The Declining U.S. Dollar: An Opportunity for Manufacturers?
The majority of Americans have long viewed the Canadian currency as “funny money,” but now with the Canadian dollar being valued higher than the U.S. dollar the tables have turned. The U.S. dollar has been on a slow decline against the Euro since January 2003—the last time that the two currencies were basically even. In November 2007, the dollar hit an all-time low trading at nearly 11 percent lower than January of the same year.
We all know that in some ways the declining dollar is negative for the U.S. economy. For some who outsource abroad, it is affecting their profits, while the majority of people probably haven’t even noticed a difference. So what does all this mean for you the American manufacturer?
The declining dollar means that it now costs less for international companies to buy American products and services, thus making American goods more attractive on a global scale. To many foreign buyers and engineers, U.S. manufacturers are now appearing more competitive.
I recently had an interesting conversation with several buyers and engineers in the UK. They were telling me that with the Pound being so strong, that when their outsourcing options are the U.S. and Eastern Europe, it is actually more economical for them to do business in the U.S. This is due to the high-level of sophistication and the phenomenal and consistent quality that they have been receiving from U.S. suppliers.
So there is an opportunity internationally, but what about locally?
As many of you remember, in July 2007 China announced some changes to their value-added tax structure affecting the pricing on more than 6,000 of their products, thus making China pricier to do business with. Taking this into consideration, many U.S. buyers and engineers have found themselves looking for alternate suppliers, both locally and globally. Don’t get me wrong, the U.S. is not becoming the next low-cost country, but it is becoming more affordable for U.S. buyers and engineers than it once was.
So where is the opportunity? As a U.S. manufacturer, the opportunity is clear; take advantage of this situation and start building relationships with buyers and engineers—both locally and globally. You can use services such as MFG.com to connect with buyers and engineers around the world, showcasing your competitive pricing. By getting awarded small, high-tolerance jobs at first, you can begin to foster your relationship with your new customers and sell them on your quality levels, responsiveness and turnaround times versus just on price.
Another suggestion is to visit some of your old customers that had decided to take their work overseas because of price. Due to the declining dollar, the costs savings that were once so attractive may no longer be. Some U.S. buyers and engineers may be very advantageous to bring their work back to the states.
Take into consideration that what goes down must come up. This decline in the U.S. dollar value is not permanent; the value will get higher and things will most likely go back to the way they were. So is banking on the falling U.S. dollar a long-term solution? No. But, capitalizing on the fact that for the time being work will cheaper to do in the U.S. is definitely a short-term solution. Use this circumstance to your advantage and focus on building those long-term relationships. So remember, that once the initial buzz of the falling dollar wears off and the dollar begins its rebound, business will go back as usual.
While many will debate the economic and political ramifications of the falling U.S. dollar, at the current moment it is beneficial for you the manufacturer, so act now. Remember: there is an expiration date to this opportunity.
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