Low cost country sourcing (LCCS) is a strategy adopted by the manufacturing houses in the developed nations to minimise investments while attempting to maximise the profits. This is done by looking at opportunities of procuring materials from a low cost emerging nation rather than buying in the expensive local markets.
However, it is necessary for a business to analyze if the low cost country sourcing will really benefit them. This can be done by an in-depth study of the following factors
1. The material & incidental costs and tax structures:
Procurement costs may be lower in the emerging nations. It is important to check on the tax structures, import/export regulations, transportations costs that accompany the procurement's. Sometimes, all these could equal or out shoot local market costs.
2. Supplier capabilities and alternate markets:
What could be the financial implications if a supplier fails to meet the deadlines of delivery or there are delays due to some type of hurdles? Are you ready with an alternative supplier? Did you check the quality? Sacrifice in quality will have a detrimental effect on your products.
3. Risk factors:
Political unrest, frequent wars, and terrorism acts can interfere with a smooth supply of materials.
Using the services of professional procurement consultants can ease your workload to a large extent and improve efficiency.
However, it is necessary for a business to analyze if the low cost country sourcing will really benefit them. This can be done by an in-depth study of the following factors
1. The material & incidental costs and tax structures:
Procurement costs may be lower in the emerging nations. It is important to check on the tax structures, import/export regulations, transportations costs that accompany the procurement's. Sometimes, all these could equal or out shoot local market costs.
2. Supplier capabilities and alternate markets:
What could be the financial implications if a supplier fails to meet the deadlines of delivery or there are delays due to some type of hurdles? Are you ready with an alternative supplier? Did you check the quality? Sacrifice in quality will have a detrimental effect on your products.
3. Risk factors:
Political unrest, frequent wars, and terrorism acts can interfere with a smooth supply of materials.
Using the services of professional procurement consultants can ease your workload to a large extent and improve efficiency.
Thank you For sharing this information.
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