Understanding Order Quantities
Minimum Order Quantity aka MOQ
MOQ's are often set by suppliers as an attempt to cap the minimum amount of products that can be ordered during a single production run for the supplier to profit. An MOQ is always determined based on the supplier, the product, and the number of features requested.
The 3 basic rules for understanding MOQ are:
- The more custom a product, the higher the MOQ
- The higher the MOQ, the lower the price
- A lower the MOQ means more limited options
This document is going to go into detail the above three rules, and explain the reasons for them from a factory/supplier point of view.
As a preface, it should be understood that China works based off of the scale. The appropriate time to turn to China for offshore manufacturing and procurement is when the intended order quantity no longer makes sense for domestic wholesale, or product customizations require one to get as close to the source as possible. Low order quantities don't often prove China to be as advantageous as one may think. The reason for this, purchasing from China takes time and effort. While instant costs savings might sound appealing, factoring in service fees, shipping and logistics costs, import taxes and time spent, the advantages quickly begin to shrink.
The More Custom a Product, The Higher the MOQ
Customizations can be broken into two types, major and minor.
Minor customizations include adding logo's, changing colors and including add ons that don't change the overall structure of the product. An example of this would be adding a keychain ring to a flashlight, or including a custom sticker and hanging tag on a pair of sunglasses.
Major customizations include changing or modifying the overall structure of the design. When a product mold needs to be changed due to an alteration such as size or feature, serious alterations need to be taken into account. Major customizations can also include seemingly simple add ons such as a rubber grip that would require customizing. While major customizations may seem daunting, the major things that should be taken into account are whether or not the order quantity can meet up the suppliers MOQ requirements, and the necessary amount of design and re-engineering that would need to take place.
When it comes to product customizations, the feasibility will always depend on the ability of the supplier.