Assessing consequences of low cost sourcing in China
Journal article, 2009
Purpose – The purpose of the paper is to develop a framework for low-cost sourcing assessment and
to explore the consequences of low-cost sourcing in China for a European manufacturer.
Design/methodology/approach – The low-cost sourcing framework generated from literature and
the consequence analysis is based on a case study of a European company that has outsourced part of
its casting processes to Chinese suppliers.
Findings – Characteristics of low-cost sourcing are based on a literature review divided into three
categories: country characteristics, supply network structure, and supply network relationships and
the case study shows that these three categories of characteristics jointly create negative effects.
A two-directional cause and effect relationship is proposed between the characteristics and the
operational supply chain performances. The presented low-cost sourcing assessment framework
should be a good starting point for low-cost sourcing assessment, including mapping a firm’s total
characteristics, and for analysing their performance impact.
Research limitations/implications – The conducted single case study is not enough for identifying,
formulating, and validating all existing relationships between the low-cost sourcing characteristics. The
present study has identified the existence of the relationships but has not evaluated their levels of impact.
Practical implications – Managers should be aware of how suppliers in low-cost countries may
affect the structures, relations, and operational supply chain performances of the supply network. This
paper presents a sourcing assessment framework enabling describing what dimensions of the
sourcing characteristics would be affected by sourcing to a specific area of the world and what
consequences and performance effects this would have.
Originality/value – Few prior studies have focused on companies with already established
relationships with low-cost-country suppliers and how these companies should make the best out of
these supply chains. This study takes a holistic perspective on low-cost sourcing and identifies several
streams for further research.
Supply chain management