Planning for uncertainty

esuk-nov16-p32-dynamic-ems1Flexibility and careful planning have helped Dynamic EMS manage the exchange rate challenges presented by Brexit, without simply increasing contract prices for its customers.

Britain’s decision to leave the EU has brought about the supply chain manager’s nightmare: uncertainty in the market. This has manifested itself in a number of ways, the most obvious being the overnight drop of the pound against other currencies. Dramatic as this was, it came as no surprise, as exchange rates had been steadily becoming more challenging throughout the year. Nonetheless it is an issue that has required careful management. No EMS provider wants to be in the unenviable position of having to simply increase contract prices to customers as the only possible solution to this situation.

Dynamic EMS’ customer base is widely spread, with some customers preferring to deal in either Euros or US Dollars. Traditionally Dynamic has converted these to Sterling for the most part, as this has been the currency in which it carries out most of its trading with the supply chain. With the current, aggressive, fluctuations in exchange rates, however, it made sense to revisit this strategy to find a solution that gives better price stability through the supply chain to the customer, without simply absorbing or passing on those variances.

Predictable flow

For Dynamic EMS, products sold in foreign currencies are stable in that nominated currency since it has agreed a Euro or US Dollar price with the customer for the duration of that contract. Regardless of exchange rate fluctuations the customer will still be paying Dynamic the agreed price in that currency. This ensures a predictable flow into the company
of one or other of those currencies, at a rate that effectively remains static for the duration of that contract. If this incoming currency is used to pay for materials, where they are originally priced in that same currency, it is possible to stabilise the pricing within Dynamic’s financial system.

Of course, such a strategy only works effectively if the outgoing currency can be closely matched to the incoming currency. To this end, Dynamic EMS has had to develop forecasting tools to ensure that, moving forward, it achieves this parity. Its goal is to monitor the value of materials incoming in other currencies against product shipped to customers in those same currencies. This enables the company to react to both flexes in incoming material and outgoing product before they become an issue. If, for example, Dynamic pays out more Dollars than it receives, it has to buy in currency at the daily rate, plus commission, which could disrupt any hoped for price stability.

Avoiding exchange

As a result of these changes, Dynamic EMS has to deal with some of its supply chain partners across all three currencies, having to consider carefully which parts will cause most problems through exchange rate variations. It also has to consider carefully which customers would benefit most through dealing with Dynamic in currencies other than Sterling, either because of their locality or their end customer’s locality.

Dynamic EMS takes pride in the fact that through flexibility and careful planning it is able to offer the best solution to its customers.