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 (see part 1 and part 2) about this issue in the context of the garment industry, but they are applicable to many other custom-made products.
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 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…
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.
There is one more reason why factories ask for minimum order quantities that are not justified by any external constraint, and that one is not mentioned in the Imports Oriental blog posts. 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.
This can be quite disheartening for importers. There is nothing to do about it… Except maybe looking for other, smaller manufacturers!
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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…
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.
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