Best China Sourcing company
That Drives Profit Growth
Chapter 1: Introduction To MOQ
What is the meaning of MOQ?
The MOQ stands for Minimum Order Quantity. This term pertains to the smallest quantity of products that customers can order. In the same way, it also pertains to how many quantities a supplier will sell.
Based on his LinkedIn post, Hieu Nguyen defined MOQ as the requirement that buyers must meet when they purchase products from certain suppliers. This MOQ represents the production costs, including material, production, and labor.
Moreover, MOQ means that the higher the product quantity, the lower the cost of production. It would also mean that it can be a higher profit margin for both the supplier and the buyer. However, this MOQ definition does not preclude that you can’t negotiate for a lower price anymore. Instead, it will give buyers a negotiating power to get the best deal for your business.
To understand the MOQ meaning, you can refer to the following example: You found a “low MOQ clothing manufacturer china” with a set MOQ 100 pcs. It implies that you can buy their products as low as 100 pieces and even add more.
What is MOQ wholesale?
MOQ wholesale means that the wholesale supplier or B2B sellers will not accept any low MOQ order quantity. It is not feasible to ship small amounts or even cater to low-value order production. So when buying from them, remember that you must have to buy in bulk for the supplier to accept the order and gain profit.
Why is MOQ so important?
Based on the meaning of MOQ provided above, it plays a massive role in many aspects for both the sellers and buyers. For sellers, MOQ is essential because it helps them know which businesses they can partner with and which they cannot not. If we refer to the MOQ business term, this allows suppliers to communicate to buyers how many units are must for them to take the job.
On the other hand, what the MOQ means for buyers will differ based on their business scale, target market, and demands. Some businesses run on a small scale, so they require to manufacture only small numbers of orders. They need to find a supplier that caters to low product MOQ. For instance, if the buyer’s business is in line with clothing, they need to find a low MOQ clothing manufacturer.
Furthermore, other businesses operate on a large scale and need many products. These businesses need to look for suppliers that cater to both high and low MOQ. At the same time, a supplier that can meet their demands has high-quality materials, a fast production process, and even low labor costs. The buyers will know if the suppliers can produce the number of units required solely by looking at the MOQ.
Chapter 2: The Different Types of MOQ
As per the MOQ meaning in business, MOQ has a significant on the buyers and sellers. The buyers must consider whether they can sustain high MOQ or else they need to find other suppliers. On the other hand, the sellers can select low or high MOQ based on their warehousing and production capabilities. They implement two types of MOQ: low MOQ and high MOQ.
Low MOQ means that buyers can get the lowest stock possible, around 1 to 100 items. This type of MOQ benefits both the start-up sellers and buyers. For instance, a low MOQ t shirt manufacturer offers low MOQ because they are new in the industry, are exploring their niche, and are flexible with their offer. In contrast, buyers buy low MOQ t-shirt products because they are starting up their businesses.
Suppliers that offer low MOQ have their own set of advantages and disadvantages. One example of how MOQ stand for its benefits to buyers is that there will be fewer expenses on pile-up stocks and inventory. It would also open doors to testing the suppliers’ reliable products before ordering with high MOQ.
However, the disadvantage that low MOQ provides is that there are possibilities that the quality will be low. Sometimes, suppliers will use low-grade raw materials so that they can finish the production and still make a profit. For this reason, you have to ensure that the supplier’s low MOQ business term is true to claims.
High MOQ means that the supplier can cater to large orders and has extensive stock of products. High MOQ also provides both advantages and disadvantages. For its benefit, buyers can get a much better deal since suppliers will order bulk items of raw materials. The production will also be done all at once to cut labor costs and supply chains.
However, the high MOQ’s disadvantage is that there would be a high upfront cost. For example, you work with a high MOQ manufacturing company with 1000 MOQs priced at $15. You need to pay $15 000 for the production cost of the product, which for some can be a hassle and rattling.
Chapter 3: The Pros And Cons Of MOQ Manufacturing For Buyers
China has everything that you can find. However, sourcing from China may not appear easy as you think. You can face many difficulties, especially with the MOQ. Based on Michelle Tung, you will most likely deal with this phenomenon if you want to do business in China.
The following are some of the pros and cons that you will face with the MOQs set by suppliers and manufacturers.
Pros Of MOQ
Most buyers know that you can get the best deal possible when working with suppliers who have MOQs. When you buy in bulk or wholesale, you can price your product better and cheaper to attract more customers. Even though you might face paying higher warehouse costs or selling discounted items, you can still get good earnings.
