More and more companies are using China’s growing manufacturing sector as a source for their goods. However, the Minimum Order Quantities (MOQ) demanded by factories and suppliers can provide considerable difficulties, particularly for small and medium-sized businesses.
MOQs, or minimum order quantities, are a common practise in the sector where factories and suppliers indicate the very least amount of a product they will agree to create and sell.
Even though MOQs might differ from manufacturer to manufacturer and supplier to supplier, it can be challenging to completely get around this constraint. Fortunately, there are a few strategies a buyer may adopt to lower their MOQs while still benefiting from buying goods from other countries.
The minimum order quantity (MOQ) is the quantity at which your supplier will create the goods for you. Additionally, the MOQ is determined by the factory’s production costs, as the supplier must set up the equipment in addition to purchasing a minimum number of raw materials when the manufacturer manufactures the product.
The time and cost of setup can vary greatly. Additionally, if you customise a product, the vendor might need to purchase a few special parts for your order.
Why do suppliers require MOQ?
A MOQ will always be necessary to control the risks of financial loss because factory start-ups based on your orders demand the bulk purchase of materials and hefty start-up expenses to get the equipment up and running for production.
However, your risk is substantially greater if you place a large order with a new supplier on your first occasion of doing business with them.
Therefore, the following are a few strategies that you must adopt while you are doing negotiation of MOQ with your prospective Chinese supplier.
Show your strength
Now, keep in mind that everyone wants the business, and everyone wants a piece of the market. So, practically all suppliers are open to negotiation. Do not reveal your weaknesses to the suppliers when negotiating. Be confident and well-prepared. Take charge of the negotiation table.
To entice the supplier to work with you, you must demonstrate your strength and authority. You can draw a picture of the markets, nations, and annual volumes you serve.
You need to give your suppliers reason to believe that your business is strong and will succeed in the longer run.
The truth is that Chinese suppliers are more concerned with how much money they can make from this customer than they are with how much money they can make from this order.
They are willing to give you a lower MOQ for the initial order if, during the negotiation of MOQ, you can convince them that you are a potential long-term partner.
Order at the right time
Like other businesses, manufacturing experiences peak and dip times. It is advised that you place an order during the supplier’s off-season, that is, outside of some significant holidays, if your order size is less than the supplier’s MOQ and the product lack any market, then the supplier will be ready for lower MOQ.
Offer a a little higher cost per unit to exchange for a lesser MOQ
Although many customers may not be able to afford this choice, paying more up front for a smaller order can help customers save money on future shipping, storage, and other expenses.
Use standardized components
You will probably encounter a larger MOQ if you choose to use non-standardised or not widely available parts rather than common materials or easily made parts and components.
Use the same components across all product lines
It is simpler to meet MOQ requirements for watch components when they are made with multiple faces and bands, but the same inner components.
Ask the suppliers about slow moving stock
Additionally, suppliers receive cancelled orders from other clients or some overordered products that are still in stock. If they already have low MOQ items in stock, you can request one. You may want to think about ordering from the factory’s excess stock if you can find one that is comparable.
Get offer from both large and small manufacturers
Smaller businesses are frequently more flexible with MOQ requirements, even though larger manufacturing companies can occasionally provide lower rates due to economies of scale. Additionally, smaller businesses could be more eager to accept smaller orders than bigger businesses.
Buy from a trader instead of factory
Trading firms can submit group orders on behalf of numerous purchasers at once, serving as intermediaries between buyers and producers. This enables the MOQ for a specific supplier to be divided among numerous customers, lowering it for everyone.
Source from excess stock
When possible, order from a factory’s excess inventory. A factory will attempt to sell the goods elsewhere at a lesser price when a buyer cancels an order at the last minute, when a manufacturing line is finished later than expected, or when a product does not pass quality check.
Visit markets in China personally
Buyers that are prepared to put in the work might be able to do a better negotiation of MOQ with wholesalers directly as opposed to going through an intermediary.
Source from DHgate or AliExpress
There are benefits and hazards to sourcing goods from China through online marketplaces. It does not follow that you should not independently verify suppliers just because an online marketplace has done so.
However, MOQs in online marketplaces are frequently low or non-existent, at least among properly vetted vendors.
Let guided imports manage your sourcing and manufacturing for you
For a fair price, a sourcing agent provides a simple, secure, and transparent approach to get a local purchasing and sourcing department. There is no fool proof way to have a supplier’s minimum order amount reduced.
However, you can be confident that you are obtaining the highest quality service at a reasonable price by working with a veteran China sourcing agency with a local presence and a qualified team.
To do business, negotiation is an important skill and you must try to learn this skill and also master it. Needless to say, if you hire a Chinese agent, he can always be a good solution. Your sourcing agent can do a better negotiation of MOQ with the supplier on behalf of you and help you to get the right MOQ that you set your mind to.