Nearshoring and the Changing Geography of Supply Chains

The era of "lowest-cost-wins-everywhere" sourcing is over. Smart companies are rethinking their sourcing geography — and finding that closer isn't always more expensive.

Five years ago, if you told a CPG executive that nearshoring was a better sourcing strategy than offshore manufacturing, you'd have gotten some politely skeptical looks.

A lot has changed. Between pandemic disruptions, geopolitical uncertainty, rising overseas labor costs, and a renewed focus on lead time flexibility, the calculus on where to source has fundamentally shifted.

Here's what I'm seeing on the ground — and how to think through sourcing geography for your business.

Total Cost vs. Unit Cost

The most common mistake in sourcing decisions is evaluating cost at the unit level only. When you factor in freight, inventory carrying costs, lead time risk, tariffs, and the cost of supply disruptions, the true total cost picture often looks very different — and frequently more favorable for nearshore and domestic suppliers.

Lead Time as a Competitive Variable

In a market where consumer preferences shift quickly and retail replenishment windows are tightening, the ability to respond fast is a genuine competitive advantage. A supplier that's 6 weeks away can't help you when demand spikes unexpectedly. A supplier that's 2 weeks away can.

What "Nearshore" Actually Means for CPG

For most U.S. CPG companies, nearshoring means Mexico, Central America, and the Caribbean for manufacturing, and U.S. or Canadian suppliers for packaging and raw materials. Each has tradeoffs — and the right answer depends heavily on your specific product category and supply chain structure.

This Doesn't Mean Abandon Offshore Entirely

A thoughtful strategy isn't nearshore everything — it's matching your sourcing geography to the risk, flexibility, and cost profile of each category. Some components are still best sourced overseas.

Sourcing geography is one of the most consequential strategic decisions in supply chain — and one that deserves regular revisiting. If you're not sure your current approach still makes sense, it's worth a fresh look.