LCCS Alone Will Not Save Anyone (Even Chrysler)

Take it from a procurement pundit. As a shareholder, whenever you see low cost country sourcing at the center of a turnaround strategy -- rather than as a component of an overall procurement and operations strategy -- duck and run for cover. For, as GM has learned so well, cutting unit costs alone by sourcing from China will not save a company -- it will prolong an agonizing death, but it won't overcome it. After all, if a manufacturer -- or even a service provider -- is not providing products that businesses or consumers want, even the best cost cutting programs will only go so far. And low cost country sourcing, alone, is an especially short-sighted strategy (especially given rising labor and commodity prices worldwide, not to mention the tariff mongering, protectionist viewpoints of politicians on both sides of the isle today). Sure, Chrysler will save a few bucks on unit cost in the near term given their current plan, but long term, unless they start building products that people want as well as focusing on sustainable procurement cost savings and cost avoidance activities -- instead of LCCS one hit unit-cost wonders -- I'd stay far away.

Jason Busch

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