The LCCS Success Factors
By John Kamauff and Robert Spekman -- Supply Chain Management Review, 1/1/2008
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Companies today are seeking to lower their costs by extending their supply chains to the far reaches of the world. Typically, a key component of this strategy is low-cost country sourcing (LCCS). Yet firms adopting this approach need to understand that LCCS entails a lot more than just sending out an RFP and selecting the low-cost respondent. They will never achieve the desired savings or other advantages of LCCS without a coordinated enterprise-wide market strategy. Central to this strategy is building collaborative relationships with suppliers that will keep product quality high while minimizing the potential for supply chain risk.
This article presents the results of an empirical study of buyers' experiences sourcing from low-cost countries. In the final analysis, we found that companies that made the investment in supplier development and related localization efforts benefited from LCCS to a far greater degree than those that did not. Moreover, the cost-reductions realized from successfully pursuing LCCS opportunities far outweighed the effort involved.
The findings also led to a series of suggested action steps, offered at the end of the article. We believe that by using these steps as a roadmap going forward, companies will better position themselves for success in the LCCS arena.
Survey Details
Our sample was generated from the membership of the Institute for Supply Management (ISM). The initial list contained 5,754 names. This list was first culled by job title, eliminating those without titles or those whose titles were not relevant to our research focus. We then eliminated those whose titles suggested a lower-level purchasing title (for example, analyst or expeditor) or those whose title suggested a general manager or someone from outside of the supply management function. This process eliminated 1,586 people from the sample. Third, we narrowed the sampling frame by removing people from certain industries such as service businesses (for example, consultants, hotels, banks, not-for-profits, and universities). These actions further reduced the sampling frame to 4,074.
If a potential respondent had an e-mail address as part of his or her record we sent them an online version of the survey. Sample names without an e-mail address were mailed a paper version. In total, 802 surveys were sent via e-mail and another 3,272 were sent by regular mail.
We received 105 complete surveys. After accounting for bad addresses and returns indicating that the survey was not relevant to the respondent's activities, this represented a response rate of 5 percent. This rate is typical of surveys that target such populations, and likely represents a large underestimate because those least likely to provide a return are those for which the survey subject is not relevant.
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