What is the minimum Order Quantity (MOQ)?
The Minimum Order Quantity (MOQ) is the smallest quantity of a product or service that a supplier or manufacturer requires a customer to purchase in a single order. The minimum is also known as “The Minimum Purchase Quantity”.
For example, a clothing manufacturer may require a MOQ of 1000 pieces per order for a particular style of shirt to cover the cost of fabric, cutting, sewing, and shipping. A supplier of electronics components may require a MOQ of 5000 units for a specific microcontroller to ensure that their production line can operate efficiently and meet demand. A distributor of pharmaceutical products may require a MOQ of 1000 bottles of a certain medication to cover the cost of packaging, labeling, and regulatory compliance.
What is a minimum Order Value (MOV)?
A minimum order value is the lowest amount of products that a supplier will sell per order or per product. If the minimum order value is set at $25,000, they will not take orders below that amount. Manufacturers, on the other hand, almost always specify a minimum quantity rather than a minimum value.
How to calculate the Minimum Order Quantity
To calculate the minimum order quantity (MOQ), you should estimate the demand for the product, determine the lead time, calculate the reorder point, determine the economic order quantity (EOQ), and then set the MOQ based on the supplier's constraints such as production capacity and transportation costs.
The MOQ is the Minimum order quantity that a supplier must produce to break even. Each takes into account the potential changes in fixed and variable costs for each product unit depending on the particular order quantity.
Freight, equipment setup and depreciation, labor, raw materials, energy, packaging, plant and warehouse rent, taxes, and other factors that may vary significantly by the manufacturer are just a few of the many factors to consider.
For accurate numbers, these calculations need sophisticated algebra and calculus. Manufacturers typically round to the nearest full integer using empirical methods.
There is no formula that a buyer can use to determine the MOQ. You are unaware of the specific expenditures incurred by each producer. The Optimal Order Quantity (MOO) that you may have seen mentioned on other websites in relation to your order is actually that quantity.
3 Types of MOQ
It is crucial to remember that the MOQ is not a set sum. The MOQ is largely influenced by theunique order specifications of each customer.
The product requirement document is crucial when placing an order because of this.
We always source the greatest products, not always the cheapest, as DocShipper has repeatedly noted. A great illustration is a t-shirt. For labels like Louis Vuitton, we source from the same foundries.
Three different MOQs are available from the manufacturers, depending on thespecific requirements.
Complex MOQ
You are an apparel designer who needs a complicated customized product with a specific fit, shoulder breadth, length, and/or collar shape.
Let's assume the MOQ is 300 pieces. By using design drawings, the clothes maker will create samples. All sample charges will be deducted from a subsequent, larger order. For established designers or fashion brand firms, this choice is frequently reserved. The most effective illustration of a large or complex MOQ is the MOQ for garment makers. It is highly challenging to determine a MOQ pcs number for apparel due to a large number of variables.
The MOQ for garments is as follows:
- MOQ for fabric is 300 meters, or roughly 360 square yards, for each shirt color.
- MOQ for each item is 300 for each distinct color or size.
- MOQ in USD - total order of 2,000 shirts.
- MOQ in units: 300 t-shirts that are packed.
Low MOQ
Low MOQ refers to orders for fewer than 500 units of a product. These products frequently come in big parts with tiny orders. Take furniture as an illustration.
One of two methods can be used to calculate low MOQ formulas:
Product – the quantity required to meet the MOQ before beginning production, furniture manufacturers demand a specific quantity of units.
The order must be made in order to meet the MOQ, which for chemical manufacturers is aminimum of $50,000.00 worth of merchandise.
The MOQ for t-shirt orders is frequently smaller, at 100 units, and the customer may only need to minimally personalize the product (a logo or printed pattern).
This would make the ideal personalized option for a school uniform or attire for office workers. Customers can choose from a wide selection of t-shirts and polos in a range of designs, hues, sizes, and materials.
No MOQ
T-shirt orders with no MOQ are frequently filled from the manufacturer's current inventory. Although there is a wide range to choose from, the inventory on hand lacks branding.
A single t-shirt can be ordered, and the manufacturer will send the shirt via express delivery to any location in China.
You can produce personalized t-shirts of the same quality as well-known brands if you run a Print on Demand company and work with a top-notch drop-ship company.
Negotiating MOQ
Chinese companies frequently negotiate; it is an essential component of all business dealings. You can bargain for a reduced MOQ even if you're a brand-new customer.
