I used to work for an importer who had a rule to ALWAYS importer full containers from China and Vietnam. One order was one container.
He was in the fashion business, so there was no reorder for most references. Only one-shots. Either they sold well (and he was quickly out of stock), or they didn’t sell as easily as expected (and he had to keep that unsold inventory for at least another year).
He loaded up for several reasons:
- It allowed him to offer simple projects to suppliers, and to get a good price
- It kept things simple internally, and buying assistants didn’t have to think much
- It gave him the false impression that he was optimizing his costs.
Why did I write “the false impression”?
I think his model is fundamentally broken. I have worked with other importers in the same industry, and they tend to break shipments into smaller and smaller chunks.
What are the advantages of shipping smaller quantities?
- It reduces your exposure to demand fluctuations, You are optimizing your whole system, rather than optimizing freight costs at the expense of unsold inventory.
- If the first batch has production issues, you can push the manufacturer to take corrective actions for the next orders.
- If some customers give you feedback about the packing or the colors, you can easily adjust these elements for the following productions.
- If the factory “bumps” your production and ships it so late that your customers cancel their order, you are in less trouble.
- Manufacturers have less of an incentive to “stab you in the back”, for example by using much cheaper materials.
What do you think?