Question

41) Exchange rates among major economies in the world fluctuate daily. Clearly explain how this can pose a risk for a company and its associated supply chain. How might a company mitigate such risk?

42) Clearly describe the impact that the “Internet”, as a technology, is having on supply chains. What are the challenges it poses to companies?

Answer 1

41) When the exchange rate fluctuates a currency can either appreciate or depriciate. Such fluctuations of currency can lead to trimming of profits and cash flows.
a) Currency appreciation
It is an increase in the value of country's currency in terms of another. Thus the local produce will be higher in price and costly to procure for the supply chain.

b) Currency depreciation
Loss of value of a country's currency with respect to one or more foreign currencies. Thus the local produce will become lesser in price.This will have a negative impact on the suppliers because their profit margins will decrease considerably and may ask for higher margins than agreed upon.

A company can mitigate the risk by
a) Agreeing on a baseline exchange rate with suppliers.
b) Maintaining multiple suppliers from different countries.

42) Supply chain is related to series of activities involved in moving raw material to finished goods to end consumers and ensure transfer of goods or services from suppliers to end consumers while block chain technologies are latest technological means to keep hold on records, transparency, end to end encryptions ensuring data privacy and chain of blocks storing information from its trail.

Maintaining permanent history of products, tracking all sort of information’s, maintaining transparency, and securely handling all data is what block chain can be useful for supply chain purpose.

Block chain is a disruptive technology and that many companies are investing in adopting these technologies as these technologies give the company efficiency in dealing with records, helps in real autonomy in transactions and helps keep every single information since it being created.

c) Hedging against currency fluctuations.
d) Use risk management tools and models to arrive at a optimum rate of fluctuation which the company can handle