Top procurement organizations source at least 20 per cent of their enterprise spend from low-cost countries.
Alongside the development of ICT, the emergence of real-time analytics has made low-cost country sourcing easier for businesses. Studies indicate that low-cost sourcing can save more than 30% of the costs for businesses in the developed countries. Apart from cost-savings in various aspects of the business, low-cost country sourcing of processes such as silver plating can bring a number of benefits.
Consider these 5 benefits brought by low-cost sourcing
Reduced labour costs
Low-cost countries such as India have considerably lower wages than nations in Western Europe. Hence, they offer a high quantity of skilled labour at significantly low prices. Studies suggest that in many cases, wages in the exporting countries were around 90% lesser than the developing countries. The high availability and low cost of labour is the foremost factor driving low-cost country sourcing.
Sharper focus on product development
When a company is engaged in production, research and development in the product often take a backseat. However, if production is sourced to low-cost countries, businesses in the home country can focus on the development of new products and services. Cost savings generated from outsourcing allow businesses to make a considerable investment in R&D or expansion of the business.
Improved product quality
Businesses strike partnerships with suppliers that have state-of-the-art infrastructure and technology. If the supplier is able to pass all of the concerned quality tests, businesses in developed countries can procure high-quality products. Many suppliers in the developing world offer better quality products than the importing companies. The key is to find a supplier that delivers consistent results over time.
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No need to handle risks
Sourcing is not free from risks, but once the responsibility of production is shifted to the low-cost supplier, the hassle of dealing with the risks also shifts to them. Suppliers in developing countries put in place sound strategies to protect foreign investments. Meanwhile, the companies in their home country are free to focus on running their business instead of diverting focus to mitigate risks.
Faster business growth
Cost savings and high revenue from low-cost sourcing enable some of the biggest businesses in the world to accelerate their growth. Not only does low-cost sourcing help companies cater to their home market, but also enables them to tap other potential markets around the world.