Why Do Factories Require Minimum Order Quantities?

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What are Minimum Order Quantities (MOQ)?

Sourcing products from China is rarely as simple as browsing through a catalogue of ready-made items.  In reality, the vast majority of overseas product manufacturing takes place on a made-to-order basis.  Overseas product manufacturing is a complex process incorporating factories, suppliers and sub-suppliers of materials, all of whom are looking to turn a profit at every step.  One of the ways this is done is through Minimum Order Quantities.

Minimum order quantities, or MOQs, specify the absolute lowest number of units a supplier or manufacturer is willing to produce in an order.  Small orders that require their own designing, sourcing and manufacturing processes are often not worth a firm’s time when larger orders, even at lower rates, can bring in much higher gross profits.  For an order to be sufficiently profitable for a supplier or manufacturer, it usually needs to be higher volume.

Minimum Order Quantities are determined by a number of factors, but they are always based on the specifications of your product.  For example, how “custom” is your order?  Does your product require many custom, unique materials or components?  If so, you’ll probably encounter higher MOQs than you would for a more generic product with more common materials and components.  While it is possible to negotiate some suppliers’ or manufacturers’ MOQs, a lower MOQ will usually result in higher costs per unit.

MOQ can also be affected by your sourcing agent.  An agent who receives commissions from suppliers may be inclined to source from the supplier that pays the biggest commission, rather than from the supplier that offers the lowest MOQ or best terms.

Guided Imports, a third party resource, will offer an up-front, transparent pricing structure without MOQs or commissions.  This way, clients can have the peace of mind of knowing exactly what they are paying for, and the assurance that their agent functions like a part of their team, rather than as yet another middleman looking to turn a profit at your expense.

 

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