What is Low Cost Sourcing?

Low Cost Sourcing is moving a business process from one company location to a lower cost supplier or location, typically in another geographic area (India, China, Rural US, etc.).   Offshoring is the most common form of low cost sourcing, but several other alternative sourcing approaches are available.  Example forms of low cost sourcing include…..

Outsourcing: Moving part of a business or process to a supplier.  For example, a common practice is to outsource a function of IT to a supplier such as IBM, HP, etc.

Offshoring: relocation of a business process from one country to another.   Offshoring may involve moving the function to a supplier with staff in another country, or setting up a direct staff in the remote country.

Homeshoring or Homesourcing: A growing form of Low Cost Sourcing, where employees work at home using telecommunications solutions (often through a subcontractor) instead of at a company office.   The approach takes advantage of a large, skilled workforce who prefers to or is limited to work at home.

Rural Sourcing (Domestic Sourcing): Similar to off-shoring, except the work is moved to a rural area of the primary country.  Rural areas typically have much lower costs than cities.   The approach reduces cost while keeping the organization in the primary country.

Retired Sourcing: The movement of work to part-time retired employees;  ideal for situations where skills are no longer widely available in the primary work force (e.g., computer mainframe programmers).

College/Intern Sourcing: Movement of a business function or a project to a group of college students or recent college graduates.   This blog publisher started his career in an IBM call center that was staffed primarily by college interns.

In Sourcing: The opposite of outsourcing.  In-sourcing means bringing work back to the primary location, either for strategic reasons, due to an external problem, or because the cost advantage is no longer available.