Low cost country (LCC) sourcing – A study of critical factors for a sustainable business and operating model

Kolekar, Parshuram Laxman (2021) Low cost country (LCC) sourcing – A study of critical factors for a sustainable business and operating model. [Dissertation (University of Nottingham only)]

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Abstract

Problem: Companies are trying to find the best ways to optimise their sourcing or manufacturing cost. Low Cost Country Sourcing (LCCS) has become a buzzword. Although a few companies have adopted this approach but only few are able to realise the full benefit of this approach due to lack of knowledge, several unknown factors that are ignored before entering into LCC, a missing organisation level vision and strategy, organisation structure, structured execution etc. Therefore, it is an important matter to understand the factors that are influencing LCC decision making and the factors that are enablers or key success factors for LCC sourcing.

Purpose: The purpose of this dissertation is to understand the success factors for LCC sourcing and to define a business and operating model that can help to understand a systematic approach and execution of LCC sourcing .

1. The Systematic approach for LCC sourcing.

2. Key issues and challenges in the LCC sourcing process.

3. A methodology that needs to be followed for a successful LCC Operation.

Method: To examine the research questions, a survey was designed and directed towards the business managers who are making decisions on LCC sourcing those who are working for multinational companies. As access to the numbers of respondents is limited, this sample size should not be taken as an industry sample instead is a stratified to cover various industries in the manufacturing and services, however it should provide a good indication how the companies within industries are approaching the LCC Due to an increasingly competitive environment, greater ambitions of the companies to become international (Multinational), greater pressure on the organizations from the capital market and in-turn shareholders, declining earnings etc. factors are creating significant pressure on the organisations to find all possible ways to increase and sustain profits. There are two ways to outperform in this environment, one by focusing on product innovations and another by optimising processing cost or operating cost. Innovations will help organisations to sustain its financial performance (by launching innovative products), whereas in the rapidly changing environment the innovative products are short living hence the focus needs to be broadened beyond the product and process innovations to outperform in the market through business model innovations by cutting internal cost or cost of production. There are several contributors to internal cost but in this world of JIT (Just in Time), organisations are focused on making their core products and outsource rest of it, this concept brings high significance to purchasing and supply chain activities therefore material and material related cost (including logistics cost) are becoming key contributors to the product cost. Next to the material cost comes cost of production or conversion cost or operating cost and that plays a significant role in the total product cost.

Organisations are looking for sustainable solutions, the methodology such as Kaizen, Continuous cost improvement, value engineering are not just enough to help sustain organisations in the dynamic business environment. A radical step needs to be taken to reduce the organisational cost.

Significant changes in the method of communication and management of logistics & supply chain, improving economies and education levels in developing countries, improving infrastructure etc. are driving changes in the business models that were traditionally followed. The stereotypes of necessity of having R&D centres and manufacturing at the same locations, and also having manufacturing locations very close to the market are changing rapidly with changes in technology and way the supply chains are managed. Technology has helped to revolutionise the thinking process on manufacturing and sourcing.

The premise for the questionnaire was prepared through non directive feedback with the business managers through my personal contacts.

Conclusion: Through my investigation of practice literature, some research papers and with my personal experience on this subject key success factors are identified for the successful LCC sourcing. Using all these factors a business and operation model is prepared that can be referred for any LCC sourcing, planning, decision and execution process. These factors were confirmed on its importance and adherence through field work surveys and interviews. The final model is presented after calibrating the proposed model with field work feedback from practicing managers.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Kolekar, Parshuram
Date Deposited: 04 Apr 2022 04:10
Last Modified: 04 Apr 2022 04:10
URI: http://eprints.nottingham.ac.uk/id/eprint/64095

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