MOQ Examples from Alibaba suppliers
The minimum order quantity (MOQ) required by suppliers on Alibaba can vary significantly depending on the type of product. This is because different products have different production requirements and cost structures that affect the supplier's ability to offer smaller or larger MOQs.
Children’s Products
- 750 – 1000 pcs per order
- 750 pcs per product/material
- 750 per pcs color
Kitchen Products
- 750 – 1000 pcs per order
- 750 pcs per product/material
- 750 per pcs color
Watches
- 750 pcs per order
- 750 pcs per model (including case size)
- 150 – 200 pcs per color (dial and case)
Electronics
- 750 – 1000 pcs per order
- 750 pcs per product
- 750 per pcs color
Clothing
- 750 – 1000 pcs per order
- 750 – 1000 pcs per color (custom colors)
- 150 – 300 pcs per color (standard colors)
- 150 – 250 pcs per size
The reasons for Minimum Order Quantity
Suppliers have MOQ requirements to ensure that the cost of production and shipping is covered, and to achieve economies of scale. By producing larger quantities, suppliers can reduce the cost per unit and increase their profitability.
Low-profit margins
The majority of Asian suppliers have razor-thin profit margins. Sometimes as low as 2 or 3%. To reach their break-even point with low-profit margins, suppliers must produce a large volume of products to reduce the cost per unit and increase profitability.
Trying to negotiate the MOQ requirement and the unit pricing at the same time is likewise a bad idea. On the other hand, a lower MOQ may necessitate a higher unit price from the supplier to compensate for a lower total profit on your order. Similarly, a lower unit price may result in a higher MOQ.
Expecting a supplier to offer both a price and a MOQ decrease at the same time is usually a bad business move.
MOQs set by their subcontractors
High Minimum order quantity requirements are not necessarily the fault of the manufacturer.Chinese suppliers maintain a small amount of supplies and components on hand. As a result, they must purchase materials and parts on an as-needed basis from subcontractors. As a result, the plant must be able to meet the subcontractor's MOQ.
This also explains why MOQs for different items and materials (or even different hues of the same material) vary. It is possible to minimize the MOQ by identifying which materials and components the supplier keeps in stock or can procure in lower minimum order numbers with minor effort.
However, there are certain drawbacks to this strategy. Materials that must comply with reach or other chemical laws, for example, must be purchased in higher quantities.
Because product conformity is not optional, using standardized materials' to get around the MOQ requirement may not always work.
Asian suppliers don’t keep many products in stock :
If a factory just kept ready-made products in stock, selling low volumes would be a breeze. They rarely do, though. At least not when it comes to 'export ready' products.
You may find tens of thousands of suppliers on Alibaba, all with ready-made goods. Off-the-shelf products are, nonetheless, made in China for the domestic market. This is a problem because such products are not manufactured in accordance with product labeling laws and safety norms in other countries (e.g., the United States or the European Union).
In the United States, for example, all products must bear an English-language country of origin label (i.e., Made in China). While certain off-the-shelf items may be compliant, you'll have to search hard to find them.
So, let's return to the original question. Off-the-shelf goods can be acquired in modest quantities; the issue is that you cannot buy such things – forcing you to return to “made to order” which means you must fulfill the supplier's minimum order quantity.
Suppliers often have multiple MOQ requirements
Many suppliers present a single MOQ for all products. However, that is rarely the case.
Take, for example, the textile sector. The MOQ for apparel producers is frequently as follows:
- 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
Standard materials and colors (i.e., those with higher turnover) are sold with a reduced MOQ, as shown above. The larger the minimum order quantity needed, the more customized a product is.
If you can receive this information from your supplier, you can make this work in your favor. In the preceding example, you must purchase 1000 units. You can obtain four distinct products if you buy a T-shirt in a regular material and color (SKUs).
A custom material, on the other hand, would only provide one SKU because the MOQ requirement is the same as for the “per order” MOQ.
This helps to explain why product MOQs are typically larger, although printing and other alterations can be given with lower MOQs. The same is typically true for cutting and other procedures that the supplier can handle.
When it comes to MOQ restrictions, Chinese vendors are often cooperative
Unlike manufacturers in many other countries, We’ve discovered that Chinese vendors are more ready to lower the MOQ to accommodate smaller orders.
In Vietnam, for example, this strategy is uncommon because suppliers have greater MOQ requirements and are less inclined to haggle. As a result of the trade war, several companies have switched orders from China to Vietnam, giving factories in Vietnam less of a reason to maintain MOQs low.
The MOQ requirement varies depending on the season and the number of orders the supplier is currently processing.
