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Follow UsSpeculation that China will soon enact currency reforms highlights the need for flexibility in global-sourcing efforts, according to Jeff Woods of Gartner Research. On 29 April 2005, China's currency, the yuan, briefly traded outside its normal government-controlled range of 8.276 to 8.280 to the dollar, sparking widespread speculation that the long-anticipated revaluation of the yuan was imminent.
Considering this, firms with global supply chains should look at the potential impact that events such as currency revaluation may have on global sourcing strategies - and, consequently, on the IT strategy developed to support these supply chains, Mr Woods says. For example, if revaluation of the yuan occurs, its value will likely rise, eliminating many of the motivations for companies to source products from China. This could slow or reverse the outsourcing and overseas sourcing plans that many US and European companies are pursuing.
Many firms' business application IT strategies - particularly those of retailers - are based on the assumption of continued, rapid and inevitable expansion of global sourcing. However, changes to your business application IT strategy may be required in the event of global events such as currency revaluations, according to Mr Woods.
The impact of such events can extend beyond an enterprise's own immediate sourcing needs. While consumer goods manufacturers must continue to provide a high level of service to retailers, currency revaluation may reduce the level of major IT and process accommodations that manufacturers have recently yielded to large retailers in areas such global data synchronization and radio frequency identification (RFID).
In this scenario, Mr Woods says that companies participating in global supply chains should begin thinking about system requirements for "insourcing" supply chain processes, domestically sourcing goods or finding alternative international sources.
Source: Gartner Research