In this solo expert talk, Lara Guevara— a supply‑chain veteran with 17 years of experience— examines the hype around "China+1" sourcing diversification amid a perfect storm of global disruptions. She outlines the current macro‑environment: the Strait of Hormuz closure (affecting ~20% of global oil and 18% of air freight), ongoing Red Sea shipping disruptions that add 10‑14 days to transit times, and soaring US‑China tariffs that have risen to roughly 125% in many categories, eliminating the previous de‑minimis exemption. Guevara argues that conflating these distinct crises leads founders to make costly, irreversible sourcing moves. She details three founder case studies (Vietnam, Mexico, India) that illustrate how tariff savings, proximity assumptions, or cost reductions were offset by higher unit costs, quality issues, longer lead times, and extensive dual‑sourcing periods. To avoid these pitfalls, she presents a decision framework distinguishing three valid reasons for diversification (tariff arbitrage, geographic risk concentration, lead‑time optimization) from three invalid reasons (fear, peer pressure, untested assumptions). Central to the framework is a seven‑input total landed‑cost model—unit cost, tariff differential, freight cost, transition costs, quality risk, dual‑sourcing duration, and shipping‑route risk. Guevara emphasizes that only when the alternative country wins on most of these inputs should a move be pursued. The video concludes by previewing the next three weeks of the "Sourcing Question" series, which will dive deeper into landed‑cost modeling, near‑shoring analysis, and supplier audits. The overarching message is that analysis, not panic, should drive sourcing strategy.
Chapters
The Strait of Hormuz just closed. 20% of the world's oil, 18% of the global air freight, major container lines halting Red Sea routes again. And in founder group chats everywhere right now, the message is the same: we need to get out of China. I understand that instinct, I really do, but I've been in supply chain for 17 years and I've watched brands make expensive, irreversible sourcing decisions in response to headlines, and I've watched them pay for those decisions for years afterwards. So before you redirect your sourcing, before you start conversation with suppliers in Vietnam, India, Mexico, or other countries, let's talk about what's actually happening, what it actually means for your business, and what a smart response actually looks like. Because panic is not a sourcing strategy. I'm Lara Guevara, 70 years in light chain from enterprise manufacturing to TTC. And this month we're going into the questions founders are asking more urgently than ever: where should you be making your product? If you followed the April series, we spent the months cleaning up hidden costs— the weight, 3PL fees, packaging redesign. We found real money hiding in operational details, but May is about the bigger structural question, not how your supply chain runs, but whether the foundation it's built on— the country, the supplier, the sourcing model— is still the right one. We're spending 4 weeks on this, and we're starting with the hardest conversation first: the China Plus One fantasy. The idea that diversifying away from China is automatically smart, that Vietnam or India or Mexico is the obvious next That founders who moved are ahead and founders who stayed are behind. By the end of this video, you'll have a clear framework for when China Plus One is the right move, when it's the wrong one, and how the current global situation like tariffs, conflicts, shipping disruptions actually changes the calculation. Let's get into it. Let me give you a clear read on what's happening in the world right now because you deserve context. Not just headlines. The US-Tariff conflict escalated earlier this year. The Strait of Hormuz, the narrow waterway between Iran and Oman, experienced major disruption. That passage controls roughly 20% of global seaborne oil. It also supports a large share of air freight traffic in the region. Dubai's Jebel Ali Port, the Middle East's largest container hub, temporarily suspended operations. Major cargo airlines like Emirates, SkyCargo, Etihad, and Qatar Airways rerouted flights. At the same time, the Red Sea disruption is still unresolved. Container lines that briefly returned to Suez Canal routes are rerouting again around Cape of Good Hope. That adds roughly 10 to 14 days of transit time on major Asia trade lanes. And layered on top of that is the US-China tariff environment. China-origin goods now face effective tariff rates of roughly 125% or more in many categories. The meaning is exception for China-origin goods is gone. For DDC brand sourcing from China, the landed cost pictures change dramatically after 2024. Now let me put the key numbers together clearly. The Strait of Hormuz disruption impacts roughly 20% of global oil and about 18% of air freight capacity. Red Sea rerouting adds about 10 to 14 days of transit time on key Asia trade lanes. US-China tariff jumped roughly 125% for many product categories. The, the minimis exemption for China-origin goods has been eliminated, and the US weighted average tariff rate increased from roughly 2% historically to over 20% since 2025. Those numbers matter, but here's the key observation: there are actually two different crises happening. One is shipping route disruption, the other is trade policy. Both are real, both matter, but they require completely different responses. When founders combine them into one giant reason to get out of China, that's when expensive mistakes happen. Now here's what a real conversation sounds like. A founder hears about tariff or watches shipping disruptions or sees a competitor announce production in Vietnam, and the logic feels obvious: move production somewhere else, pay lower tariff, reduce exposure, sleep better at night. That logic isn't wrong, but it's incomplete, and incomplete sourcing logic costs real money. Now let me explain the gap between the expectations and reality. Founders expect lower tariffs immediately, but often the tariff savings are offset by 15-40% higher unit cost. Founders expect the same or better quality, but quality consistency often takes 6-8 months during the supplier learning curve. Founders expect faster lead times, but