A Deep Dive Into Re-Globalization and Sourcing From Multiple Countries

We’ve been talking for a while here about the need to diversify your supply chain. But what was once a conversation about the future is quickly becoming reality for many U.S. manufacturers.

While the U.S. remains a highly important export market for China, challenges due to China’s original Zero-COVID policy and then sudden easing, among other factors, are forcing U.S. manufacturers to think about how to become more agile. And they’re finding that sourcing from multiple countries is key.

A Worldwide Shift Toward Re-Globalization Has Begun

In recent weeks, we’ve seen increased openness to and desire for more diverse sourcing options and strategies. And this seems to be the beginning of a global realignment. 

This is a watershed moment—a massive shift from what we’ve seen over the past 30 years. This shift has been coming for a while, but it’s now a reality…and at an unprecedented level. Things will continue to evolve, but it seems that re-globalization is here to stay.

Re-globalization involves both rethinking and remodeling known globalization patterns. It requires rewiring traditional ways of sourcing—i.e., putting all your eggs in one basket (typically China)—in order to better insulate the supply chain against future disruptions.

This doesn’t mean shifting away from China entirely. 

It simply means that manufacturers are hedging their bets by incorporating sourcing from other countries in addition to China. They’re seeking to strengthen their ties with other countries like Vietnam, Cambodia, Indonesia, and Malaysia to ensure they have options in case they need them.

What’s Causing This Shift? 

After nearly three years of supply chain disruptions, why is this shift happening right now?

There are a number of factors at play, including U.S. sanctions, tariffs, and export restrictions. But the current shift is due in large part to recent volatility in China in regards to COVID shutdowns. 

China’s original Zero-COVID policy has affected manufacturing in a way we haven’t seen, forcing widespread shutdowns and timeline delays. The effects of the crackdown of the Zero-COVID policy—and then the sudden easing of this policy—have become more evident even in the last month. As a result, many companies are reducing their reliance on China to protect their interests.

Many Companies Are Now Looking for Dual Sourcing Options

Now, instead of sourcing primarily from China, many more companies are utilizing dual sourcing. At Flywheel, our goal is to provide our clients with dual quotes (typically China plus appropriate countries outside of China) to give them multiple viable options for sourcing.

Many are looking to other south Asian countries—for example, Vietnam. There are a number of benefits and drawbacks to working in Vietnam, including:

• It’s often less expensive than China. We are seeing examples of similar-to-lower costing but the tariff avoidance can help considerably to support a lower landed cost.

• It’s in good proximity to China, so if there are goods that need to cross borders, they can do so.

• Vietnam has an underdeveloped pool of cheaper labor (as of right now).

• The China worker is aging. 

• Factories in Vietnam are learning quickly, and are being trained on quality control and project management skills. Vietnam factories and operations becoming more sophisticated as their businesses are growing.

• The one caveat to sourcing in Vietnam is that MOQs are often higher than in China.

• Chinese factories are opening up in Vietnam so they come with the expertise and experience.

Vietnam is still working to advance their infrastructure (the same can be said of Indonesia and Malaysia). Road, rail, and port infrastructure is not what it is in China. It could take them a long time to rival China in that regard, but it’s still a good option for those looking for sourcing outside of China. 

While Vietnam may not be the “new China,” there are certainly pockets of opportunity there. We’re seeing a shift in some of production to Vietnam. There have been some large American companies there for years, of course, but we’re now seeing more of a trend happening.

Is Re-Globalization on Your Radar? 

In the midst of global volatility and unknowns, it’s important to diversify your sourcing so you’re not reliant on a single country for production.

If you’re ready to consider sourcing from multiple countries consolidated by one partner, Flywheel Sourcing can help. Our approach is unique in the industry: We already work in multiple countries, making us more nimble than other sourcing companies. We can help you find the right factory in the right country for your products, goals, and budget.

Contact us to discuss your sourcing needs and learn how we can help you diversify your supply chain.