Low Cost Country Sourcing
A challenging and rewarding opportunity
LCC sourcing has become a competitive necessity for major industries, determining the profitability of a business. But companies must have strategic sourcing experience and skills to attain those savings at a manageable level of risk. Working with a third party can be a key success to attain a quick route to such savings.
Low Cost Country Sourcing can deliver tangible results to the bottom line
Companies can realize significant direct savings — up to 50 percent or more depending on categories — when they successfully access and rely on low-cost sources in emerging regions.
Range of savings achieved through LCC sourcing
Source: AsiaBuyer Supply Chain AnalysisThe following countries are typically considered to be low-cost sourcing markets: China, India, Vietnam, Thailand, Ukraine, Romania, Bulgaria, Mexico, Brazil. Savings generally result from low labor and infrastructure costs, and amongst these countries Asia Area have the highest gross wages differences.
Average gross wages in USD / Month (2013)
Source: US Bureau of labor statisticsProcurement savings can make a direct contribution to a company’s bottom line, compared to other methods for improvement. To otherwise achieve the same impact, the company must increase revenue by a much higher significant level.ge, GEP has seen incremental
But there are a number of traditional barriers when dealing with LCC countries:
Difficulties to locate the right supplier seeing the limited availabilities of relevant data
Cultural and language differences which hinder communications
Differences in norms and quality standards
Underestimation of the time required to complete transitions to low-cost country sources
Quality and lead time issues hard to handle from a remote office
Lack of human resources to handle LCC procurement
Miscalculation of the Total Cost of Ownership (TCO)
Purchasing services providers (PSP) are a key success to achieve sustainable profits:
Most of companies agree that it is necessary to have a professional team on site who can overcome the resulting challenges of LCC. On the other end companies which have set up their own structure in Asia, factory, retail network, sales or purchasing office has been facing specific problems: high operating costs, staff turnover, corruption, cultural issues or simply lack of local purchasing skills available. Using the services of a PSP, expert in procurement on its market, is the best way to achieve results by:
More information about Asia Sourcing
Sourcing and benchmarking globally
Evaluating efficiently the supplier panel
Securing the quality and delivery time
Reducing overheads and operational risks