Don't swap suppliers because of euro value drop, African purchasers told

3 June 2010

3 June 2010 | Neil Oelofse

Buyers in southern Africa have been warned not to be tempted into striking deals with euro-zone suppliers based on the attractive fall in the currency’s value.

George Lynch of Procurement Initiatives Africa, an online community for buyers, said price was only one of the factors that should be considered when deciding where to buy.

“The fall of the euro might be a buying opportunity for one-off purchases by southern African buyers, but I would caution against breaking a longer-term relationship with a supplier to take advantage of a gain that might only be short-lived,” Lynch told SM.

The euro has been under pressure on currency markets because of concern over sovereign debt in euro-zone countries including Greece, Spain, Italy and Portugal. At the time of writing, the single currency traded at $1.215, near its lowest level in four years.

Lynch said that in supply management, the cost of one component should not be looked at in isolation. Rather, any purchasing opportunities should be considered in comparison with the cost of all the elements combined, including warehousing, transportation and distribution.

Such an exercise could lead a buyer to discover opportunities for cost reductions in other components of the supply chain.

“Before considering taking advantage of the fall of the euro to reduce costs, southern African managers should first take a closer look at other elements of their total logistics or supply chain for cost-reduction opportunities,” Lynch said.

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