Why moving sourcing out of China isn’t a flip-of-a-switch solution—and what smart companies with the help of my team are doing about it now
As tariffs rise and geopolitical tensions intensify, businesses across the U.S. are scrambling to understand what comes next. Whether you’re a wholesaler, a DTC e-commerce brand, a legacy retailer, or a domestic manufacturer relying on Chinese inputs, the uncertainty is real, and the stakes are high. In the face of this volatility, many companies are hesitating—choosing to delay deliveries from China that are now subject to tariffs as high as 145%. Although products like computers and communication devices have enjoyed a temporary reprieve, the vast majority of goods used in the real economy—from building materials to the smallest hardware components—remain under heavy tariff pressure. Buyers are faced with a difficult choice: purchase now and risk a policy reversal, or hold off until inventory is nearly depleted, accepting smaller orders at higher prices. Pricing elasticity adds to the complexity, leaving buyers uncertain about future sales volumes and how competitors will respond. While many view moving supply chains out of China as a viable long-term solution, the reality is much more nuanced. As a sourcing company operating in China for over three decades, we at Sparq have been helping clients navigate this complex transition long before it made headlines.
The Top 10 Real Challenges of Moving Supply Chains Out of China
1. Product Development Speed
In China, regions often specialize in specific categories—such as flooring in Zhejiang, lighting in Zhongshan, and furniture in Foshan. This specialization creates deep knowledge, tight supply chains, and an unmatched speed for developing new products. One of our clients in the lighting sector shared how, within 10 days, they were able to prototype a new LED fixture using a network of local suppliers. When they attempted the same project in Vietnam, it took over two months.
2. Higher Minimum Order Quantities (MOQs)
Most factories outside China require larger MOQs to justify production runs. This makes small-batch testing or seasonal product launches unfeasible, particularly for businesses with tight cash flow. For example, shifting swimwear production to Cambodia might not work for brands that rely on seasonal flexibility. One startup client found their minimum order requirement in Cambodia was several fold higher than what their Chinese supplier had accepted.
3. Lack of Component Supply Chains
China is not just the final assembly hub—it’s the supplier to the suppliers. Many Southeast Asian factories still import raw materials and components from China, making the benefits of relocation marginal. We had a client move a consumer electronics project to Malaysia only to find that 60% of the components still had to be sourced from Shenzhen.
4. Limited Manufacturing Capacity and Product Variety
Relocating production doesn’t automatically guarantee comparable lead times or output. Many factories in Vietnam, Indonesia, and Malaysia are already operating at or near full capacity—especially in high-demand sectors such as textiles, electronics, and household goods. For example, one U.S. apparel brand placed a trial order with a Vietnamese manufacturer and was taken aback when the estimated lead time came back at 150 days—more than twice the turnaround time they were accustomed to with their Chinese supplier.
Additionally, these factories often cater to large-volume clients and focus on a narrower SKU range to streamline operations. This creates a disadvantage for small and mid-sized buyers, who may struggle to secure production slots or request customizations. In contrast, Chinese manufacturers—especially those located in mature industrial clusters—are built to accommodate a wide product variety and customization within tight geographic zones. This proximity between component suppliers, tooling houses, and assemblers enables a level of speed, flexibility, and scale that is still unmatched elsewhere.
5. Slower Sampling and Prototyping
Need to iterate quickly? Expect longer timelines for samples and prototypes outside China, where R&D capabilities, tooling expertise, and communication infrastructure are less developed. One client working on a custom kitchen appliance shared that the Chinese sample took 12 days and required one revision. In contrast, the same part in Indonesia took six weeks and three revisions.
6. Shortage of Specialized Trades
China still leads in trades like tool and die making, CNC machining, precision injection molding, electrical engineering, advanced textiles, and optical fabrication. Finding skilled labor in these trades elsewhere is a major hurdle.
7. Professional Staffing Limitations
China’s sourcing infrastructure includes a deep talent pool of English-speaking merchandisers, engineers, and project managers trained to Western standards. This level of professionalism is not yet widespread in other countries. On many occasions you must rely on Chinese staff and project manager from China to develop workflow and bring expertise to the new factory location.
8. Higher Production Costs Countries like India often impose heavy regulatory and bureaucratic burdens. Combined with less automation and lower production efficiency, many goods end up being more expensive to produce outside China. One of our clients in the consumer goods industry found that their all-in landed cost from India was 18% higher than from China—even before factoring in delays.
9. Quality Control Challenges China’s quality control processes are deeply embedded, from inspection systems to final packaging. In new sourcing locations, maintaining consistent standards requires additional supervision, training, and infrastructure.
10. Lack of Automation Despite rising labor costs, China remains one of the most automated emerging markets. Many Southeast Asian alternatives still rely on manual labor, making them less consistent and scalable.
Realistic Solutions for Today’s Sourcing Landscape
1. Partner with Chinese suppliers with overseas factories. These are often larger and better capitalized, though they may require higher MOQs. With negotiation, they may accommodate medium-sized production runs for strategic customers.
2. Explore new supplier relationships region by region. Use a systematic, country-specific approach to qualify manufacturers.
3. Even partially relocating your component supply chain can significantly reduce tariff exposure and improve resilience. One increasingly common strategy involves sourcing products in SKD (Semi-Knockdown) form from Chinese factories—where components are pre-assembled just enough to avoid full tariff classification. These parts are then shipped for final assembly in the U.S., helping businesses lower duty costs while maintaining supply chain continuity. This hybrid approach can also shorten lead times and provide more flexibility in inventory planning.
4. Encourage regional supply chain investment. Mexico, India, and other nearshore markets could become long-term alternatives.
5. Leverage automation. Companies looking to reshore should prioritize investments in robotics and AI to offset high labor costs.
Sparq’s Strategy: Anticipation and Long-Term Planning
At Sparq, we anticipated this shift as early as 2018 when the first wave of tariffs hit. We chose to maintain our China office as a regional command center while helping clients explore new options in Vietnam, India, and Malaysia. This approach leverages the core advantage of our China-based team—a group of loyal engineers, product managers, and sourcing experts who can train new suppliers and replicate proven processes. We didn’t open new offices in every country. Instead, we expanded our reach through relationships, knowledge transfer, and hands-on engagement with emerging suppliers—many of whom were established by former Chinese vendors. We believe that successful relocation is not just about moving boxes—it’s about transferring knowledge, processes, and expectations.
We are at a strategic inflection point. For many retailers, online sellers, and domestic manufacturers who depend on affordable and reliable inputs, these supply-chain disruptions pose an existential challenge. At Sparq, we see these challenges as opportunities. With practical solutions built on decades of hands-on expertise, we’re committed to guiding our partners through this transition. We want American businesses not only to survive this shift—but to thrive and emerge stronger in the new global landscape.