Understanding Minimum Order Quantities – What it is and Why it Matters?

Product Sourcing

Large quantity order on a conveyor belt in China

When it comes to China, everything is on a mass scale due to its 1.4 billion strong population. China thinks on a large scale and what many Australian importers fail to realise is that includes order quantities.

Many Chinese manufacturers aren’t interested in small orders. They have minimum order quantities (MOQ) to make it worth setting up the machinery and dealing with the administration involved in an order. The time it takes to design, setup and complete admin is basically the same whether they have an order for 100 or 10,000 units. Small quantities also make it hard for manufacturers to make a good profit margin.
 

How Factories Determine Minimum Order Quantities

There are several factors that have a bearing on the minimum order quantity.
 

Type of Product Being Manufactured

The good being manufactured will play a large part in how many are required. A custom product that requires materials the factory doesn’t readily use will generally have a higher MOQ than a more generic product that uses standard materials the factory usually carries.
 

Relationship Between Manufacturer & Customer

A factory may determine the MOQ based on the organisation making the request. The factory is more likely to accommodate the MOQ if the request comes from an agent they deal with regularly compared to a small business they have no previous history with. The agent may be able to ask a favour and lower the MOQ because of the long-standing relationship between the two organisations.
 

Supply & Demand

The MOQ may also be higher at different times of the year. If a factory is flat-out trying to fulfill orders before the Chinese New Year, it’s unlikely they will be generous with lowering their MOQ. But if the factory is quiet and they’re keen to get in more work, the factory manager might be more willing to take on a smaller order.   
 

What to Do if You Can’t Meet the Minimum Order Size

If you don’t meet the minimum order requirements, you’ll need to make some decisions. You can either adjust the order size or find a new supplier.
 

Increase Your Order Size

If you want to work with a factory, you may consider increasing your order size and keeping more stock on hand than you may like. The one advantage of a high MOQ is a reduced unit price. But if the MOQ isn’t an option, you’ll need to look for another factory.    
 

Supplier with Smaller Quantities

While Chinese factories deal in bigger quantities, there will be some manufacturers willing to accept smaller orders than the majority of others. It’s a matter of finding the right factory but that’s not an easy task.

Using an Australian import agent can help, they have regular dealings with factories and can easily take on the challenge to find another suitable supplier. Just like the factory, agents have a MOQ too. So if you only have a small order, you may have trouble finding an agent who can take you on as a client.
 

Offer to Pay a Higher Unit Price

If you’re struggling to find a manufacturer who will do the short order you need, you could try offering to pay a premium on the unit price or negotiate on the MOQ. The increase may be just enough to get the factory to agree to do the order.

If you need assistance with sourcing a reputable factory to manufacture your products in China, call Vara Allied on 6115 0118 or contact us online