As companies diversify sourcing across the U.S., Mexico, and Asia, many are encountering fragmented order volumes that undermine scale efficiencies. While nearshoring improves resilience and responsiveness, splitting production across multiple regions often introduces cost penalties, especially when minimum order quantities (MOQs), tooling amortization, or labor utilization thresholds are missed.
When Diversification Erodes Scale Advantage
In sectors like electronics, automotive, and consumer goods, suppliers typically set minimum order quantities (MOQs) to cover baseline production costs. As buyers split demand across the U.S., Mexico, and Asia, these regional thresholds often fall short, forcing suppliers to absorb fixed costs or pass them downstream. Industry analysts note that this fragmentation can inflate unit costs by roughly 5–10%, as suppliers deploy smaller production runs or duplicate tooling .
The challenge deepens when regional sites require separate compliance steps, certifications, or equipment setups. In Mexico, for instance, suppliers servicing both domestic and export clients often require separate lines for U.S. and Latin American compliance, a cost that buyers must absorb unless volumes are consolidated. In parallel, some Asia-based suppliers have begun charging inventory holding fees or increasing lead times for buyers who shift partial demand to nearshore competitors without clear volume commitments.
Re-Engineering Sourcing Models
Rather than treating regional diversification as a plug-and-play strategy, businesses are rethinking how to structure contracts, delivery flows, and cost models across a multi-node footprint. This means clarifying core-versus-variable volume splits, rebalancing incentives, and using predictive demand signals to coordinate load balancing.
Strategic suppliers, particularly in industrial machinery and electronics, are now pushing for volume guarantees or shared tooling investments to protect against idle capacity. Without these mechanisms, suppliers may deprioritize fragmented accounts or pass on costs through price increases and inflexible terms. Procurement teams must therefore not only segment suppliers by geography and risk, but also by their exposure to order fragmentation and their capacity to accommodate it.
Rebuilding Procurement Agility
Integrated Volume Forecasting Across Sites: Procurement teams should implement global forecasting tools that map aggregate demand across nearshore and offshore locations, allowing centralized visibility into when and where MOQ thresholds are at risk. This creates an early warning system for cost leakage.
Regional MOQ Harmonization: Where possible, negotiate unified MOQs across supplier networks that span multiple geographies. This gives suppliers flexibility to fulfill orders from different sites while preserving the buyer’s cost position.
Cost Structure Transparency: Push for open-book costing where volume fragmentation risk is high. Understanding fixed versus variable cost drivers helps procurement teams model where consolidation delivers the greatest ROI—and where decentralization creates unacceptable penalties.
Shared Production Risk Mechanisms: Explore volume pooling or coordinated production calendars with other business units or ecosystem partners to avoid individual underutilization. This is especially critical when transitioning to suppliers in emerging nearshore clusters without legacy scale.
Contractual Volume Flex Clauses: Build flexibility into contracts for volume redistribution across sites as demand shifts. This gives procurement the option to reallocate orders without penalty while protecting against supplier pushback on low-volume runs.
From Fragmentation to Intentional Footprinting
Nearshoring promises speed and resilience, but without volume discipline, it can just as easily erode procurement economics. The challenge ahead isn’t simply finding regional suppliers, it’s managing the cost and complexity that comes with spreading demand too thin. The next evolution in procurement strategy will depend not on how many nodes a company can stand up, but on how effectively it orchestrates demand across them.
