Low-Cost Country Sourcing
Low-Cost Country Sourcing (LCCS) involves contracting suppliers from countries with low labor and production costs. LCCS has both pros and cons. A major advantage of LCCS is lower operating costs due to cheap labor and inexpensive materials. The wages paid in developed economies are much higher than those in emerging economies. Furthermore, the cheap cost of raw materials in such countries lowers the cost of production. Also, such countries offer fewer energy costs. This leads to minimal capital investment as another advantage. Overall, the move maximizes profits.
LCCS also has its disadvantages. Such include difficulty in monitoring quality as the outsourcing is done to countries far away. This threatens the quality of goods or services (Jonathan et al. 121). Another problem is the lack of adequate skilled labor in developing economies. Language barriers and cultural issues may also affect the sourcing process. Poor road, railway, airport, and seaports infrastructure in such countries can hinder the logistics of a business hence affecting supply. Also, there may be hidden costs due to tariffs and other trade regulations in those countries. Finally, LCCS leads to a longer supply chain which is harder to manage compared to a short one.
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines
Order Paper NowSome of these risks can, however, be mitigated. The issue of monitoring quality can be tackled through maintaining close communication with the supplier and carrying out spot audits to ensure quality. The process of supplier development should also be undertaken to improve the performance of the suppliers. Companies should have alternative sourcing scenarios in case there are major challenges in supply from the low-cost country (Jonathan et al. 123). Finally, to tackle delays in supply, buffer lead times should be adopted in addition to having safety stock (Jonathan et al. 125). These are ways of mitigating risks associated with LCCS.
Work Cited
Jonathan, Ellsworth, et al. “Risk Management in Strategic Sourcing: An African Perspective.” Int. J Sup. Chain. Mgt, vol. 8, no.5, 2019, pp. 119-
