For two years, retail supply chain executives have been saying they're diversifying away from China. The PowerPoint slides are full of "China Plus One" strategies. The investor calls are full of hedged commitments to Southeast Asia and South Asia sourcing. But the proof has been harder to quantify — until now.

QIMA's Q1 2026 Supply Chain Barometer, released by the quality control and supply chain compliance firm, provides some of the clearest hard data yet on where retail sourcing is actually shifting. The headline number: inspection and audit demand in Vietnam rose 30% year-over-year in Q1 2026. Across Southeast Asia as a whole, the figure is 24% — the third consecutive quarter of double-digit regional growth.

The Geography of the Shift

Vietnam is the clearest winner in the China exit. Supply Chain Dive reported that 35% of diversifying supply chains sourced more from Vietnam in 2025, making it the top destination for companies reducing China exposure. Apparel, footwear, and electronics assembly have led the shift, with brands from Nike to Apple publicly announcing expanded Vietnam production capacity.

India is the second major beneficiary, with inspection demand rising sharply in electronics and machinery — sectors where India's government has aggressively courted foreign direct investment through production-linked incentive schemes. Apple's decision to shift 15-20% of iPhone production to India has had downstream effects on supplier ecosystems and the inspection firms that monitor them.

Bangladesh and Thailand round out the Southeast Asia picture, with Thai inspection activity up 44% year-over-year, according to QIMA's data.

What the Numbers Actually Mean

It's worth being precise about what inspection and audit demand measures. When QIMA sees a 30% increase in Vietnam inspections, that reflects brands that have committed to specific Vietnam-based suppliers and are actively running quality control on production. It's not exploratory sourcing or capability mapping — it's operational. In that sense, it's one of the cleanest leading indicators of where goods are actually being made.

The data doesn't mean China is being abandoned. China inspection volumes have declined proportionally, but China still accounts for the majority of global manufacturing output for most product categories. What the QIMA data reveals is that the marginal unit — the incremental production that was going to China a few years ago — is increasingly going elsewhere.

That's a significant structural shift even if China remains the dominant sourcing country in absolute terms. Retailers are building redundancy and optionality into their supply chains in ways that will be durable regardless of how the current tariff standoff resolves.

The Hormuz Factor

QIMA's analysis also highlighted the Strait of Hormuz disruption as an accelerant for diversification. The firm noted that the partial blockade since late February has pushed ocean freight costs sharply higher on routes passing through the Gulf — making the relative economics of nearer-shore sourcing in Asia more attractive compared to routes transiting through the Middle East.

That's a second-order effect of the Iran conflict that gets less attention than oil prices but matters significantly for logistics planning. Companies sourcing from Vietnam or India face shorter transit routes through the Malacca Strait rather than the Suez Canal and Gulf, partially insulating them from the Hormuz premium.

The Warning in the Data

As we reported last week, three-quarters of retail supply chain leaders say tariffs are forcing a strategic reset — and 87% are building buffer inventory as a hedge. The QIMA barometer validates that the reorientation is real, but also confirms something supply chain leaders already know: building out new supplier relationships in Vietnam or India takes 18-36 months to reach the quality consistency and scale that established China relationships provide.

That gap — between the urgency to diversify and the time required to do it properly — is the defining supply chain tension of 2026. The numbers are moving in the right direction. But the Q2 crunch, with 125% tariffs on Chinese goods now in effect, will test whether the diversification has happened fast enough.