Short answer: Moving production saves money only when the landed-cost gap, after counting tooling moves, quality ramp, and freight differences, pays back the switching cost within your planning horizon. For many brands the math favors staying and re-engineering the product or the supply chain instead. Run the full comparison before signing anything.
The comparison most brands skip
- Unit price is not the comparison; landed cost is. Add the new country's duty rate, freight to your warehouse, insurance, and any broker or compliance fees before comparing anything.
- Model at least three tariff scenarios for each option: current rates, rates 10 points higher, and rates 10 points lower. A move that only wins under today's rates is a bet on policy, not a strategy.
- Include the cost of dual-running: during the transition you will pay for quality control, expedited freight, and management attention in two places at once. That overlap period is pure cost.
The switching costs nobody puts in the spreadsheet
- Tooling and molds: moving or remaking tooling can cost tens of thousands per SKU, and the new factory's first articles still need approval cycles.
- Quality ramp: expect elevated defect rates for the first several production runs. Price the rework, the returns, and the brand damage of a bad batch into the decision.
- MOQs and cash: new factories often require higher minimums or prepayment from unproven customers, which ties up cash exactly when you are spending on the transition.
- Management bandwidth: sourcing trips, video calls at odd hours, and relationship building with a new partner consume the scarcest resource a small brand has.
When staying put wins
- Your current factory's quality is proven and the relationship gives you priority capacity, flexible payment terms, or fast sample turns. Those are worth real money.
- The tariff gap is narrow enough that product re-engineering closes it: changing materials, simplifying the design, or shifting the product mix can cut duty exposure without moving a single mold.
- Your volumes are too small to get good pricing or attention at a new factory. Small brands often get worse economics after moving because they drop from a valued customer to a rounding error.
When moving wins
- The duty differential is large and durable: a 20-plus point gap that survives your scenario modeling, on products where duty is a big share of landed cost.
- You are already qualifying a second source for resilience. If the move is happening anyway for risk reasons, the economics just need to clear a lower bar.
- The new location shortens freight time or cost to your main market enough to offset the switching investment, for example nearshoring for US fulfillment speed.
A decision framework you can run this week
- Step one: build the landed-cost model for staying versus moving, with three tariff scenarios each. No model, no decision.
- Step two: price the switching costs honestly, including tooling, quality ramp, and six months of dual-running overhead.
- Step three: compute the payback period on the switching investment under each tariff scenario. If it does not pay back within two years in the base case, stay.
- Step four: pressure-test the non-financial factors: quality risk, timeline risk, and whether your team can actually manage the transition. A move that wins on paper and fails in execution is the most expensive option.