China Manufacturer MOQs & Your Bottom Line

What Exactly is MOQ?

MOQ – Minimum Order Quantity – is typically known as the minimum number of finished items Chinese manufacturers are willing to make in a single production run. Everyone knows China factories will not manufacture a quantity less than their MOQ, right? Not necessarily.

We will explore some options; but first, allow us to mention that there are actually TWO MOQ’s. Most companies are familiar with actual number of finished items Chinese manufacturers are capable of making in one production run. The second MOQ – one that usually does not get mentioned as much as it should – is the material supplier’s MOQ. Chinese Manufacturers must purchase their raw materials from material suppliers.

The material suppliers sell material in various standard units of measure to keep things simple. They also do this to avoid having lots of odd inventory they cannot easily sell. Therefore, when China manufacturers contact material suppliers about pricing and availability on certain materials, they must do careful research.  This is especially the case if the quantity is close to that factory’s MOQ for example. In such cases, there’s a chance the material supplier’s MOQ may be greater than what’s needed to satisfy the China manufacturer’s MOQ for finished product quantity.

Why Have Them?

China manufacturers, just like any company around the world, don’t want to pay out money if they aren’t certain they will get an ROI. If the product is for a reliable customer who reorders on a regular basis there may be no deposit required. However, manufacturers are more reluctant when it comes to new products and new customers. Why is this? Well, first off, they aren’t certain about reordering with new customers and products. And consequently, factories become reluctant about putting out the money for the overage of material. They will also ask for an additional deposit to cover that part of the cost. And excess material remains in the China manufacturer’s factory until there is a reorder. Then, once they use the excess material, they credit the cost against the current cost of the finished goods.

Is an MOQ Set in Stone?

An MOQ is, for the most part, set in stone. This is because Chinese Manufacturers want to make money by manufacturing enough of an item to also cover their costs. Actually, they make enough to cover the time and expense of setting up the machinery, tooling, jigs, and providing training. A short production run takes as much time and expense to set up as a large one making the short production run much less profitable.

If a short run is unavoidable for whatever reason there may be ways around it. First, an offer to pay a “small run fee” may be acceptable. This fee covers the setup and, in some cases, the training of the workers. China manufacturers may agree to this scenario if there is a reasonable expectation of larger quantity production runs in the future.

Remember though, all China manufacturers are different in what they are willing to do. The difference could be the time of year or the fact that a particular factory may not be as busy as they would like to be and the owners need to keep the workers busy. It could be a company like ITI Manufacturing has a strong relationship with factory management and is able to persuade them to make a “test run” of a first-time product for a new customer.

Working Around MOQ Costs

Another way to work with China manufacturers’ MOQ is to submit a large PO and asking for only a small shipment to be first to ship. The factory may be able to purchase the raw materials they need in bulk and use a small amount of them for the small first run than holding the bulk of the materials in their warehouse for the upcoming, larger production run. Two comments on this scenario: First, the landed cost of the small run may be greater due to shipping a smaller quantity and second, always be upfront with the factories about the expected quantities and timeframes for each production run. It does not take much for Chinese manufacturers to lose interest in a product and a particular customer if it cannot depend on what they are being told.

There is more to learn about MOQ as well as finding creative ways to lower costs. Each company and situation is as different as there are different Chinese manufacturers.

For more information, contact ITI Manufacturing for help with finding the right China manufacturers.

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