{"id":1850,"date":"2018-01-24T15:36:06","date_gmt":"2018-01-24T15:36:06","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/?p=1850"},"modified":"2021-07-28T06:55:45","modified_gmt":"2021-07-28T10:55:45","slug":"low-cost-country-sourcing-mindset-must-evolve","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/low-cost-country-sourcing-mindset-must-evolve\/","title":{"rendered":"What The Low Cost Country Sourcing Mindset Must Evolve To"},"content":{"rendered":"

One of the hottest buzz phrases of the early 2000s was \u201clow-cost country sourcing,\u201d or LCCS.<\/p>\n

Here in 2018, we still outsource to low-cost countries.\u00a0 But, with the hot economy that I\u2019ve been blogging about lately, it\u2019s time for an evolved focus and perhaps a new buzz phrase.<\/p>\n

As\u00a0I\u2019ve written\u00a0about the currently hot economy, there \u201cis a point where businesses cannot find enough\u00a0resources to support the increased amount of products and services that confident, well-compensated consumers are demanding.\u201d\u00a0 Those resources include supplier capacity.\u00a0 If it hasn\u2019t happened already, suppliers will soon be unable to deliver in the same time frame that you \u2013 and your organization\u2019s customers \u2013 have become accustomed to.<\/p>\n

So, you\u2019ll need more and new suppliers.<\/p>\n

Where do you look for them?<\/p>\n

Well, maybe not in the same low-cost countries that you\u2019ve looked in the past.<\/p>\n

Why not?<\/p>\n

Well, in the early 2000s, the focus was on low cost.\u00a0 Mainly because the economy was tough.\u00a0 Driving cost out of the supply chain wasn\u2019t just good business \u2013 it was essential for survival!\u00a0 And the labor arbitrage delta between buying countries like the USA and certain low-cost countries was huge.\u00a0 At the time, I remember reading that the labor in one of those countries was 12x cheaper than American labor.<\/p>\n

However, more recent sources have pegged the current delta at less than 3x.\u00a0 And it\u2019s not only the accelerated labor inflation in the low-cost countries of the previous decade that have changed and made them less desirable sourcing targets.\u00a0 But the capacity<\/em>\u00a0of suppliers in those countries has filled up, especially on the services side.\u00a0 While you may have gotten top-level talent to service your account 15 years ago, you may end up with the bottom of the barrel-level talent serving you if you were to onboard a new supplier in those regions today.<\/p>\n

Supply base talent is like a bell curve, with the horizontal axis representing talent levels from low to high when reading left to right.\u00a0 Well, in many of the household name low-cost countries, the right side of that bell curve is already serving buying organizations who\u2019ve sourced there before you.\u00a0 While capacity still exists, good capacity<\/em>\u00a0has been drying up for years.<\/p>\n

So, today, there needs to be a new paradigm for offshoring.\u00a0 LCCS will not serve today\u2019s hot economy as well as it served the cold economy of 2002.<\/p>\n

Today\u2019s focus needs to be on HCCS:\u00a0 High Capacity Country Sourcing.<\/p>\n

To continue today\u2019s the production and service levels, buyers need to source in countries where the #1 priority is capacity.\u00a0 And implied with \u201ccapacity\u201d is top-notch capability \u2013 the ability to meet high standards for quality, delivery, and service.<\/p>\n

You need suppliers that you can onboard quickly.\u00a0 You need suppliers with scalability.\u00a0 You need suppliers who are agile enough to accept more business if the economy continues its tear or scale back while remaining solvent if things cool off.<\/p>\n

Sure, a cost advantage still is a reason to offshore.\u00a0 But keeping your organization competitive and performing well in the challenging environment that is the hot economy of 2018 will require extra attention to capacity in your supply markets.<\/p>\n

The letters HCCS should be on the lips of every buyer facing supply constraints today.<\/p>\n

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Recommended Reading<\/b><\/p>\n