When compared to a factory that is desperate for fresh business, a supplier with full-order books is less likely to accept lesser volumes.
Satisfying Supplier MOQ
As a new business owner, meeting the MOQ can seem challenging at first. 500 T-Shirts were ordered, and you now have to sell them all. You are capable of achieving this, so you must prepare and be willing to temporarily “tighten your belt”. At first, your profits might not be as high as you'd want, but that's the price of conducting business. But then how to go on with the supplier?
- Be truthful about your inventory - How can you get your 500 T-Shirts sold? Are you able to run a marketing campaign?
- Close deals - Customers enjoy a good offer. Even offers like “Buy one, get one half off” or “Buy two, get one free” frequently have good sales results.
- Flash sales - Provide your customers with a last-minute deal akin to the one stated above.
- Be inventive and inquire about mix-and-match products - Find out if the supplier has additional stock that they'll discount for you.
- Modify your product line - Stop selling any 500 T-Shirts that do not sell.
- Find a new source - DocShipper always searches for the best manufacturers. Contact us to discuss finding a different MOQ if you are having trouble meeting the existing one.
Failed Negotiations
A supplier could occasionally refuse to reduce their MOQ. Many of the more reputable vendors that DocShipper works with are unwilling to alter their MOQ.
As a startup company, this could place you in a difficult situation. One thing to keep in mind is that DocShipper won't press vendors too hard for a lower MOQ. Chinese vendors collaborate extensively with one another, even though they are in the same sector. Buyers that behave rudely and disrespectfully during negotiations will be promptly blacklisted.
Why you shouldn’t always select the manufacturer offering the lowest MOQ
MOQs as low as 10 to 20 pieces are not uncommon to discover on Taobao and other supplier directories. Keep in mind that many of the suppliers with lower MOQs are trading businesses or distributors, not true manufacturers.
These products are typically off-the-shelf and made for the Chinese domestic market. As a result, 'low MOQ' products are not created to meet product safety and labeling laws in the United States, the European Union, or Australia.
Issues with buying lower than the MOQ
We talked with a European apparel manufacturer a few months ago to figure out why they were having quality concerns. After speaking with their Guangdong supplier, We quickly realized that the root of the problem was the fact that they only bought a certain amount of pieces per style.
The supplier could only get 'in stock' fabrics from local wholesalers on an order-by-order basis because they couldn't match the usual fabric MOQ.
The normal fabric was occasionally out of stock, resulting in quality concerns with the fitting and washing of their garment designs.
The solution was to buy fabric rolls in bulk for many orders, which allowed them to meet the MOQ requirement and assure that the same fabric was utilized on each order.
9 strategies to lower the MOQ required by your supplier
When sourcing products from suppliers in China, the minimum order quantity (MOQ) requirement can be a significant challenge for small businesses. However, there are strategies that can help reduce the MOQ and make it more feasible for businesses. We'll explore nine effective strategies to lower the MOQ required by your supplier.
Present your MOQ bid to the supplier
Instead of relying on the supplier's theoretical MOQ, it's more effective to send your own "MOQ bid" to the supplier with your full order volume. This can prompt the supplier to offer lower MOQs per SKU or color after examining the order list. However, negotiating a lower MOQ may not be possible for the supplier without taking a loss or buying more materials and components, and some may offer a lower MOQ in exchange for a higher price. It's often more efficient to design your product and use materials and parts that the supplier can procure in lower volumes.
Hypothetical case study A: Clothing
A client arrives in Shanghai to visit manufacturers of clothing apparel. This client owns two stores in Europe. Large enough to meet the supplier's minimum order quantity, but only for one or two products.
This is a problem since stocking 10,000 blue skirts and another 10,000 red ones is not feasible for a small business with two locations.
As a result, the client's goal was to figure out how to add more SKUs (i.e., more colors and forms) while staying above the manufacturer's minimum order number.
The MOQ was controlled by a subcontractor, as we discovered. When it comes to color, though, they have more freedom. As a result, one important issue is resolved.
The finding of the supplier's own MOQ per cutting, which was set at 50 pieces, was an even greater deal. That makes sense because the provider has complete control over the MOQ per size. Cutting is a straightforward operation that does not necessitate a large amount of material in each variation.
As a result, the client may purchase skirts in four different colors and five distinct forms. Up to 20 SKUs are possible.
Hypothetical case study B: Watches
Watchmakers often establish a minimum order quantity (MOQ) of 1000 pieces per case design. When it comes to the minimum order quantity per dial and case color, they are more flexible.
