If LCCS is Dead, What’s Next?

I recently came across a discussion with IDC’s Simon Ellis over on Supply Chain Digest that offers up a perspective on how companies should think about global sourcing in the context of the post low-cost-country sourcing (LCCS) world. Simon’s take is that companies should consider a conceptual framework based upon the concept of "Profitable Proximity Sourcing" or PPS for short. I’m not sure if I agree with the concept in its entirety, but it is intriguing on the surface. According to the research note, PPS is a concept that "looks to balance cost and service, with green or sustainability also increasingly playing a role in the decision-making process." In addition, "PPS is not meant to dissuade companies from low-cost country sourcing, but rather to encourage it as part of a diversified sourcing portfolio."

The concept of taking a portfolio approach to global sourcing is nothing new for more advanced procurement organizations. Nor is looking beyond basic unit-cost factors to consider the total cost equation. But the concept of putting this all together in a framework that captures the more qualitative -- at least in the analysis phase -- geographical and related benefits of on-or near-shore options with the cost savings from more distant areas makes sense. Still, rather than call this LCCS, PPS or even competitive country sourcing (my favorite name for it), I’d argue we should just call this global sourcing. The way it was always intended to be.

Jason Busch

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