Low Cost Country Sourcing-Good or Bad?
Sourcing from Countries like India,China & Vietnam results in 25-30% Savings for the Clients based in Europe or USA.Share your experience?
As a professional that's been specialising in LCCS for a few years now, I've seen and experienced the movie titled "Good, Bad & Ugly" in addition to the great successes that LCCS can present for our customers. Whether it be sourcing from India, China, Malaysia, Thailand and up through South America and the growing sourcing from the former baltic states, LCCS is still a gr8 opportunity .... if and when, it's done properly. As a former consultant, it grains me to no end to hear about the "bad stories", especially when they are done by what I term, desktop procurement professionals ..... those who never been to the location, experienced the business relationships nor bothered to understand the "tips & tricks" you need in your bag of tricks for good LCCS outcomes. I've a slightly different view on James' comment above (devils advocate here) about ensuring you take an ethical view on child labour etc. The competing view would be to offer that by "allowing your business to transact" with those types of suppliers, your in fact giving tghe opportunity for the employee's to upskill and earn a living. It's contradictory, but how does it really boil down to your share holders. If they save a buck, do they really care how? Is it your business to dictate how others runs their businesses? As the question was posed - is LCCS good or bad? It's both and always will be depending on how you choose to sit on the fence or what side. Top me it's a gr8 way to "shake up" local supplier or traditional supplier sources. Don't worry, they are doing the same thing but not telling you! With economies up & down globally, not considering LCCS as part of a procurement strategy, whether it be full blow endorsement or a "bit part" tactical ploy, is not what a good procurement professional should be avoiding. It should be part of the procurement arsenal if you are truly going to add value to your businesses / customers etc.
I agree with you Pankaj India is making excellent quality products at very good prices and the best part is the language and communication with the indians is easier as compared to china or vietnam according to me because the indian command over the english language is very good and thats a very major part in business relation development "communication"
As for me, I'll say it could swing both ways (good or bad) depending on getting the right quality at the best rate (not necessarily the cheapest rate), that is the good. For the bad, I'll say not doing a proper background check on your suppliers to know if they meet up with their country of origins' standards first, then do they meet up to the standard of your own country (sourcing country)? and then do they meet up with why our customer will stay loyal to our brand?... I quite agree with Dominic that shareholders don't care how the extra penny they earn is gotten but i'll also go with James because when the chips are down and customers wage war on the company for not following the ethical/sustainable procurement practices i.e poor working conditions of your suppliers' employees. We've seen companies loosing revenue from such acts of "not just caring" about who they do business with once the cost is good for them to maximize profit.
Nonetheless, I feel where there's quality there's a good standard in place hence becomes a win-win.
It comes down to the supplier. As long as they are not using slave labour, child labour, paying a low wage, poor working conditions or any other unethical means of offering the customer the cost saving then there's no reason not to use them. Proper supplier vetting procedures should be carried out to avoid dealing with any of these unsavoury organisations. That's a personal opinion and obviously not shared by the likes of Nike. Again personally speaking I would be looking to negotiate a more competitive rate with my existing suppliers before going to the extremes of International purchasing but this is more so to do with the industry I work in. Like you say Pankaj, 25-30% can sometimes be the cost savings which will work excellently for commercial teams working to target costing but hopefully all procurement professionals are doing this ethically.