The Evolving Landscape of Low Cost Country Sourcing

By Robert A. Rudzki, SCMR Contributing Blogger
January 11, 2011 - SCMR Editorial

One of my colleagues was having a year-end discussion with a client of ours about LCCS and their exposure to China. This client is a global company in a fast-paced industry, and sources a lot of its direct product from China, sometimes on an expedited basis.

The client expressed concerns about future total costs and lead times of sourcing from China – and rightly so, given what is happening in China, combined with likely increased energy and logistics costs around the world.

That raises an interesting question that you should be thinking about right now, regarding dealing with your own LCCS program risks: Could the U.S.A. be the next frontier in Low Cost Country Sourcing? That’s not so crazy as it may sound.

The logic can be boiled down to a few key determinants: (a) the relatively low value of the U.S. dollar compared to other key currencies, (b) wage inflation in many of the “current” low-cost countries, (c) a realization that there is a Total Cost of Ownership (TCO) implication to sourcing materials and (even services) from half-way around the world, (d) longer supply chain timelines and less responsive supply chains that span the world, compared to within-NAFTA or within-USA options, and (e) risk management differences between “local” and “offshore” supplies.

This just reinforces a theme that regular readers of this blog should be familiar with: doing strategic procurement well requires, among other things: (a) a fact-based approach – one that is based on thoroughly understanding current reality and anticipated trends, not just history; (b) it deserves an investment in the appropriate skills and enough of the right resources to develop and execute relevant strategies; and (c) it requires constant monitoring and adjustment to optimize results in an ever-changing world.

Are last year’s low-cost countries the right answer for the future? Maybe not.

The U.S. as the next frontier for low-cost country sourcing? Why not? Are you ready?



About the Author

image
Robert A. Rudzki
SCMR Contributing Blogger
Robert A. Rudzki is a former Fortune 500 Senior Vice President & Chief Procurement Officer, who is now President of Greybeard Advisors LLC, a leading provider of advisory services for procurement transformation, strategic sourcing, and supply chain management. Bob is also the author of several leading business books including the supply management best-seller "Straight to the Bottom Line®", its highly-endorsed sequel "Next Level Supply Management Excellence," and the leadership book "Beat the Odds: Avoid Corporate Death & Build a Resilient Enterprise." You can reach him through his firm's website: http://www.GreybeardAdvisors.com

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Carload volumes were up 4.3 percent at 306,988, and intermodal volume for the week ending July 26 was up 3.3 percent at 264,809

Lyon, France-based Norbert Dentressangle, a $5.5 billion global third-party logistics (3PL) services provider focused on global logistics, transport, ocean, and air services, said today it has acquired Des Moines, Iowa-based Jacobson Companies, a value-added warehousing (VAW) company, for $750 million from private equity firm Oak Hill Capital Partners.

Download the newly released research report, "Transportation Management Systems" conducted by Peerless Research Group (PRG) on behalf of Supply Chain Management Review and Logistics Management magazines. Learn what logistic experts are saying about their current supply chain technology infrastructures, how they tackle the transportation component, and revealed the gaps that still need to be filled in order to attain end to-end visibility of a streamlined supply chain.

From cost center to growth center. Get insightful opinions on changes in the marketplace from this independent survey of warehouse personnel. Motorola Solutions examined the current warehousing marketplace in our 2013 Warehouse Vision Report, conducted April-May of 2013.

Even though not all publicly-traded less-than-truckload carriers (LTL) have posted second quarter earnings yet, the early consensus for those that have issued results is looking very good.

Article Topics

Blogs · Global · Supply Chain · Procurement · Management · All topics

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.