In order to lessen the cost, many firms are opting for or thinking to opt for low-cost sourcing strategy. There are countries which provide cheaper raw materials or have reduced wage rates, and sometimes even both. By opting for sourcing services from these countries, you will enjoy cost reduction and almost 40%s of saving. However, there are certain risks associated with it. Read on to know which are the things you need to consider before you take such a decision.
Additional Costs-
You may get lower factory price from an international supplier as it has lower overheads and costs of wage. But you should not forget that you will have other additional charges like, duties, warehousing and shipping. To grasp the total price you have to pay, you need to pay attention to the acquisition cost rather than the price you pay locally.
Managing Risks-
The main risk that lingers with low-cost country sourcing is the risk of failure to deliver, and this might happen due to a number of reasons like, bankruptcy, climatic disaster, political disruption or supplier processes failure. There is one way which you can solve this problem. Instead of sticking to one supplier, use another supplier from another country. This way, if one fails, then you can order the second supplier to do the process.
Maintaining the Quality-
There is no point in choosing low-cost services if the quality of goods is not up to the standard despite saving a lot of money. Before you sign a contract with the supplier, you need to visit them so that you can be assured that the supplier has staff and system to carry on the entire process.
Different Cultures-
As cultures are different, you need to aware of the culture prevailing while sourcing services. This means that you need to identify the way an international supplier approach the business because it may be different than the way you address the business. For instance, in some countries, a positive reply does not mean they agree with you, it may mean they have heard your proposals.
Fluctuations in Currency-
Trading with international countries means that the actual price you are paying for the goods includes the currency exchange rates. If you are willing to take this risk, you must know that the currency rates moves unfavorably, and this will surely affect your price.
Be Adaptable and Flexible-
If you want to be successful, you should learn to be flexible and show a quick response to changes that are happening surrounding you. This can be either the availability of the product or its design. Whatever the situation develops, a smart businessman knows how to react to those changes and provide ideas that can be productive in such situations.
By keeping these aforementioned points in mind, you can go for low-cost country sourcing. Choose a country that will bestow you the best combination of flexibility, cost, adaptability and culture.
Sourcing Instinct 