One concern many small buyers have in China has to do with the minimum order quantity imposed by manufacturers. It is actually the barrier that keeps many retailers working with importers/wholesalers. But some smart importers have figured out ways to decrease these minimum quantities.
The Imports Oriental blog wrote two posts about this issue in the context of the garment industry, but they are applicable to many other custom-made products.
1. Material supplier
The key is to understand the reasons behind a minimum order quantity imposed by the supplier.
Usually, there is a solid reason. For example, it is imposed by a material supplier. This pops up all the time for garments because controlling the color is difficult when dying a small quantity of the fabric. Or sometimes a small metal accessory is out of stock and its manufacturer needs an order of at least 10,000 pieces to launch production.
In these cases, the buyer can use the required amount of that material/accessory across several products. Some of my clients use the same fabric on two lingerie sets, a cami top, a chemise, some suspenders, and even eye covers.
Another solution is to buy some stock fabric, but the customer needs to be quite flexible in terms of designs…
2. Internal requirement
In other cases, the minimum order quantity is an internal organization issue. If the buyer is not in a hurry, production can be spread over a longer period:
It is easier for your supplier to fill a few temporary positions lasting two months than find twenty people willing to work full time for only two weeks.
On the other hand, some factories simply don’t want small orders. They don’t want to focus their attention on very small quantities, at the expense of their main customers’ orders. Many buyers are tempted to pretend that they will increase quantities over time. But suppliers are often suspicious:
Be careful promising that you will place big orders after your first trial order. Every factory has heard this story many times. It is not new. Be upfront with your plans, but don’t be surprised if they don’t take your future promise of big orders very seriously.
3. Manufacturing efficiency
There is one more reason why factories ask for minimum order quantities that are not justified by any external constraint. Chinese factories only look at local efficiencies, and it leads them to wrong conclusions. In their mind, large orders that can be processed in big batches drive their unit costs down by 10 to 30%. So they become literally obsessed with large orders.
4. Quality risks
In some cases, it is harder to control quality on a small quantity. Especially when complex processes (e.g. dyeing & finishing fabrics) are involved.
>> Related e-book: Controlling the Costs of Quality
This can be quite disheartening for importers. There is nothing to do about it… Except maybe looking for other, smaller manufacturers!
Some other tips for MOQ issues for garments :
Not only use the same fabrics for several products, but also try to “rotate” colors in the designs. For instance 1st colorway is red/white, the second colorway will be white/red.
Also try to limite the number of colors for the group of articles in the same quality. Unfortunately I often have MOQ issues even if the same fabric is used for different articles. This because the designer uses an almost impossible quantity of colors in the designs. Not only the fabrics have minimums, also there are color minimums.
For all-over prints the minimums can be quite high. Even if the supplier accepts printed fabrics below minimum (With or without an upcharge) you might face a lot of misprints allover the batches. And there is nothing you can do about that.
Another reason for high MOQ’s might be that the supplier is not interested in the order and/or you as a customer. Usually the high MOQ is accompanied with an unreasonable high price.
Right, good advice, thanks!
I often face the MOQ problem due to the LCL/FCL dilemna. The factory that I have been working with for the past 5 years are able to accommodate my small orders. They are aware that to get the big order sometimes there are small orders to fullfill. I face a two sided problem with orders that barely fill even the small 20″ container: (1) Ex -factory to port- trucking; it cost the same for the factory whether it is full or not, they amortize the difference, then add it to the individual cost of the product. (2) FOB China landed USA cost is the same problem as #1. Your freight cost increases when shipping less container load, affecting your final import cost per piece. Best case scenario is consolidating small orders with your other products from the same factory. Our products are stuffed and filled, how does the garment industry deal with shipping flat and folded products?
Lora,
Low quantities sure impact the cost of freight per piece. All buyers face this issue, whether they import garments or electronics.
I think there is a trade-off: either optimize freight costs and risk keeping unsold inventory, or buy only what you know you will sell and pay a little more…
Isn’t Ex-Factory to port trucking synonymous to FOB Renaud?
No. If you import from China and you don’t want to manage the in-China logistics and the export customs declaration on the China side, buy FOB. Not EXW!
EXW that Lora Brady talked about already included in-China logistics by same factory, yet it seems without export customs declaration?
As there are so many competitors around, perhaps small businesses can have a chance to start with little quantity orders to minimise risk.
I am looking to start my own business working at home, (internet base) and would prefer to start with small quantity.
Zenny,
You are right, tough competition is pushing factories to accept smaller orders, especially for off-the-shelf products requiring no customization production. But the constraint is often at the sub-supplier level (i.e. the materials/components factories). Count for small decreases in MOQs, nothing really substantial.
Off-the-shelf products are products that have been left from less than MOQ batch runs from previous clients and now lay in stock affecting factory’s productivity? These are ODM capable products?
If I understand right, then in supply chain it goes like this?
Raw materials factory > components factory > product manufacturer
Do you think offering higher price per piece to lower MOQ can work?
On the other hand when I convince manufacturer with price increase to lower
MOQ from 1000 to let’s say 200, does that still leave him with unused raw materials
that take space in factory affect productivity?
Thanks
No, “off the shelf” products are those standard products that are sold “as is”, without customization.
Yes, in some cases manufacturers are ready to decrease MOQs if the customer pays a higher price. But it is not always possible — it mostly depends on the MOQ of their own suppliers, and on their own suppliers’ willingness to trade lower MOQs for higher prices.
