Not Every SKU Should Move: A Framework for SKU-Level Sourcing Decisions

You've been thinking about this all wrong. When founders talk about diversifying sourcing, they talk about it like it's a brand-level decision. We're moving to Vietnam, or we're getting out of China, we're going domestic. But sourcing is not a brand-level decision, it's an SKU-level decision. The same brand might have 3 products, and the right answers for each of them is completely different. One belongs in Vietnam, one should stay in China, and one should run across both at the same time. Today I'm going to give you the framework to figure out which is which. Last week we talked about the China+1 fantasy, the pattern of brands making expensive sourcing decisions driven by headlines and fear rather than analysis. If you haven't watched that video, it's linked below. The world is still noisy this week. Major container lines have suspended bookings to and from Gulf ports. Insurance markets have withdrawn war risk coverage for ships transiting the Strait of Hormuz. Air freight capacity out of India has dropped dramatically, with Gulf carriers unable to serve those routes. All of that is real, and it's exactly why this framework matters. Because the pressure right now is to just move your sourcing, and doing that without structure is how you turn one problem into three. So here's the framework: 4 factors, a scoring matrix, and a decision protocol you can apply to every STU you sell. By the end of this video, you'll know exactly which products go to move, which to keep, and which to run across 2 suppliers at the same time. Here's the mistake I see founders make constantly. They decide to diversify sourcing, usually because of tariffs, shipping disruptions, or competitor pressure, and then they treat that decision like a company-wide pivot. We're moving production. They apply that decision to everything they sell, but their SKUs are not uniform. Some products are simple, some products are complex, Some have huge margins, some have tight. Some move thousands of units per month, some barely move. Some require speed to market, others can sit on a boat for 12 weeks and nobody cares. Moving a simple high-volume, high-margin SKU to a new supplier, that can work. Moving a complex, low-margin SKU to a new supplier, that's how you end up with 3 bad production runs and $47,000 of wasted inventory. The mistake isn't diversifying. The mistake is applying the move to the wrong product or SKU. The core insight is simple: sourcing is not a brand decision, it's an SKU decision. The same brand can have products that should stay in China, products that should move to Vietnam, and products that should be running on both. The real question is never, should we diversify? The real question is, which SKUs? There are 4 factors that determine whether an SKU is a good candidate for a sourcing move. Let's go through them one by one. First factor: complexity. Ask yourself how complicated the product actually is to manufacture. On one end of the spectrum, you have very simple products—single material, straightforward construction, minimal quality control steps. Those travel well to new suppliers. On the other end, you have high-complex products, multiple components, specialty materials, tight tolerances. Those need a supplier who already understands the product. A new supplier will have a learning curve, and every failure in that learning curve costs you time, money, and sometimes customer trust. So ask the question honestly: How many things could go wrong during production? If the answer is a lot, stay with a supplier who already knows how to make it. Second factor, margin. Margin is your safety net during a sourcing transition because costs almost always increase temporarily. Higher unit cost at the new supplier, sampling, tooling, travel, dual sourcing during the overlap period. And if a product has high margins, it can absorb a 15% increase during the transition and still make money. If a product has low margins, it cannot. So ask the key decisions: if this product costs 15% more for the next 12 months while the new supplier ramps up, does it still make money? If the answer is no, that SKU is very risky to move. Third, volume. Suppliers prioritize customers who bring volume. And if you move an SKU that generates $80,000 a year to a new supplier, you are not their priority customers. You're a side project. But if you move an SKU that generates half a million dollars a year, now the supplier has incentive to perform. They assign better quality managers, they solve problems faster, they invest attention. Low-volume SKUs struggle to get that attention. and the learning curve can stretch much longer than expected. So ask yourself, is the annual volume large enough for the new supplier to care? Fourth factor, lead time sensitivity. Some products require speed to market, others don't. A product tied to a seasonal campaign of launch or launch window might need to arrive exactly on time or earlier. 