horizons: Apple’s recent strategy reflects shorter-term, adaptable commitments rather than permanent large-scale relocations. By initially testing smaller-scale production lines in India and Vietnam, Apple maintains the option to rapidly scale these alternative operations if needed, without fully abandoning its cost-efficient Chinese manufacturing base. This strategy was demonstrated during the recent geopolitical shifts, allowing Apple to ramp up Indian production quickly as needed.

Leveraging the Value of Waiting and Acquiring Information: One of the most critical insights for managers facing radical uncertainty is appreciating the value of waiting. Patience can be a strategy—albeit a temporary one, and not without cost. When a situation is rapidly evolving, deferring a decision until more information emerges can drastically improve the decision quality. Apple strategically uses waiting periods to gather critical information before making costly decisions.

For instance, rather than immediately relocating entire factories during initial tariff threats, Apple temporarily absorbed tariff costs and monitored policy developments closely. During this deliberate waiting period, Apple actively invested in information gathering—running pilot manufacturing lines in India and Vietnam and qualifying alternative suppliers—effectively purchasing the option to move swiftly if necessary. Although waiting involves interim costs, it reduces the risk of irreversible and premature investments. By defining clear milestones—such as specific tariff thresholds or geopolitical events—Apple ensures waiting is a purposeful strategy that enhances flexibility and reduces long-term uncertainty.

However, Apple’s leadership must carefully balance caution with efficiency. Excessively conservative strategies could increase iPhone production costs significantly, reducing Apple’s competitive advantage. Thus, Apple continuously calibrates its strategy based on quantitative risk assessments, market conditions, and strategic objectives—ultimately aiming to optimize resilience without sacrificing profitability.

Oh, and I forgot one more tool…

Lobbying as Strategic Insurance: Of course, another powerful tool in Apple’s uncertainty toolkit isn’t found in their factories—it’s in Washington’s hallways. When faced with potentially devastating tariffs, Apple didn’t just rely on diversification or waiting patiently for clarity; they actively leveraged lobbying efforts to influence tariff policy directly. As recent exemptions announced by President Trump clearly demonstrate—conveniently covering smartphones, computers, and chips—the conversations between tech executives and policymakers often pay off handsomely. After all, when tariffs threaten to catapult iPhone prices from a manageable luxury to a $2,300 extravagance, it's remarkable how quickly Silicon Valley’s voice echoes through the White House. For companies like Apple, investing in lobbying isn’t merely about political goodwill; it’s strategic insurance that can literally save billions overnight.

Should You Wait to Buy an iPhone? Understanding Apple’s Pricing Scenarios Amid Tariff Uncertainty

Just as global firms carefully manage their supply chains amid unpredictable tariffs, consumers face uncertainty in product pricing decisions. And indeed Apple customers were quick to run and buy iphones at the current price. But what if you don’t need a new iPhone? Shouldn’t you wait?

Let’s explore possible scenarios affecting Apple’s pricing strategy for iPhones given the ongoing trade disputes and tariff volatility:

Scenario 1—Tariffs Increase Significantly: In this scenario, high-level trade negotiations deteriorate sharply, resulting in the imposition of substantial tariffs—potentially around 20%—on electronic imports from China. Apple, heavily dependent on manufacturing in China, quickly faces increased import costs. To maintain profitability, Apple would likely raise prices swiftly. Under these conditions, the current $999 iPhone could realistically jump to around $1,199, a noticeable $200 increase.

Impact: Consumers purchasing after the tariffs increase face higher costs. Buying immediately before tariffs take effect offers significant savings.

Scenario 2—Tariffs are Reduced or Eliminated: Conversely, political leaders reach an unexpected resolution, significantly lowering or completely removing tariffs. This scenario would allow Apple to reduce retail prices while maintaining margins or gaining market share. The existing $999 iPhone price might then drop to approximately $899, reflecting savings passed directly to consumers.

Impact: Consumers who wait for lowered tariffs would benefit substantially, saving around $100 compared to current prices.

Scenario 3—Persistent Volatility with Short-Term Price Adjustments: If trade discussions yield no clear resolution, prolonged uncertainty prevails. Apple might keep standard pricing stable ($999) but introduce periodic promotions and short-term discounts as tariffs fluctuate temporarily. These brief price adjustments could see the iPhone priced between $949 to $979 temporarily to stimulate demand amid consumer uncertainty.

Impact: Consumers who monitor closely and act quickly during promotional windows can capitalize on moderate savings.

To navigate personal purchasing decisions amid tariff uncertainty, consumers should first clearly assess their immediate need for a new device—deciding whether an upgrade is essential now or if waiting is manageable. Then, set concrete price thresholds—for instance, commit to purchasing if prices drop below a certain point (e.g., $950) or immediately before anticipated tariffs hike. Finally, stay actively informed by regularly monitoring tariff developments and Apple’s pricing announcements, enabling a strategic timing of purchases.

Bottom Line: Navigating an Unknowable Future

In a world of radical uncertainty, the mindset with which we approach decisions is just as important as the analysis itself. Rather than seeking a perfect answer, the goal should be to frame the problem in a way that illuminates trade-offs and robustness. Whether deciding on reshoring manufacturing or any other strategic choice under uncertainty, a few guiding principles emerge:

Acknowledging Uncertainty: Explicitly recognize the limits of forecasting to avoid overconfidence and encourage transparency.

Scenario Planning: Actively create and test multiple realistic scenarios to prepare for various plausible futures.

Selective Quantification: Clearly differentiate measurable risks from genuinely unknowable uncertainties, focusing quantitative analysis where it can truly add value.

Building Optionality: Invest in flexibility through diversified production, adaptable contracts, and modular supply chains.

Strategic Decision Timing: Identify which decisions are urgent and which can benefit from additional information, thus avoiding premature commitments.

Continuous Learning and Adaptation: Maintain mechanisms to constantly update strategies in response to new insights and changing environments.

By embedding these principles, both firms and consumers can confidently navigate uncertainty—not just survive it, but use it as a lever for strategic advantage. In today’s volatile landscape, adaptability and resilience are the new cornerstones of sustainable competitive success.

As Yogi Berra famously said, “It is difficult to make predictions, especially about the future.”