Low Cost Country Sourcing (LCCS) - Are International Purchasing Offices the next paradigm?
With business environments getting competitive, organizations increasingly look to 'Source' functions to low cost geographies, an activity commonly referred to as Low Cost Country Sourcing (LCCS) or Best Cost Country Sourcing (BCCS). This effort has resulted in the emergence of BPOs or BPM enabled offerings over the years, a model that's served for a good period of time. However, organisations need to look beyond and achieve more value by taking a fresh, integrated approach also considering the human resource angle - how do we excite the current breed of procurement professionals!
As a professional with years of experience in this domain, I strongly believe LCCS could be the next paradigm - a more strategic kind of service when compared with a pure play BPO or BPM led service. LCCS or BCCS is treated as a stand-alone offering for Source to Pay (S2P) enabled offerings while I feel it could very much be part of the same gamut of S2P services as well. In fact you will agree with me that looking at LCCS holistically, any transformational or BPM service is in fact a by-product of this very exercise of LCCS itself.
Challenges & Benefits
As you are aware, identifying/developing the right supplier(s) base is the most critical part of any LCCS model and we need to consider various challenges associated with global supplier development - knowledge of local laws, monitoring, market realities, cultural issues, exchange rates and many more. Effectively implemented however, the benefits would be too significant to ignore - cost deflation, global sourcing techniques, creation of alternate supply bases, establishment of robust engagement models and more... I envisage that these issues could be approached by packaging LCCS as a proven concept taking along its benefits effectively implementable only by an executioner - the role I foresee the International Purchasing Office (IPO).
In the paradigm I propose the typical IPO model works on sourcing/ supplier development and supplier management - an end-to-end approach where, by the time a sourcing/ supply base gets developed the entire process gathers relevant information which forms a solid foundation for the BPM offerings. This eventually paves way for a robust BPM which is our typical BPO model. In terms of business engagement, I feel the IPO model and the associated activity could be offered standalone or as a package. I believe the value differentiator would be the fact that it is modularized to an extent and has the ability to form a niche offering to the overall S2P value.
Going forward, I envision that businesses can distinctly benefit by defining an integration and scale-up plan for the IPO with LCCS as a foundation, a move that will enhance the overall S2P/ BPO/ BPM value chain while also offer a unique proposition that could be modular.
LCCS (IPO model) should be more seen as an extensive category management exercise for selective categories which lays foundation for BPM or (BPO) processes in a more systematized and structured manner.
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