Globalization changed procurement by connecting businesses to suppliers and manufacturing centers in global markets. A company may obtain its raw materials from one country, manufacture its parts in another, and sell its finished products to various regions. This structure provided access to specialized capabilities, competitive production costs and larger supplier markets. International sourcing became a major component of commercial competitiveness for many industries. But geographic concentration of supply networks has also exposed companies to risks beyond the performance of individual suppliers. Political instability, congestion at ports, tariffs, sanctions, trade barriers and transportation disruptions can impact entire sourcing markets. Such issues have become particularly important for companies that depend on essential raw materials, unique parts or suppliers located in a limited number of countries. International trade still plays a major role in the world economy, however. World merchandise trade grew 2.1% in 2024 to approximately US$24.6 trillion, the U.S. International Trade Commission (USITC) reported. This implies that cross-border trade is still important, even as there is more discussion of regionalization and supply chain diversification. What is changing is how companies organize their international sourcing networks. Procurement teams are looking for alternative markets, additional suppliers and regional production rather than relying on a few manufacturing sites. The objective is not necessarily to bring all sourcing closer to home. It is to reduce excessive dependence on particular markets without sacrificing the commercial advantages of global trade.
Although these approaches are often discussed together, they represent different sourcing decisions.
The buying of goods, materials and services from suppliers in international markets, on the basis of factors such as cost, capability, quality and availability.
Moving sourcing or production to countries that are closer in proximity, often to reduce transportation complexity, improve coordination, or lower replenishment times.
The act of relocating production or sourcing activities from a country outside of a company’s home country back to that country.
Choosing suppliers or production locations in countries with which the company's home country has stronger political, economic or strategic ties.
There might be some overlap between these approaches. For example, a company may retain international suppliers but bring some of its manufacturing closer to its main markets and develop deeper sourcing relationships with politically aligned economies. Why this difference matters: Being closer and politically aligned doesn't automatically mean better commercial outcomes. A local supplier may not have the same production capacity or technical know how as a well established international partner. Similarly, sourcing from a politically aligned market does not eliminate financial, operational or regulatory risks. Each model operates differently depending on what an organization buys, where its customers are located and the degree of disruption it can withstand.
Trade relations increasingly influence procurement decisions. Tariffs, export controls, sanctions, and import rules can affect the cost and availability of materials, sometimes at short notice. These developments introduce uncertainty on pricing, production planning and contractual commitments for companies reliant on certain foreign suppliers. Nearshoring can reduce exposure to long distance trade routes and cross border complications. Friendshoring could be more predictable in sectors where countries already have trade ties and compatible regulatory regimes. But neither method completely eliminates the risk of geopolitical exposure. Political developments, trade disputes and regulatory uncertainty can also affect regional markets.
Proximity is conducive to coordination with suppliers, especially for production involving continuous technical dialog, design adjustments or tight quality control. Shorter routes can also shorten transit times and give more flexibility in reacting to changes in demand. This is helpful for companies with low stock levels or uncertain replacement needs. But shorter geographical distances do not always mean faster deliveries. Production capacity, customs procedures, infrastructure, supplier scheduling and transport availability can still cause delays.
Changes to tariff regimes, common rules and access to regional markets can influence sourcing decisions. Trade agreements can make certain markets more attractive to procurement teams. North American trade is one example of the close link between production in a region and trade across borders. According to the Office of the United States Trade Representative (USTR), US trade in goods and services with Mexico in 2025 was estimated at US$ 964.1 billion, up 3.7% from 2024. This figure does not establish that nearshoring was responsible for the increase, but it demonstrates the scale of commercial activity between closely interconnected trading partners. Regional trade relationships can make some markets more attractive for purchasing teams. But supplier selection still has to consider product-specific rules of origin, customs requirements, regulatory compliance and the actual cost of moving goods across borders.
While nearshoring and friendshoring can help ease some supply chain management issues, they also involve costs and operational limitations. Some potential benefits include: • Closer access to production facilities and end markets. • Improved communication and coordination with suppliers. • Limited exposure to certain international shipping routes and geopolitical risks. • More flexible replenishment and adaptation to changing demand. • Opportunities to develop long-term relationships with regional suppliers. However, businesses also need to consider: • Higher labour, manufacturing or operating costs in alternative sourcing markets. • Supplier capacity limitations for specific or high-volume items. • Infrastructure limitations affecting transportation and manufacturing efficiency. • A smaller pool of alternative suppliers in some regional markets. • Supplier development, transition and qualification costs.
A sourcing decision that looks attractive based on transportation savings or geographical proximity may not be as competitive when the entire cost structure is considered. Procurement teams need to consider Total Cost of Ownership (TCO) rather than just the purchase price or the distance from the shipping source. This includes production costs, logistics, inventory requirements, quality, compliance, supplier performance and the financial impact of potential disruptions. It is the same with resilience. Moving production to a nearby market does not necessarily diversify risk if the organization becomes dependent on one supplier or manufacturing cluster.
