Understanding MOQ — The supplier's perspective

At the recently concluded Global Sources Electronics show, suppliers offered their take on MOQ. “Everything is negotiable” was mentioned several times, indicating where their point of view starts.

It all comes back to costs and constraints. What additional costs will the supplier incur to support an order? Will any of the upstream component or raw material vendors impose any kind of MOQ requirements?

The easiest way to get low MOQs is to buy the supplier’s existing design. An importer taking this strategy will then face packaging as the key issue with three main choices:

1. Supplier-branded packaging: PL sellers generally will not do this.

2. Plain: The buyer can use a plain version of the supplier’s box (same die cut) and provide stickers with the company name, product description and brand name to be placed on the box. Doing this will generally keep packaging MOQ requirements lower.

3. Custom printing with buyer’s brand: Custom printing means the factory has to go to its box supplier and request them to do so. The box supplier typically has an MOQ of 1,000 pieces. Consequently, the factory will set MOQ at 1,000 pieces.

Some factories, on the other hand, work with box suppliers that may do smaller runs but at a higher price. One company, for example, quoted $300 extra to accommodate the setup, ink injection, test run and other steps. Other suppliers will quote a higher per-box fee.

If the factory’s box supplier won’t do smaller runs, and many do not, the importer can find its own box vendor, and have it print and deliver the boxes to the factory. The factory will then typically accept the smaller MOQ.

Buyers wanting their own design and some product customization, meanwhile, will need to think about the costs the supplier will incur to deliver these changes. Some areas to consider are:

a. Components: A dashcam supplier at the show said the chipset or lens can be changed with no problem and impact on its low MOQ. That is unless a buyer wants Sony components, because Sony has higher MOQ requirements.

b. Mold: A different shape will require a new mold and will certainly cost extra money. The supplier will either charge an upfront cost for the mold, a higher per unit cost, a higher MOQ or some combination thereof. The buyer can always offer to pay the mold fee as an upfront, recognizing that sales volume needs to be higher to ultimately break even on the product.

There are other issues that could drive MOQ that were not mentioned. They can include (a) labor time and effort to process an order, which is very similar for small and large orders, and (b) equipment setup time, which may be high for certain specialized products. There are certainly many others.

The main point is that MOQ is usually driven by some valid business reason, reasons that once a buyer understands can be discussed and overcome. A buyer’s mileage will certainly vary from one supplier to the other, but “Everything is negotiable.”

Note: Among the suppliers that participated in this discussion, MOQ numbers ranged from one for eBikes to 500 for CCTV security cameras with custom boxes.

Want to know how to work with factories to produce your unique products? Join the Global Sources Summit to learn sourcing best practices, October 17-19, 2016. Co-located with Global Sources 3,000-booth trade show in Hong Kong. Learn more at http://www.GlobalSources.com/summit

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