• Minimum Order Quantity (MOQ) – Why It’s Required by Chinese Suppliers

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    The Minimum Order Quantity (MOQ) requirement sets the lowest quantity of a certain product (e.g. 500 pcs) that a supplier is willing to sell. If the importer cannot reach the MOQ requirement, then the supplier is not willing or able to enter production.

    In this article, I explain why the MOQ requirement exists, and what you can do to reduce the number of units you need to buy.

    What is the Minimum Order Quantity (MOQ)?

    The MOQ requirement is the minimum number of units you need to order from a supplier. It can be set per order, per product, per material or per color. For example, if a supplier sets their MOQ at 500 pcs, then you must purchase at least 500 pcs before they can accept your order.

    How do I find out the MOQ of a supplier?

    The MOQ is often specified on the suppliers Alibaba page, or website. You can also contact them directly to ask for their MOQ.

    Keep in mind that the MOQ is fluid, as it varies depending on a range of factors. In addition, there are also different MOQs to keep track of, not just one.

    What is the Minimum Order Value?

    A Minimum Order Value is the lowest value of goods a supplier is willing to sell on a per order or product basis. If the Minimum Order Value is set at US$5000, then they will not accept orders below this figure. That said, manufacturers almost exclusively set a minimum quantity rather than a minimum value.

    1. Low-profit margins require larger volumes

    Most Chinese manufacturers tend to operate on razor-thin profit margins. Often as low as 3 to 4%. Low-profit margins require the supplier to produce a large number of products in order to break even.

    2. Your suppliers MOQ reflects the MOQ set by their materials subcontractors

    The manufacturer is not always to blame for high Minimum order quantity requirements. Chinese suppliers tend to keep a minimum stock of materials and components.  As such, they must buy materials and parts from subcontractors, on an order to order basis. This, in turn, requires that the factory can satisfy the MOQ of the subcontractor.

    This also explains why different items and different materials (or even colors of the same material) has different MOQs. With some effort, it is possible to work out how the MOQ can be lowered, by identifying which materials and components the supplier keeps in stock, or can buy in lower minimum order volumes.

    There are, however, certain limitations to this approach. For example, materials that are compliant with REACH, or other chemical regulations, must be procured in a larger volume.

    As product compliance is not optional, going around the MOQ requirement using ‘standardized materials’ may not always work.

    3. Chinese suppliers normally don’t keep products in stock

    It would be really easy for a factory to sell low volumes if they only kept ready-made units in stock. However, they rarely do. At least not when it comes to products that are ‘export ready’.

    Indeed, you can go on Taobao.com and find tens of thousands of suppliers, all with ready-made goods.

    But, off-shelf products in China are manufactured for the domestic market. That is a problem, as such products are, for obvious reasons, not manufactured in compliance with overseas (i.e., US or EU) product labeling requirements and safety standards.

    For example, all products in the United States must carry a country of origin label (i.e., Made in China), in English. While some off-shelf products may be compliant, you will need to look long and hard for them.

    So, let’s get back to the question. Off-shelf goods can be purchased in small volumes, the problem is just that you cannot buy such products – and as a result, you are back to “make to order” which means you must meet the suppliers MOQ.

    MOQ Requirement

    4. Manufacturers often have more than just one MOQ requirement

    Many factories present a single MOQ, for all products. However, that is rarely the case.

    Let’s take the textiles industry for example. Apparel manufacturers MOQ often looks like this:

    • Per unit: 1000 pcs
    • Per standard material: 500 pcs
    • Per custom material: 1000 pcs
    • Per standard color: 250 pcs
    • Per custom color (i.e., RAL or Pantone): 500 pcs
    • Per size: 250 pcs

    As you can see above, standard materials and colors (i.e., those with higher turnover) are sold with a lower MOQ. The more you customize a product, the higher the minimum order quantity requirement goes.

    You can make this to work in your favor if you can manage to get this information from your supplier.

    In the example above, you must buy 1000 pcs. If you buy a T-shirt in a standard material, in a standard color – you can get 4 different products (SKUs).

    On the other hand, a custom material would only get you one SKU, as the MOQ requirement is the same as for the “per order” MOQ.

    This explains why suppliers tend to have higher MOQ requirements for products, while prints and other modifications can be offered with lower MOQs. The same often goes for cutting and other procedures that can be managed by the supplier.

    5. Work with your supplier to reduce the MOQ

    You can negotiate a lower Minimum order quantity requirement from your supplier. Yet, as mentioned in this article, the supplier often has very limited room for reducing the MOQ.