Rather than choosing between globalization and regionalization, many organizations are considering a combination of sourcing models.
Diversifying the supplier base can reduce reliance on individual suppliers or concentrated production markets. Organizations may therefore continue working with existing global suppliers while looking for alternative sources in other parts of the world. This is especially the case for critical materials and components where an interruption at one supplier may impact production at multiple business units. However, adding suppliers without a clear commercial or operational rationale can increase the complexity of procurement. Suppliers need to be able to meet the quality, capacity, compliance and delivery requirements.
China-plus-one is a sourcing and manufacturing strategy in which companies retain their existing operations in China while developing additional production or sourcing relationships in at least one other country. This allows companies to maintain existing operations in China while developing additional production or sourcing relationships in countries such as India, Vietnam, Mexico or other appropriate manufacturing locations. That decision is dependent on product categories, supplier ecosystem, infrastructure, availability of labor, trade arrangements, and access to raw materials. The goal is to develop alternatives where there are tangible commercial or risk benefits, not just moving production because another country looks better from a geopolitical angle.
Not all products and services require the same sourcing model. A company may utilize global sourcing for commodities that are standardized and priced competitively in the international market, but it may choose to utilize regional suppliers for time-sensitive components or products that require frequent technical coordination. For critical inputs, dual sourcing, alternative suppliers or higher inventory protection may be required. Less critical categories could still be subject to traditional competitive sourcing methods. That’s why the category level assessment is important. Procurement decisions should be driven by supply market conditions, business criticality, supplier availability and the impact of disruption.
Alternative sourcing markets are not found by simply comparing supplier quotations. Procurement teams need to see supplier capabilities, market capacity, pricing conditions, regulatory requirements, infrastructure, and potential geopolitical exposure. No less important is the qualification of suppliers. Just because a supplier looks good commercially does not mean that they have the financial strength, technical capabilities, production capacity or regulatory compliance required to continue long term operations. Without continuous supplier evaluation, diversification may actually create new risks instead of reducing existing ones.
With sourcing becoming more diverse, procurement leaders will need to revisit how supplier markets are evaluated and how sourcing decisions are approved. The starting point is to understand existing exposure. Organisations need to know where critical materials come from, how dependent they are on specific suppliers, and whether multiple suppliers share the same fundamental geographical or operational risks. This assessment should extend beyond direct suppliers where possible. A company may have multiple approved suppliers, but still be dependent on the same country, manufacturing cluster or upstream material source. The next question is where alternative sourcing makes commercial sense. Procurement teams should evaluate potential markets on total cost, supplier capability, lead times, trade arrangements, infrastructure and regulatory requirements. The objective is not to get more supplier names but to find alternatives. Another area to look at is supplier development. A new sourcing relationship may need technical assessments, quality validation, contractual changes and production planning before it can deliver real supply continuity. Before transitioning to new suppliers or redistributing purchase volumes, these requirements must be taken into account. Finally, as business conditions change, supplier portfolios should be reviewed. Developments in trade policy, changes in market prices, supplier performance and demand can change the attractiveness of sourcing locations over time. For procurement leaders, the most important decision isn’t whether to go for global sourcing, nearshoring or friendshoring. It’s determining where each approach adds the most value and how much supply exposure the organization is willing to accept.
Companies reviewing their global sourcing strategies should consider other supplier markets for cost competitiveness, supplier capability and operational risk. Cognitud assists companies in evaluating sourcing alternatives, understanding supplier markets and making better supplier decisions based on commercial and operational requirements. Using its procurement consulting experience, the firm assists organizations in identifying appropriate sourcing options, assessing supplier capabilities and qualification criteria, and enhancing procurement processes for supplier evaluation and performance monitoring. This helps companies to develop more balanced sourcing strategies, to avoid over-reliance on single suppliers and to take sourcing decisions that consider both immediate cost pressures and the long-term resilience of the supply chain.
Navneet Bargoti
Optimize procurement decisions with strategies aligned to your business needs.
Global sourcing is the practice of purchasing goods, materials and services from suppliers in international markets. It helps businesses access competitive prices, specialized capabilities and a wider supplier base.
Businesses can improve supply chain resilience by diversifying suppliers, exploring alternative sourcing markets and reducing dependence on specific regions. Regular supplier assessments and risk monitoring also help maintain supply continuity.
Supply chain resilience helps businesses maintain operations during geopolitical tensions, trade restrictions and transportation disruptions. It reduces supply risks and enables organizations to respond more effectively to changing market conditions.
Supplier diversity reduces dependence on individual suppliers and geographical markets. It gives businesses more sourcing alternatives, improves supply flexibility and helps manage potential disruptions.
Reshoring is the process of moving production or sourcing activities from another country back to a company's home country. It can improve operational control, shorten transportation routes and reduce dependence on international suppliers.
