Increased Efficiency through LCR Sourcing/Procurement

How to Increase Efficiency and Profitability Through LCR Sourcing/Procurement

Low Cost Region (LCR) sourcing is a cost-saving strategy utilized by companies in the United States other industrialized nations. LCR sourcing is designed to maximize efficiency and resources by procuring raw materials and products from low cost regions. When properly implemented, LCR sourcing can enable a company to save substantial money without compromising the company’s quality of product offered.

Key Factors to Consider when Selecting a Low Cost Region 

One of the most important facets of the LCR sourcing process is the selection of a country or region for sourcing products and opportunities. LCR sourcing typically requires experience with the manufacturing industries in China, India, Mexico, Indonesia and other countries with relatively modern infrastructures. While labor costs are a key factor to consider when employing this strategy, procurement efforts should also consider a region’s economic and governmental stability prior to sourcing materials in a low cost region. Ideally, LCR sourcing would involve a financially stable country that offers extremely low labor costs.

How LCR Sourcing Functions to Support Profitability 

LCR Sourcing allows a company in a high cost region to focus on sales and increasing profits. LCR Sourcing achieves this goal by overseeing the sourcing procedures from start to finish. Some of the key functions of LCR Sourcing include the following:

  • Establishment of relationships with foreign vendors
  • Identification of new product opportunities and manufacturers overseas
  • Facilitating logistics activities to ensure quality control and timely delivery
  • Regular reviews of supply chain efficiency
  • Maintaining familiarity with international market pricing structures

The Benefits and Challenges of LCR Sourcing 

While cost-savings is the primary reason why companies engage in LCR sourcing, the strategy also provides companies with a competitive edge. Additionally, LCR sourcing facilitates their establishment as a trusted local entity within emerging markets. While the allure of these benefits is certainly attractive, companies should make sure that they have the resources to tackle language barriers, cultural differences and other challenges that may arise. By enlisting the support of a professional procurement firm with experience in LCR sourcing, business owners can maximize their chances for success.