during supplier onboarding and relationship development, lead time can actually increase. Founders expect geopolitical risk, but Vietnam and India often ship through the same ocean infrastructure China uses, and founders expect a smooth transition. But most sourcing transitions involve running two suppliers at once: your original China supplier and the new supplier learning your product. That dual sourcing period can last 12 to 18 months and it cost money that almost nobody included in the business case. Now, here's the key question founders rarely ask: Does the alternative country actually use different shipping infrastructure? Vietnam exports largely move through the South China Sea, then through the Strait of Malacca or the Pacific. Those are many of the same trade lanes Chinese exports use. India's exports often move through the Arabian Sea and then either the Suez Canal or the Cape of Good Hope. The ships disrupted in the Red Sea are not carrying Chinese goods. They are carrying Vietnam's goods, Indian goods, goods from factories brand moved specifically to avoid disruption. Geographic diversification only reduces risk if the new geography actually uses different infrastructure. In many cases, it doesn't. Now let me tell you about 3 founders who diversified. All 3 had legitimate reasons, all 3 made the move, and all 3 paid more than expected. First case: a brand moved production from China to Vietnam to reduce tariff. Unit cost increased 22%, quality defects tripled during the ramp-up period. The company had to run both factories simultaneously for for 18 months. The tariff savings were real, but they were completely eaten by higher unit costs and dual sourcing transaction costs. Second case, a brand moved production to Mexico to shorten shipping time to US customers. They assumed proximity meant faster, but supplier capacity constraints actually increased lead times. The company repeatedly used air freight to avoid stockouts. Air freight premiums wiped out the shipping advantage. They ended up paying more per unit and waiting longer. Third case, a brand moved production to India to reduce unit cost. The unit cost was generally lower, but communication gaps cost 3 production runs with incorrect specifications. The company lost $47,000 in inventory. They actually returned to their original Chinese supplier The spreadsheet had been correct, but the supplier relationship infrastructure was not ready. 3 founders, 3 different strategies, 3 different failure modes. None of these founders were careless. They were responding to real pressures—tariffs, shipping risk, cost reduction—but they were responding to part of the picture, not the entire model. Here is the framework I use when helping brands evaluate sourcing diversification. There are 3 valid reasons to diversify and 3 bad reasons. Valid reason number 1: tariff arbitrage. If duty savings genuinely exceed the increase in unit cost and operational cost. Then valid reason number 2: geographic risk concentration. If your supply chain exposure is existential and the alternative country uses different infrastructure. Valid reason number 3: lead time optimization. If geographic proximity truly changes the customer's experience and inventory economics. Now, the wrong reasons: fear— headlines are not a sourcing strategy. Peer pressure— your competitor's move does not automatically apply to your product. And assumptions— believing something will be cheaper, faster, or safer without doing the total landed cost analysis. The current environment makes this distinction even more important. Tariffs genuinely change the math for some product categories. A 125% tariff can make alternative sourcing economically viable, but only when the full landed cost model is calculated. Shipping disruptions also matter, but ask the hard question: Does the alternative confi use different shipping routes? If not, you may not be reducing risk. You may simply be adding the supplier transition cost. The brands that navigate disruptions successfully are doing analysis, not reacting to the news cycle. Before you start any conversation with a new supplier, before you put source from Vietnam on your strategy roadmap, before you change anything, ask one question. Does the total landed cost of the alternative actually beat what I'm paying today? Not just unit cost, not just tariff, but total landed cost. That includes unit cost difference, tariff difference, freight cost from both origins, transition costs like tooling and sampling, supplier onboarding, quality learning curve, dual sourcing beards, and shipping route exposure. A proper landed cost comparison includes 7 inputs: unit cost comparison, tariff freight comparison, freight cost comparison, transition cost, quality risk during wrap-up, duration of the dual sourcing period, and shipping route infrastructure risk. Brand that model. If the alternative country wins with all 7 inputs, or at least minimum 5, you have a real case. If it only wins 2 or 3 inputs and you ignore the rest, you're repeating the same mistakes those fathers made. Here's the takeaway: the world is genuinely disrupted right now. Tariffs are real, shipping disruptions are real, the pressure you feel to act is understandable. But the right response to disruption is analysis, not reflective action. The China+1 fantasy assumes somewhere else is automatically better. The reality is that somewhere else might be better for your specific product, your specific volume in your specific shipping exposure, or it might not. The only way to know is to run the math. This is week 1 of 4 in our series called The Sourcing Question. Here's where we're going next. Next week, we'll break down exactly how to model a sourcing change using full landed cost analysis. Week 3, we'll analyze domestic versus overseas manufacturing and when nearshoring actually wins. Week 4, we'll run a sourcing audit so you can evaluate your current suppliers base effectively. If you want the landed cost comparison template I referenced in this video, it's in the week's Unbox Weekly newsletter. Subscribe so you don't have to miss the next video, and drop a comment below. Are you currently evaluating a sourcing change? What's driving it? Tariff, shipping disruption, cost, or something else? I want to know what you're navigating. See you next week.