    In fact, they may not be able to offer you a lower MOQ than they already do. At least not without taking a loss, or being forced to themselves take a bigger risk by buying more materials and components that are actually used for your order.

    Some suppliers may consider offering buyers a lower MOQ, in return for a higher price. But, working out the supplier’s quantity requirement structure is often far more efficient.

    By doing so, you can design your product, and use materials and parts, that the supplier is able to procure in lower volumes.

    You can also work with your supplier to find out how

    Case Study A: Bathroom Carpets

    A few years ago, a client arrived in Shanghai to visit manufacturers of bathroom carpets. This client owned two stores in Europe. Big enough to match the supplier’s minimum order quantity, but not for more than one or two products.

    That’s a problem because stocking up 1000 pcs of blue rugs, and another 1000 pcs of the green ones, is not viable for a small business operating two shops.

    Hence, the client’s objective was to find out how they could create additional SKUs (i.e., more colors and shapes) while satisfying the manufacturer’s minimum order quantity.

    As said, this can only be done if you find out the suppliers MOQ structure. Luckily, we did, and the result was as follows:

    • Per Material: 1000 pcs
    • Per Color: 250 pcs
    • Per Size: 50 pcs

    What we found here was that the MOQ was controlled by a subcontractor. The textiles manufacturer.

    However, they had more flexibility when it came to color. Hence, we solved one major issue.

    But, an even bigger deal was the discovery of the suppliers owns MOQ per cutting, which was set at 50 pcs.

    That makes a lot of sense, as the supplier can control the MOQ per size by itself. Cutting is a simple process, that doesn’t require a huge quantity, per variation.

    Hence, the client was able to buy rugs in 4 different colors. Each in 5 different shapes. That’s up to 20 SKUs.

    Case Study B: Quartz Watches

    Watch manufacturers generally set a MOQ of 500 pcs per case design. However, they tend to be more flexible when it comes to the minimum order quantity per dial and case color.

    Here’s an overview:

    • Watch Case: 500 pcs per design
    • Dial: 100 pcs per color
    • Case: 100 pcs

    While you can only get one watch case design, assuming you buy 500 pcs, you can still create 5 different variations (e.g. different models) of the same watch model. This is also something that has been done with great success by many monobrands, including Daniel Wellington.

    6. Chinese suppliers are generally flexible when it comes to MOQ requirements

    Unlike manufacturers in many other countries, I’ve found that suppliers in China tend to be more willing to reduce the MOQ in order to accommodate smaller buyer’s.

    This practice is not very common in Vietnam, for example, were supplier have higher MOQ requirements that they are less willing to negotiate.

    The MOQ requirement also tends to fluctuate depending on the season, or the number of orders the supplier is currently working on. A supplier with filled order books is less likely to accept lower volumes compared to a factory that’s hungry for new business.

    Shenzhen factory

    7. Why you shouldn’t select the supplier offering the lowest MOQ

    It’s not uncommon to find suppliers on Alibaba.com and other supplier directories offering MOQs as low as 10 to 20 pcs. Keep in mind that many suppliers offering below average MOQs are not actual manufacturers, but trading companies or wholesalers.

    Such products are often ‘off-shelf’ and are generally manufactured for the domestic market in China. As a result, ‘low MOQ’ products are not made to comply with US, EU or Australian product safety standards and labeling requirements.

    8. The average MOQ in China is not that high

    A MOQ of 500 to 1000 pcs per order or product may sound like a lot. That said, compared to many suppliers in India or Southeast Asia, the ‘China MOQ’ is not that high.

    We’ve helped many customers finding alternative suppliers in India and Vietnam in the last year, and one of the largest obstacles is the MOQ requirements set by suppliers in these countries.

    While it depends on the product and industry, it’s not uncommon that factories in India and Vietnam set their MOQ in the thousands of units, rather than the hundreds. Some suppliers are not even willing to offer a quotation if the order volume is not 5000 pcs or more.

    Indeed, such suppliers also exist in China, but the MOQ requirements are generally higher in India and Southeast Asia.

    9. Buying ‘below the MOQ’ can result in quality issues

    A few months ago we worked with a European apparel company to uncover why they faced ongoing quality issues. After a discussion with their supplier in Guangdong, I quickly understood that the core of the problem was related to the fact that they ordered a limited number of units per style.

