After years of promoting diversification as the ultimate hedge against supply chain shocks, a growing number of apparel brands are confronting a sobering reality: while sourcing from multiple countries may reduce the risk of dependence on China, it’s not delivering the cost savings or security many expected. If anything, the process has introduced a whole new layer of complexity, operational risk, and rising expenses.

Diversifying Doesn’t Mean Cheaper

Brands first looked beyond China to places like Vietnam and Cambodia to mitigate potential country risk, and Bangladesh to save on labor.  But over time, some of those advantages have eroded as costs across Asia increase. According to current industry estimates, average apparel sourcing costs are expected to rise 1.7% in the near term, and up to 3.5% for larger retailers. For many brands, moving production hasn’t cut costs – it’s just shifted where those costs appear on the balance sheet.