LG Electronics India Ltd (LGEIL), the consumer durable major, will source as much as 90 per cent of its inputs from India against 40 per cent imported so far, thus saving an outgo of $15 million this fiscal.
Termed glocalization, the project on enhanced indigenisation is aimed at reduction cost of components, an effect, which is expected to trickle down to reduction of cost of the finished product and thus enable it provide competitive product prices.
The company will also focus on tapping markets other than South Korea for critical imports.
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Benchmarking the Indian vendors against LG global quality standards, the company has appointed 100 direct vendors to meet the objectives of glocalization. Once the project is complete, these will be categorised into primary or secondary according to their respective volumes and component quantities.
LG will also work towards disintegration of procurement of components from Korea to more cost-effective sources such as China, Hong Kong, Singapore, and Europe. These international procurement offices will help LGEIL tap the local vendors in the respective domains.
The components to be imported will include ICs, motors compressors for air-conditioners and refrigerators, defrost timers, PCBs, remote controls and FBTs.
Manager sourcing, LGEIL, Sunil Kalra, said, "The idea of glocalization was conceptualised after we realised that we were not getting cost benefits from direct imports, as local demand in Korea itself was large enough not to justify import quantity or our bargain prices. Therefore, we devised a detailed indigenisation plan under which we should save up to $5 million in 2001 and are targeting $10 million in 2002."
Kalra said the company has "entered into an agreement with South Korea for local sourcing across all divisions, subject to quality clearances. Thus far, LG required 60 per cent quality control from India, and 40 per cent from Korea. This year the quality control has increased to 90 per cent from India and 10 per cent from Korea."