Nearshoring versus far east sourcing: how to compare properly

Sourcing decisions are still too often made on the ex-works or FOB price. A buyer gets a quote from a supplier in China or Vietnam and another from Turkey, Morocco or Eastern Europe. The Asian price is lower, often by a wide margin, and the decision appears to make itself.

But there is something missing in this picture. The FOB price is the most visible number in the comparison and frequently not the deciding one. The costs that separate the two options sit in freight, duty, the cash tied up in a longer pipeline, the stock written off because you committed to a forecast four months out, and the cost of fixing quality problems at a distance.

What belongs in the comparison

A proper landed cost per unit includes, at minimum:

• the supplier price, on comparable Incoterms;
• freight, port and inland haulage to your warehouse;
• customs duty, which depends on origin and whether preferential rules of origin are met;
• inventory carrying cost for stock in transit and the extra safety stock that a longer, more variable lead time requires;
• obsolescence and markdown risk from larger minimum order quantities and a longer forecast horizon;
• quality costs, including inspection, returns and rework;
• an allowance for expediting when things go wrong, typically airfreight.

Then there are factors that are hard to price but should not be ignored: speed to react to changing demand, exposure to a single shipping route, fluctuating currency, and the increase in management time a distant supply base absorbs.

A worked example

The figures below are illustrative, chosen to show the method rather than to represent any product or supplier. Assume 200,000 units a year of a seasonal product.

A 16% gap in supplier price becomes a gap of less than 1% in the other direction. Change the assumptions and the answer moves: a product with stable demand and low obsolescence risk will favour the far east option; a fashion or promotional product will favour proximity more strongly than shown here. The point is that the comparison has to be done line by line for your own product.

What changed in 2025 and 2026

Several inputs have moved, and some are still moving.

Ocean freight: Drewry's World Container Index put the Shanghai to Rotterdam spot rate at $3,632 per 40ft container on 22 October 2026. Spot rates swing, so use a range rather than a single figure. Routing is also shifting back. Seatrade Maritime reported in October 2026 that Suez transits had recovered to more than half of pre-war levels, with Linerlytica expecting a full return by the first quarter of 2027. Shorter transit cuts pipeline stock and narrows one of the main advantages of nearshore supply.

Duty: the UK-India trade agreement entered into force on 15 July 2026. UK tariffs on 99% of Indian goods were removed immediately, with some exclusions such as sugar, milled rice and certain meats. FashionUnited reported that Indian footwear had previously faced UK duties of up to 16%, while competitors such as Bangladesh, Pakistan and Cambodia already entered duty free. For textiles, apparel, footwear and many engineered goods, India is now a materially different option from a year ago. Preferential rates depend on meeting the agreement's rules of origin, so check product-specific rules before modelling zero duty.

Carbon: the UK's carbon border adjustment mechanism applies from 1 January 2027 to imports of aluminium, cement, fertiliser, hydrogen and iron and steel, for businesses importing £50,000 or more of those goods. If your product contains significant volumes of these materials, the carbon intensity of the supplier's production starts to carry a cost.

How to decide

Segment before you compare: a single sourcing policy across the range is almost always wrong. Stable, high-volume lines with long product lives usually justify far east or South Asian sourcing. Volatile, seasonal or bulky lines often justify a nearer supplier, even at a higher unit price. Many businesses end up with a dual model: a low-cost base supply and a responsive nearer source for top-ups and new lines.

Model a range, not a point: run the comparison at high and low freight rates, different lead time assumptions and with and without preferential duty. If the decision flips within a reasonable range, treat the options as close and decide on resilience and flexibility.

Give procurement, finance and supply chain planning joint ownership of the model: procurement will review the price, finance will review the cash, and planning will review the stock. Each one alone will reach a different answer.

Our free UK-India Landed Cost Comparator runs this kind of comparison for products sourced from India against your current origin.