View
217
Download
0
Category
Preview:
Citation preview
8/14/2019 Group 1B Curreny Fluctuations
1/17
IMPACT OF CURRENCY FLUCTUATIONSON THE SUPPLY CHAIN
By:
Group1- Division B
Chetan Shetty
Nikhil Wadhwani
Rijun Chokshi
Shalini Sukhari
Suneel Jadon
8/14/2019 Group 1B Curreny Fluctuations
2/17
CURRENCY FLUCTUATION IN THENEWS..
Currency Fluctuations' are top concern for UK SMEs tradinginternationally
Microsoft Arcade Price Hike due to Currency Fluctuations
India Outsourcing: Pay Is Down, Competition Is Up
For China, moving away from the dollar makes sense
8/14/2019 Group 1B Curreny Fluctuations
3/17
EXCHANGE RISK IN A SUPPLY CHAIN
- A DETAILED ANALYSIS
8/14/2019 Group 1B Curreny Fluctuations
4/17
Factory based in England
Buys cocoa from Switzerland
Pays in CHF
Customer based in Australia
Pays in AUD
An Example...
8/14/2019 Group 1B Curreny Fluctuations
5/17
RISKS IN THE SUPPLY CHAIN
8/14/2019 Group 1B Curreny Fluctuations
6/17
RISKS IN THE SUPPLYCHAIN
8/14/2019 Group 1B Curreny Fluctuations
7/17
EXCHANGE RISK IN A SUPPLY CHAIN
- A DETAILED ANALYSIS
8/14/2019 Group 1B Curreny Fluctuations
8/17
IMPACT ON THE SUPPLY CHAIN
8/14/2019 Group 1B Curreny Fluctuations
9/17
SUPPLY SIDE RISKS
INPUT COSTS The price of raw materials etc sourced from foreign
destinations may increase due to exchange rate fluctuations
SHIPPING COSTS Cost of shipping is usually in US Dollars which is the
preferred currency for trade worldwide
SUPPLIER RISK
Suppliers may run the risk of closure due to a squeeze on
their operating margins due to the exchange rate risk.
(Similar to Indian IT companies outsourcing their services
to clients in the US)
8/14/2019 Group 1B Curreny Fluctuations
10/17
OPERATIONAL RISKS
LABOR Hike in Labor charges of people employed in foreigndestinations
OPERATING MARGINS Operating margins increase or decrease depending on
the strength of the currency in the country ofoperation
INTERNAL RISKS Funds earmarked for important initiatives like R&D
may be adversely affected due to currencyfluctuations
8/14/2019 Group 1B Curreny Fluctuations
11/17
DEMAND SIDE RISKS
PRICING Fluctuations in the exchange rate may forcecompanies to hike their product price which in turnaffects their competitiveness in the marketplace
ENTRY INTO NEW MARKETS Companies may look to set up shop in emerging
markets with greater spending power due to favorablecurrency fluctuations
CUSTOMER RISK Companies may risk losing customers due to pricing
pressures brought about by currency fluctuations
8/14/2019 Group 1B Curreny Fluctuations
12/17
EXCHANGE RISKMANAGEMENT STRATEGIES
8/14/2019 Group 1B Curreny Fluctuations
13/17
EXCHANGE RISKMANAGEMENT STRATEGIES
8/14/2019 Group 1B Curreny Fluctuations
14/17
FINANCIAL HEDGINGTECHNIQUES
Modus Operandi Trading in Derivatives
Negotiating payments in the local currency
Shortcomings Protects only against short term exchange rate
fluctuations
Higher Premiums are charged based on the degree of
risk involved in the process For futures trading, both the downside and upside are
limited
8/14/2019 Group 1B Curreny Fluctuations
15/17
OPERATIONAL HEDGINGTECHNIQUES
Modus Operandi By Jumping behind the tariff wall
Eg: Toyotas manufacturing plants in the US
Optimizing supply chain by having multiple product
sourcing options
Product innovation & customization of product
specifications according to customer needs in
emerging markets
Focus on increasing productivity in off-shore &
outsourcing destinations
Decreasing the period of exchange risk exposure by
reducing the lead time in a supply chain
8/14/2019 Group 1B Curreny Fluctuations
16/17
THANK YOU
8/14/2019 Group 1B Curreny Fluctuations
17/17
REFERENCES
Deloitte Research Managing in the Face ofExchange-Rate Uncertainty
Addressing currency volatility - Short-term
solutions to immediate issues manufacturersface, Deloitte & Touche
Recommended