Even though you only get one watch case design, if you buy 500 pieces, you can still make five different variations (e.g. various models) of the same watch. Many brands, which concentrate in a single product category, have done this well.
Components and materials should be simplified
As previously stated, your supplier's MOQs are always determined by its subcontractors. Vietnamese suppliers use a variety of subcontractors, rather than simply one or two. As a result, a product made up of a variety of materials and components pushes your supplier to meet the MOQs of a number of subcontractors, as well as you indirectly. Additional MOQs may be required as a result, especially if you want very specific materials and procedures.
To avoid this, it is preferable to reuse the same materials on multiple goods rather than just one. Your supplier will be able to meet the MOQs set by his subcontractors, allowing you to choose from a larger selection of products. If your supplier is at least flexible, this practical method helps smaller buyers to cut their MOQs.
Limit the customization of your products
A product can be customized to some extent. It's significantly easier to put a bespoke logo on pre-existing factory products than it is to make something altogether from scratch. Simple customizations enable the supplier to employ standard (high-turnover) materials and components, whereas highly customized materials need the supplier to outsource a completely new design.
These OEF components may not be compatible with the supplier's own products, resulting in large MOQs. When the product is made up of standard components, this difficulty is solved because they may be utilized for several orders from different purchasers at the same time. To demonstrate our idea, consider the following watch:
- Case production MOQ: 500 standard units; 800 OEM units
- Strap production MOQ: 500 standard units; 5000 OEM units
- Dial production MOQ: 500 standard units; 4000 OEM units
- Clock face production MOQ: 500 standard units; 4500 OEM units
- MOQ of watch movement: 500 standard units; 2000 OEM units
Forcing a supplier to outsource an OEF product might result in a significant rise in MOQ, as shown in the list above. Remember to keep your customization to a minimum and use factory-standard components whenever possible.
Offer a higher order price
Most Asian manufacturers keep a stock of components and materials that have a high turnover. Thus, they can (if they wish) produce smaller quantities of products. But considering their low margins, the effort and risk involved is not worth it. Offering to pay a higher price, say 10-20% higher, may encourage your supplier to accept a small order.
Negotiate the MOQ directly
Don't rely exclusively on this option, but nothing ventured, nothing gained. Some manufacturers may revise the MOQ after negotiation. However, do not expect the MOQ to decrease by more than 10-20%.
Source from Alibaba/Taobao
Using online marketplaces to source Chinese products has both risks and benefits. Just because a provider has been approved via an online marketplace doesn't imply you shouldn't do the same. On online marketplaces, however, MOQs are frequently low or non-existent, at least among adequately vetted vendors.
Look for small suppliers/manufacturers
Small manufacturers are often more flexible than major manufacturers, even if your order is not in the hundreds of thousands of euros, and they also have longer teeth. However, as previously said, the required MOQ should not be your exclusive criterion for selection. The same may be said for selecting a provider based on their size. Choosing a supplier who is poorly organized or incapable of producing to your country's standards is never a good idea.
Use DocShipper’s service
DocShipper offers a service of sourcing where we find the best manufacturer and supplier for your business. We are able to put you in connection with a known and trustful network of suppliers, wholesalers, and providers. With DocShipper you will get a full guide on how to source and minimize the MOQ requirement in Asia. You can supply us with pictures, quantities, and prices expected for us to find the best matching service needed for you. We seek to offer you the best quality for your goods and the lowest upfront cost.
Order small quantities as a standard practice
MOQ in manufacturing is particularly common because of the fixed costs involved in setting up a production line. For a first test manufacturing run, many suppliers are ready to accept a smaller MOQ. Keep in mind that they'll almost certainly want you to meet their MOQ demand for any future orders.
Let us help You Succeed
When a corporation purchases items from China, MOQ is frequently included in the purchasing process. When sourcing products, DocShipper looks for the best suppliers—those that work with renowned companies throughout the world.
Send us your requests for extra information, connections to external products, or product recommendations. We'll be in touch with you shortly to get your new business off to a successful start!
Conclusion
In conclusion, Minimum Order Quantity (MOQ) is a critical factor in various industries. It helps suppliers optimize production, reduce costs, and manage inventory efficiently. Businesses need to carefully consider MOQ's impact on capital, inventory, and customer demand. Striking a balance and implementing flexible strategies can enhance operational efficiency, profitability, and customer satisfaction in a dynamic marketplace. To get help to negotiate a lower MOQ with your supplier, contact us!