2 weeks faster shipping couldn't mean real revenue. That kind of product can benefit from nearshoring or geographic diversification, but many products don't have that urgency. If you can plan 16 weeks ahead without issue, longer transit times are manageable. So ask the questions: would 2 or 3 weeks faster delivery meaningfully change the outcome for this product? If not, then lead time probably shouldn't drive the sourcing decision. Now let's turn those 4 factors into a decision tool. Score each SKU on a scale of 1 to 5 for each factor. For complexity, remember the scoring is inverted. Simple products scored higher because they are easier to move. So here's the scoring logic for complexity. A score of 1 means extremely complex, multiple components, high tolerance, specialty materials. A score of 5 means extremely simple, basic construction, standard materials, minimal quality control. For margin, a score of 1 means very low margin, under 20% gross margin. A score of 5 is very high margin, 60% or more. For volume, a score of 1 means under $50,000 per year. A score of 5 means $500,000 or more. For time sensitivity, a score of 1 means low sensitivity, timing is flexible. A score of 5 means high sensitivity Speed directly affects the revenue. Now add the 4 scores together. The total tells you how to approach sourcing. If the total score is 16 to 20, the SKU is a strong candidate for diversification. You should seriously evaluate moving it. If the score is 11 to 15, proceed carefully. Dual sourcing may be the best option. If the score is 6 to 10, it probably should stay with the current supplier. The risk outweighs the benefit. And if the score is 4 or 5, absolutely do not move it right now. The conditions are too risky. The matrix doesn't make the decisions for you, it organizes the decision. A high score means the conditions are favorable. A low score means you should fix the fundamentals first before attempting to move. Now let's talk about the middle category, SKUs scoring 11 to 50. This is where most brands get stopped, and this is where dual sourcing becomes powerful. Instead of choosing one supplier or the other, you split the volume. A common structure is a 70/30 split. 70% of the volume stays with the primary supplier, 30% moves to a secondary supplier. That approach gives you several advantages. Quality remains stable, because the majority of the volume stays with the experienced supplier. The secondary supplier develops capability through real production runs. You gain negotiation leverage because neither supplier has complete control, and you build redundancy if disruptions occur. Dual sourcing creates optionality without risking the entire business, but it isn't always worth it. Dual sourcing usually fails for low-volume SKUs because there isn't enough to develop real expertise at either factory. It struggles with highly complex products because maintaining specification consistency across the two factories is difficult. And it rarely works for very low margin products because the overhead cost becomes too high. The best candidates for dual sourcing are high volume products with moderate complexity and healthy margins. Before we close, there are two connections I want to make very clear. First, finance. Every sourcing scenario changes the P&L. A new supplier might increase unit cost by 15% for 12 months before stabilizing. Finance need to model the transition economics, not just the long-term outcome. Many brands fail during the transition period because they underestimated the temporary cost increase. Second, marketing. Lead times affect campaign planning. If a product moves from a 10-week lead time to a 16-week lead time, marketing needs to know. Launch schedules change, inventory builds change, customer messaging changes. Supply chain decisions ripple through the entire business. That's the Moov supply chain flywheel in action. Supply chain decision affects cost, finance models, the margin impact, supply chain changes lead time, marketing adjust campaign, and availability messaging. These conversations must happen together, not sequentially. Here's what I want you to do this week. Pull your top 10 SKU by revenue, score each one on the 4 factors, add the numbers. You will immediately see which products are strong candidates to move, which would stay exactly where they are, and which belong in a dual sourcing model. The SKU sourcing matrix template is available in this week's Unboxed weekly newsletter. The link is in the description. Go download it and run the exercise. Next week, we're tackling the next question: domestic versus overseas sourcing. When your shoring actually means the math, not in theory, in real landed cost numbers. Subscribe so you don't miss it, and tell me in the comments, when you look at your SKU lineup right now, which product feels like they need to move and what's actually holding you back. I read every comment. See you next vid.