How Does The Strength Of The U.S. Dollar Affect Outsourcing?


May 06 2015

How Does The Strength Of The U.S. Dollar Affect Outsourcing?

By: CMS Admin


Many citizens think of the U.S. dollar in terms of what they can buy within their local communities. However, the U.S. dollar is also susceptible to global economic forces, and its value continuously rises and falls against them. The strength or weakness of any currency relative to another currency is generally believed to reflect the relative strengths of the two countries' economies

American industries both affect and react to the value of the dollar. When the value of the dollar falls, our goods become cheaper and more attractive. However, when we have a strong dollar value, our industries have to compete harder against cheaper foreign labor and goods.

How Does Outsourcing Affect Dollar Strength? Outsourcing creates a trade deficit, resulting in a fall of the dollar. However, outsourcing also makes US companies more profitable and more attractive targets for foreign investment.

Weak Dollar Vs. Strong Dollar: Effects On Outsourcing

Most of the global major currencies float in value relative to one another. For many years, the U.S. Dollar has been the standard by which other currencies are measured. A strong dollar indicates that our currency buys more of a foreign country's goods. This can be beneficial for consumers and international travelers because things they want to buy and places they want to go are cheaper; however, U.S. Companies that sell goods to foreign customers suffer because, relative to a weaker currency, our goods and services cost more. This may mean U.S. producers are at a disadvantage in the global market and can lead to manufacturers moving plants to foreign countries with lower costs so they can remain competitive.

Companies are able to respond to the higher dollar by moving production offshore and outsourcing components abroad in order to stay competitive. Most large business firms can thus evade the negative effects of a high dollar that U.S. manufacturing workers (and smaller, national companies) cannot escape. As a result, although profits on domestic manufacturing operations fell, the profits of U.S. manufacturing companies on their global operations are not necessarily hurt and may even be helped by the strong dollar.

On the other hand, a weak dollar means our currency buys less of a foreign country’s goods or services. Prices on imported goods invariably rise and consumers have to pay more for imports. However, a weak dollar also means our exports are more competitive in the global market, which can lead to saved American jobs.

Tornik LLC | Outsourcing Manufacturing Operations

As our customers outsource an increasing portion of their non-core functions, Tornik has become a steady partner and a working extension of their manufacturing operations. Outsourcing enables our partners to leverage Tornik LLC’s investment in technology, production methodologies, and its specialized, trained workforce. They can also benefit from Tornik LLC’s expertise in solving problems for a variety of clients with similar requirements.

By outsourcing to Tornik LLC , our partners achieve short and long-term benefits by:

  • Freeing up resources to perform core functions
  • Accomplishing faster development, start-up and time to market
  • Decreasing overheads and the risks of technology obsolescence
  • Operating in a low cost country such as Mexico