The recent contraction in the global economy has made it imperative for companies to become strategic players in the global market. This requires them to look for ways to maintain their competitiveness apart from implementing new and innovative technologies. Pursuing low cost country sourcing is one such way through which companies can sustain competition and capitalize on growing opportunities.

Low cost country sourcing has gained popularity over time and is now considered to be an alternative for companies to remain competitive and create more value for their customers. Although it was more a reactive approach designed to reduce production costs, low cost country sourcing is now considered to be a proactive strategy to pursue sustainable competitive advantages. In this blog, procurement experts at SpendEdge discuss the key benefits of low cost country sourcing and procurement and the strategies companies can devise to mitigate risks occurring while sourcing in low cost regions.

Deciding on low cost region requires a comprehensive understanding of different social, economic, and political factors. Request a free demo to know how our experts can help you gain real-time procurement insights.

What are the Benefits of  Low-Cost Country Sourcing?

Cost Effectiveness        

While companies have reaped numerous benefits by pursuing low cost country sourcing, the increasing pressure to reduce costs holds the top priority. The cost of skilled and unskilled manpower in western countries is much higher when compared to markets in emerging economies. The benefits of low country sourcing go much beyond labor arbitrages and helps reduce manufacturing and production costs.

Economic Footprint

The changing economic scenario in low cost countries has come with reduced premium tariffs, promoting the expansion of businesses in developing regions. Improvements in technological infrastructure have further diversified the economic footprint, resulting in the sourcing of goods and services from low cost regions.

Low Cost Country Sourcing Strategies to Mitigate Risks

Low Cost Country Sourcing Strategy  to Mitigate Regional & Cultural Risks 

Often companies tend to overlook risks originating from low cost countries offering the products/ services of interest. The volatile economies do not have strict governmental rules and regulations causing internal instability and impacting the business growth. Moreover, the cultural differences and language barriers prevailing in different nations play a decisive role in the success of any business. To ensure growth in such a situation, it is critical for businesses to understand the relevant issues present in the low cost country regions and have strategies to address those risks/ situations.

Low Cost Country Sourcing Strategy  to Mitigate Regulatory Risks

For any low cost country sourcing initiative, it is imperative to understand regulatory frameworks and their possible impact on the business. There may be regulations or tariffs that can limit the production of products. Also, multilateral trade policies and relationships must also be taken into consideration before deciding low cost region. This will identify hidden costs such as quality and increased lead times occurring due to lack of local standards control. The better understanding and knowledge of International trade regulations and agreements signed between the two countries will help countries to mitigate all such risks. To gain detailed insights into the regulatory norms, request more information here!

Low Cost Country Sourcing Strategy  to Mitigate Risks in the Production Process 

While quality control mechanisms have improved over time through the ISO system, the quality assurance process still has a lot to improve in emerging markets. Companies need to evaluate the complete production process and ensure that the right terminology is considered for any sourcing initiative. By completely understanding the standards and conducting audit process,  any inconsistencies in the production process or the suppliers involved in it can be effectively managed.

Low cost country sourcing is forming the key part of most companies’ procurement strategies. Get in touch with our experts to know how your company can integrate low cost country sourcing strategies.