Sourcing from low‐cost countries

Abstract

Purpose The purpose of this paper is to investigate the issues pertinent to sourcing internationally from low‐cost countries (LCCs) and to understand which issues are associated most strongly with a firm's logistics performance. Design/methodology/approach Comparative examination of supply sources in developed countries and LCCs is conducted using a paired‐sample setting. Data acquired by a mail survey of US‐based manufacturing firms are analyzed using a canonical correlation analysis (CCA). CCA helps to reveal the structure of relationships within and between a set of sourcing issue variables and a set of the logistics performance variables investigated. Findings Results indicate that the issues that should be priorities for improvement are: supplier production capability; business culture and practices; and communication infrastructure. Research limitations/implications The survey data and analysis focused on US manufacturing firms importing from LCCs. However, there is increasing activity of US retailers importing from LCCs, suggesting a need for a follow‐on study which considers the retailer perspective. Practical implications Results not only validate the issues to be considered in sourcing from LCCs, but also provide a direction for logistics managers in allocating an organization's scarce resources to the issues of highest potential for improving logistics performance. Originality/value The fast emerging role of LCCs as supply sources of US firms and the cost advantages of sourcing from LCCs are widely recognized. However, challenges associated with sourcing internationally from LCCs and the extent to which they are related to a firm's logistics performance have received limited attention in existing logistics research. This study contributes valuable insights into this area of international sourcing and logistics management.

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