Sourcing
Diversifying manufacturing away from China
Supply chain concentration became a visible risk rather than a theoretical one. Diversification is now a normal part of sourcing strategy rather than a reaction to a single event.
Why the question is being asked
- Concentration risk. A single country of supply means a single point of failure for disruption of any kind.
- Tariffs and trade policy. Landed cost can change materially without any change in the factory price.
- Logistics volatility. Freight cost and transit reliability have both proven less predictable than assumed.
- Rising labor cost. The original cost differential has narrowed in several categories.
- IP concerns. Tooling and design ownership terms receive more scrutiny than they used to.
- Customer and regulatory pressure. Some buyers now require a documented second source.
What the alternatives actually offer
| Region | Strengths | Trade-offs |
|---|---|---|
| India | Large engineering talent pool, established tooling base, English-language working, competitive tooling cost | Logistics infrastructure varies by region; supplier quality is uneven and needs auditing |
| Vietnam | Strong in assembly and electronics, established export corridors | Shallower tooling and mold-making base |
| Mexico | Proximity and short transit to North America, USMCA treatment | Higher cost base; capacity concentrated in certain sectors |
| Eastern Europe | Proximity to EU customers, strong engineering | Higher labor cost; capacity constraints |
| Reshoring | Shortest lead time, simplest IP and compliance | Highest unit cost; limited tooling capacity in some markets |
How to evaluate a new supply base
- Tooling capability, not just molding capability. A region with presses but no tool rooms leaves you dependent elsewhere for the tool.
- Documented quality systems. Certification scope, and whether it covers the site actually running your parts.
- Communication and timezone. Who you talk to, in which hours, and how design reviews happen.
- IP terms in writing. Where CAD is stored, who can access it, and tool ownership.
- Total landed cost. Unit price, tooling, freight, duties, payment terms, and the cost of a failed batch.
- Exit terms. What it takes to move a tool if the relationship ends.
A pragmatic approach
Diversification does not have to mean relocating everything. A common and lower-risk pattern is to dual-source a small number of critical parts first, qualify the new supplier properly on those, and expand only once the relationship has been tested on real production rather than on a sample order. Start with parts where a supply interruption would hurt most, not with the easiest parts to move.
More
A quoted piece price is one line of the real number. Freight, duty, the working capital tied up in transit stock, the cost of sorting a bad lot and the cost of a line stopped waiting for parts all belong in the comparison. Supply bases that look expensive on piece price often win on landed cost, and the gap widens as lead time shortens.
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