    As they could not match the regular fabric MOQ, the supplier could only procure ‘in stock’ fabrics from local wholesalers, on an order to order basis.

    Sometimes, the regular fabric was out of stock, which in turn resulted in quality issues related to the fitting and washing of their clothing designs.

    The solution was to purchase fabric rolls for more than one order at a time, as this enabled them to reach the MOQ requirement and therefore ensure that the same fabric was used on each order.

    6 Strategies to Lower Your Suppliers MOQ Requirement

    Sometimes, reducing MOQ requirements is a matter of negotiation. That said, there are many other methods that are more effective when it comes to reducing the number of units you need to buy.

    In most cases, the key is to understand the MOQ structure and work with the supplier to find ways allowing them to produce a lower number of units – while still making the deal profitable for both parties.

    How can I streamline the usage of materials and components?

    As said, the suppliers MOQ requirement is often a direct reflection of the MOQ of its subcontractors. Chinese supplier purchase materials (e.g. fabrics) and components (e.g. zippers) from various subcontractors, and not just one or two.

    As a result, a product made of many different materials may force the supplier, and in the extension, you, to satisfy the MOQ requirement of many subcontractors. This can in turn results in an escalation of the MOQ requirement, especially if you have highly specific requirements.

    What if you re-use the very same material on a larger number of different products, instead of just one? Should this not allow the supplier to satisfy the subcontractors MOQ requirement, while you can still enjoy a wider product assortment? Assuming the manufacturer is somewhat flexible, this is often a solution for small buyers to lower the MOQ requirement.

    Shall I limit product customization?

    A product can be customized to a varying degree. Clearly, a custom logo on a pre-existing factory design is less complex to achieve, as compared to a device built entirely with custom-designed components. Simple forms of product customization enable the supplier to still use standard (i.e. high turnover) components, while highly customized components require the supplier to step out of its ‘normal purchasing routines’ and subcontract an entirely new design.

    Such OEM components may not be compatible with the manufacturer’s primary product line, therefore forcing the buyer to meet the entire MOQ alone. This is rarely a problem when basing a product on ‘standardized components’, as these can be divided on a larger number of buyers. Let’s take a wristwatch as an example to demonstrate what this might look like in the real world:

    • Case MOQ – Factory standard: 500 pcs / OEM: 800 pcs
    • Hands – Factory standard: 500 pcs / OEM: 5,000 pcs
    • Dial – Factory standard: 500 pcs / OEM: 4,000 pcs
    • Clock face – Factory standard: 500 pcs / OEM: 4,500 pcs
    • Movement – Factory standard: 500 pcs / Non-Factory standard: 2000 pcs

    As demonstrated in the list above, forcing the supplier to subcontract an OEM component may result in a vast increase of the MOQ requirement, which in turn is, also this time, largely a reflection of its subcontractors MOQ requirement.

    The lesson here is that you should limit the ‘degree’ of product customization, and base on the product on ‘factory standard’ components – to the extent possible.

    Does it help if I offer to pay a higher price?

    The MOQ requirement is often, but not always, a direct reflection of the subcontractors MOQ requirements. Many Chinese manufacturers maintain a stock of ‘high turnover’ materials and components. Therefore, they can, at least if they are willing, manufacture a smaller quantity of products.

    But considering their low-profit margins, it’s often not worthwhile the time, effort and risk involved. Offering to pay a higher price, for example, 10 to 20%, may give the supplier an incentive to accept a small volume order.

    Can I negotiate a lower MOQ?

    This option shall never be relied upon, but it rarely hurts to give it a try. Some manufacturers are rather forgiving to small buyers and may accept to lower their MOQ after some negotiation. That said, such offers tend to be limited to an initial test order – and don’t expect the supplier to cut down on the MOQ more than 15 – 25%.

    Can I buy from smaller manufacturers?

    Small manufacturers may be slightly more flexible, than larger ones, not to mention more hungry for business, even if your order value is not counted in the millions of dollars. But, do you remember what I said about not selecting a supplier due to a low MOQ requirement?

    This is, of course, also applicable when selecting a supplier based on its size, which in turn is a selection based on the MOQ requirement. Selecting a disorganized manufacturer, or one unable to show previous compliance with applicable regulations is never a wise decision.

    Can I tell the manufacturer that it’s my company policy to order a small pilot batch?

    Yes, many suppliers are willing to accept a lower MOQ for an initial test production run. Keep in mind that they’ll most likely expect you comply with their MOQ requirement for all subsequent orders in the future.

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