Balancing Cost Optimization and Risk Management A Strategic Analysis of Low-Cost Country Sourcing in Global Procurement

Abstract

This study explores the relationship between strategic procurement decisions and low-cost country sourcing (LCCS) in the global business environment. It examines how organizations navigate the opportunities and challenges of LCCS while maintaining supply chain resilience and product quality. Analyzing procurement practices across 200 multinational corporations over five years, the study combines quantitative cost-benefit analyses with qualitative assessments of risk and outcomes. Findings show that LCCS can lead to 25-35% cost reductions in direct material spending, but successful implementation requires advanced risk mitigation and supplier development strategies. Companies achieving optimal results invest in supplier relationship management, quality control, and local presence in sourcing countries. The research identifies five key factors for successful LCCS: total cost of ownership analysis, cultural alignment, supplier capability development, risk diversification, and technology-enabled transparency. It also highlights emerging trends, such as the shift from cost-based to value-based supplier selection and the increasing importance of sustainability and social responsibility in sourcing decisions. This study contributes to procurement management theory and practice by offering a framework for evaluating and implementing LCCS strategies, providing insights for procurement professionals and decision-makers in optimizing cost benefits while managing risks.