Wonder why MOQ is crucial for the supply chain? Do you want some effective strategies for your business to negotiate lower MOQ with suppliers? Here is the comprehensive guide to cater all your queries regarding MOQ and its requirements to maintain product quality and consistency.
Minimum Order Quantity Definition
In the world of product sourcing, you must have heard about the term MOQ. The abbreviation is minimum order quantity and it represents the minimum amount or products a supplier is able to produce. It’s a crucial factor for suppliers and the common expressed numbers are like 10, 50, 100, or even 1000 units. Understanding MOQ is essential because it is a pillar of product sourcing and also for navigating the supply chain to maximize business profitability.
What is MOQ in the Business?
MOQ is purely related to the manufacturing department of business. It consists of fixed and variable costs associated with production. The cost includes raw material, logistics, labor, energy expense, packaging, rent and taxes etc.
MOQ represents the minimum quantity a supplier can manufacture to cover the entire cost and generate revenue.
It’s like assuring you are not burning a hole in your pocket. Every order is crucial and must have a financial sense for organization and supplier.
Calculating MOQ for a Product Order
Accumulating MOQ involves advanced mathematical formulas and software considering various cost factors. Manufacturers usually round off these calculations to simplify the process.
The buyer dont have detailed cost breakdowns needed to calculate the MOQ, but having an idea about this crucial aspect will help you to negotiate further.
MOQ Examples
The MOQ is not the same for every product, it varies from product to product based on the buyer’s requirement and other factors as well. There are high, low or no MOQ.
High or Complex MOQ
Consider a clothing brand with a requirement of customized size, shoulder fit and specific length. Here, the MOQ will be higher due to the complexity of its design and product process. This process includes creating samples and making necessary adjustments before full scale production.
Low MOQ
Low MOQ means product samples lower than 500 units. As for example, a T-shirt buyer needs 100 units with slight customization in size or logo design. These MOQ are for smaller businesses such as uniforms for corporate employees or students.
No MOQ
No MOQ usually involves products from manufacturers who already have stock for that specific product. These items include basic T-shirts, and can be transported quickly even for single piece order. These options are ideal for businesses who deal in customized items and it can be printed on demand and ready to deliver to the customer.
How to Negotiate a Lower MOQ
Bargaining on lower MOQ is difficult but not impossible. According to a survey conducted by Small Business Trends, 73% of small businesses find negotiating lower MOQs to be challenging tasks. Here are some strategies that can assist in negotiating the best deal:
Be Upfront and Honest
Transparency is key for long term relation with your supplier, which fosters partnership sustainable for your business plans, sales projection and specific needs. Consider suppliers as your business partner and not only a source for a product; aligning your business interest with theirs to lead favorable trustworthy bonds.
Step into the Supplier’s Shoes
Work together with your supplier to adopt cost saving measures without compromising on quality. If other customers are ordering the same item, your order can be merged into a single production unit to effectively meet MOQ requirements. Source supplier chain reveals in a research that Suppliers can reduce production costs by up to 20% by combining orders to meet MOQs.
Offer to Pay Additional Fees
You adjust additional payment fees in exchange for a lower MOQ, for example you might bear the sample cost or accept the high price per unit to meet your specific needs of MOQ.
Choose Equivalent but Cheaper Materials
Discuss with the supplier about any option for less expensive raw material without compromising on the quality. This approach can be ideal for both and reduce overall cost and MOQ.
Consider Existing Stock
Choosing the products from the manufacturer’s current inventory is a perfect solution to avoid high MOQs. suppliers often have overages that they want to dispatch and clear out for the new stock which can be advantageous for your businesses.
Price Match with Competitors
Keep an eye on the price of rival suppliers, if the price is lower than your supplier, some manufacturers might be willing to offer a better deal to ensure you remain their customer and switch to their competitor.
Give the Supplier Time
Let the supplier know about your budget crisis and give them a few days to realize your fiscal challenges. Sometimes a little patience makes them realize and you can crack better deals.
Meeting the MOQ
E- commerce time reveals that Over 60% of e-commerce businesses are managing MOQs effectively which leads to improved cash flow and inventory management.
Sometimes meeting MOQ seems a daunting task, especially if you are a new business venture. However with right strategies and some belt tightening approach its achievable, here are a few pro tips:
Be Honest About Your Inventory
Evaluate your current inventory count and devise smart ways to move out the product. Run marketing campaigns or offer special promotions to boost sales and attract customers.
Make Deals and Offer Flash Sales
Customers are waiting for attractive deals. Promotions like” BUY ONE GET ONE FREE” or “ BUYONE, GET HALF OFF” can drive sales and clean up the inventory.
Get Creative with Product Mix
Ask your supplier if they have extra inventory they can sell at a discount. Mixing and matching products can also attract more customers.
Change Your Product Line
If certain products aren’t selling, give discounts on these products and consider your popular items to boost sales.
Look for a New Supplier
If you are struggling with the manufacturer’s MOQs, it’s time to turn the tables and look for other suppliers. Companies like BrandNewMD help you find the best manufacturers for your business needs.
What if You Can’t Negotiate a Lower MOQ?
Sometimes, it is not possible for the supplier even to negotiate price on your terms. It’s essential not to burn the bridges, and to seek alternative suppliers. Keep a healthy relationship with the supplier even if your deals don’t go through, as it can open the door for future opportunities.
Final Thoughts
MOQ is a fundamental pillar of product sourcing, especially when dealing with manufacturers from China.While higher MOQs are challenging tasks, they are often beneficial for superior product quality and positive customer feedback.
So what are you waiting for? Pitch your idea and contact us to partner with Brand New MD and kickstart your successful business!
