MGPS: With the State of the Dollar, How Do You Shore Up Your Margins?

TORONTO, ONTARIO--(Marketwire - Oct. 25, 2007) - North American manufacturers are feeling the squeeze on both sides of the border. American manufacturers that import raw materials are struggling with a weakened US dollar, while Canadian manufacturers that export goods are struggling with a strong Canadian dollar.

Of course, none of this should be a surprise to anyone. With the US current account deficit at over $190 billion in the second quarter of 2007, it is likely that the US dollar will remain relatively weak for a while. Factor in the cost of Iraq, the rising price of oil, increasing mortgage defaults over the last few years and it all adds up. As far back as 2004, these issues were already a concern, yet currency traders overwhelmingly predicted a continuing decline in the US dollar.

What were most corporations doing to reduce the impact of the weakened US dollar? Back in 2004 Canadian exporters were already building up substantial inventories of unsold goods. For the most part, dire warnings were issued and it seems the only plan was for the government to step in. Today, the Canadian auto trade deficit is expected to reach $8 billion in 2007 due to the strong Canadian dollar. The result is layoffs, unsold inventory, reduced productivity and weak margins.

The solution may lie in the same advice given to the American consumer in light of increasing mortgage defaults: reduce frivolous spending and increase savings. In the case of American importers and Canadian exporters, a tightening of productivity to reduce future build-up of unsold goods and a review of expenses, separating the essential from the non-essential will help reduce the impact of the weak US dollar and the strong Canadian dollar. Ideally, this should have been done back in 2004.

However, it's better late than never. The result will be fewer layoffs and unsold inventory as the squeeze on margins and cash flow is reduced.

About MGPS

MGPS is a management consulting firm that specializes in reducing non-core expenses. These expenses tend to be indirect, hidden and scattered throughout the organization. MGPS identifies hidden costs and develops and implement efficient processes to drive out unnecessary expenses. The end result is increased cash flow and greater profitability.