Low cost country sourcing

What cost savings percentages can I expect through Low Cost Country Sourcing ?

While it is difficult to predict cost savings potential as the particular commodities, country source, quality
requirements, and current pricing status is not known, typical savings for manufactured product from
China, India, and Southeast Asia, can range from 10 % to 50 % of standard North American cost. Cost
savings can only be adequately compared on a landed cost basis, so comparisons must include
transportation, customs duties, and currency hedging contracts required to deliver product to your
factory door. Most projects result in an 18 % to 35 % total cost savings.


How can risks of Low Cost Country Sourcing be minimized to an acceptable level ?

Without a doubt, many companies have attempted to source product from low cost countries with
disastrous results. Without experienced staff to understand the risk factors and put processes and
procedures to mitigate those risks, failures can easily occur. Many companies have experienced part
shortages, delayed shipments, poor quality, intellectual property infringement, foreign currency losses,
lost shipments, and warranty claims in initial attempts at Low Cost Country Sourcing. In reality, any of
these with perhaps the exception of the foreign currency losses can occur with suppliers in our own
backyard. However, time zone differences, cultural misinterpretations, faulty language translations, and
logistical problems are all common challenges that must be managed for international sourcing to be


Why do companies require assistance in Global Sourcing Activities ?  

The challenge for many mid-sized and some large corporations is in acquiring the experienced resources
to strategize, manage, and implement successful sourcing of materials and components in low labor rate
countries. Typically the experience and knowledge required to support a successful transition to a foreign
source is not resident within the current organization, and recruiting a Supply Management professional
with the required experience is extremely difficult and expensive.  Although many large multi-national
corporations have created their own International Procurement Offices (IPO) in low cost countries, the
financial commitment to staff and maintain an IPO is in the millions of dollars per year. Most mid-sized
companies do not have the volume to justify, or financial resources to commit to an expense of this


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