Logistics of low cost country sourcing

Abstract

Increasing globalisation creates new possibilities for sourcing from low cost countries (LCC), but also comes with a range of logistics challenges and issues to be dealt with. The purpose of this paper is to investigate how logistics and its impacts are considered in LCC sourcing decisions. An exploratory multiple case study of industrial product companies engaged in distant LCC sourcing serves as an empirical base. Findings reveal that firms do not explicitly take logistics into account during LCC sourcing decisions. Even if logistics is considered, it is generally in a reactive way and takes a transactional cost focus. Instead, we propose a framework to proactively consider logistics factors in the early stages of LCC sourcing. This is done through identifying product and supplier related logistics factors and their impact on pre-transaction, transaction and post-transaction elements in the Total Cost of Ownership model.