I thought ODM are standard products that can have logo printed on them and even materials upgraded. I sometimes see suppliers offering the latter option as well.
I’m an exporter from China , the MOQ is really a big problem for small buyers , i’v been keep thinking about this since i step in this business field . Sometimes we just lost the potential customer because of the high MOQ . Recently , i cooperated with a small buyer , a retailer , who wants to import fan .He asked about 50 , but with at least 5 different types , that is to say , 10 of each . Of course no factory will do this , MOQ is 200 for each ! I want to accept this order because i believe evety big order begins small . I take a lot time to find a way , do as following : searching the factory first and find the right model for the customer to confirm , then i ask the factory to tell me their wholesalers’ contact information , they also have MOQ , but they are much easier to persuade than factories ! The price is of course higher than the factory , but almost no big difference for the customer . My customer is very happy to get the fan and very satisfied with the price .Foreign customers are never able to find these wholesalers on the internet , let alone some local communication !
Nobody want to do this because it take time and with little benefit . But what i see is not the present only , i see the future and i believe there will be bigger order if my customers broaden their business with my products !This is a win-win thing !
I’M Chris , I appreciated every small order , as long as you’re really sincere to do business with me and you do have benefit from the cooperation and me too . My email : chris1990321@hotmail.com , contact if you wanna import from China but don’t have so much money to begin .Just ignore this if you think i;m advertising , i just think that maybe there is such person may need someone like me in China , but don’t know how to find , now i’m here for you .
Chris, thanks for the good tip. I also heard about wholesalers, and I agree that they are not easy to find. Your advice to ask the factory for wholesalers is pretty good.
Renaud，thanks . there is still one problem , not all factories do business oversea also do local market , sometimes they only face the foreign market , didn’t have wholesales in China . I have to pick out these first and also have to compare the products and prices , finally pick out the most cost-efficient one to my customer . These works are really impossible for ones oversea . So do u think my idea gonna work well for my future career ? I believe in myself but still want to get some suggestion from others .
Interesting. Yes, many small buyers from other countries would be interested in buying from wholesalers.
It makes sense particularly in industries where safety standards are not very different from those in China. And for buyers that sell in distribution channels with a quality standard that is not too high.
so I and small buyers are looking for eachother , wander how to find them , seems a long way to go , do you have any advice for me ? any information is appreciated ,
Marketing will be a challenge. Try many things and see what works… Good luck!
Thanks , i’m trying Also good luck for you ,
So you ask Chinese supplier for his wholesaler location and buy small quantity from them first so you can start buying MOQ from Chinese supplier knowing what you get?
I thought this was about HOW to decrease an MOQ?
When I had my importing business selling stuff on eBay, this was my primary issue. I don’t want 300 pairs of something when I know my return sale is barely 50. I want just 100 orders. So what did I do about this? I began to look for suppliers to whom I could buy more than one product from. For example, I would purchase 3 different widgets from the same supplier. It took me longer to find a supplier with a niche product that sold on eBay. But after spending hours, I finally did. So now I would contact them and told them my plan.”Hey listen, I don’t need 300 of widget A how about we do this. I order 100 widgets A, 50 widgets B, 50 B widgets, and 100 Widgets C. How does this sound?” They are still outputting their 300 order.
Think outside of the box and understand if you’re willing to buy their minimum order, they will compromise and work with you. So look for 1 supplier with different products that sell. They are hard to locate but it can be very rewarding. Usually that supplier sells the same product but with different variations of it.
Yes, excellent tip. Thanks.
Dear Renaud Anjoran..
I am wondering about quality problems while ordering small quantities.
I’ve heard about twisting problems, if I for example order normal t-shirt with slub yarn. Why does this problem occurs? How do the main problems look like with MOQ?
I am not sure about this particular technical issue. I guess it is due to the fabric supplier’s inability to make a small batch with a consistent quality.
This is interesting because I heard that as volume of batch run gets larger, the more quality issues there are. I also heard that small quantities can be made by hand so does that mean less precision and consistency is used when it is made by worker than machine?
Renaud. I want to understand your example with coloring small quantity fabrics where supplier has no control over color. I am not familiar with garment production and try to understand the meaning of having no control but this is how I understand it in short:
Garments require color variety and that’s why there is even MOQ for each color for manufacturer to take into account. That why MOQ is very high in garments production? Because manufacturer wants to cover many MOQ orders for raw materials i.e. different colors?
Does that mean that garments is among highest production industries where there are a lot of raw materials involved?
Sorry, more questions keep popping up after already submitting previous.
Question about MOQ concern by manufacturer. If MOQ is 1000 by manufacturer for each buyer, that means he wants to have his raw material investment covered by each buyer? Assuming this is the case, why not make divide raw materials investment so cost would be shared by several manufacturers? The best case scenario is having reputation of manufacturer selling small quantities to buyers which gives competitive advantage though more clients to manage. The worst case scenario? Having raw materials taking space in factory while waiting for new orders from clients?
Thanks Renaud
My company is a knitwear production company. The MOQ problem does restrict the potential to work with small retailers. Indeed, we have tried to group the yarn use by several clients into single pool. Let say we order 100kg cashmere, we spread to 3 clients. We offer discount to clients who produce with yarn using by our existing clients. So generally, this help us in lower the cost.
Thanks for sharing your experience, Lukas!