Build a Strong Tie with Suppliers
How you accept the MOQ can allow you to build a strong tie with the suppliers. Chinese suppliers are very particular about their relationship with their buyers. Suppose we are to compare them with other suppliers outside China. For instance, “low MOQ clothing manufacturer turkey” will overlook relations while a “low MOQ Clothing Manufacturer China” will not.
When the supplier trusts you, they can support you in establishing a stable supply chain. They will also be the first to assist you in any future expansion.
Another benefit of using the right MOQ is how they can provide better profit margins. Suppliers can provide discounts and better deals when you order products with higher MOQ. In the same way, buying with MOQ can allow you to control your stocks.
Optimize Cash Flow
Cash flows are one of the benefits you can get when you have acquired the right MOQ. The MOQ will set good product prices, and with a continuous and maintained order size, there is a big chance for higher profit.
Reduced Product Shipping Cost
Ordering products frequently may result in a much higher cost. Compared to when ordering in bulk, you can get the product that you need for an amount of time, then buy again if it’s running out. This method will reduce the need for a higher shipping cost, the bill for customs, and other shipping papers.
Provide The Lowest Possible Price Per Unit
One of the benefits of MOQ is how it can provide the lowest possible price per unit. The rule of most suppliers and factories is that the higher the MOQ, the lower the costs. For this reason, it can provide your business a door to scale up, earn profits, and attract more customers.
Cons Of MOQ
Need For Physical Space
Among the disadvantages that the MOQ provide is the need for physical space. If you are a small business or first-time entrepreneur, the volume required for an MOQ may be hard to store. If you consider buying products with large MOQs, you also need to arrange a warehouse to keep the product safe.
Force To Deal with Too Many Stocks
There are instances in business where you cannot sell all the stocks you have. It will lead to the product expiring, leaving you with dead stock. So before you can completely lose money, you are left with no choice but to sell the product at a discounted price. Nevertheless, this would be a hassle and will cost you money.
Exclude Additional Fees
In an MOQ formula, the ones that are being calculated are what made up the product. It means that any additional fees, such as shipping costs, have different prices for you to pay. You, as buyers, will also make necessary arrangements like customs, registration, and other paperwork that also cost money.
We have mentioned that for every unit, there is a corresponding price. For instance, for a 1000 product MOQ, the price will cost around $10 per unit. Because of how enormous these amounts are, many buyers, including small businesses and first-time importers, cannot take the risk.
Chapter 4: The Factors That Affect The MOQ
There is a broad range of factors that you must consider since it affects the MOQ. The following are indicators of whether the MOQ will cost lower or higher.
Quantity Of Orders
Every supplier’s MOQs are based on order volume. The more complicated and expensive the products the suppliers offer, the higher the MOQ. They make sure that the order quantity is suitable for making a profit.
The prices of every MOQ matter based on what kind of raw materials the suppliers used to create the product. Sometimes, they will order the raw materials from their partner companies which only allow wholesale or bulk orders. For this reason, suppliers are forced to increase the prices per set MOQ.
Types Of Products
Based on the MOQ business term, the MOQ varies on what kind of products the buyers need. For instance, for a low MOQ cosmetic manufacturer that sells makeup, lipstick, and daily necessities, the usual MOQ order quantity would be 10,000 pieces. It pertains low because these products are simple to produce, are in demand, and has low-priced materials. In contrast, expensive and complex items will have a lower MOQ, around 1,000 pieces; they are hard to produce.
Another factor that affects the rate of MOQ is customization. Creating a completely new product takes a lot of time and is expensive. An example of this method is when you buy from a “low MOQ t shirt manufacturer” with a product that is a specific color, print, and size.
If you want to dye the shirt fabric, there would also be an additional payment to achieve the right color. These reasons could lead to a higher MOQ. The minimum MOQ order quantity can reach up to 500 and can go up to 5000.
The meaning of MOQ varies depending on the product, requirement, and supplier. So a unique and new product that would need to have a new mold can affect the MOQ. Creating new molds for customized products is much pricier and more complex. Because of this reason, suppliers have no choice but to raise their MOQ to cover the costs.
Chapter 5: The MOQ Formula And How To Calculate
Businesses have their own set of MOQ meanings, which varies from seller to factory. In calculating the MOQ, buyers and suppliers need to use an MOQ formula. These MOQ formulas may not be universal; however, they can be a starting point to knowing how many units your business needs. The following are some of the steps that you can take.
One of the ways that you can understand the supplier’s MOQ definition and type is by calculating the demand. You must analyze their data, stock levels, seasonality, and other factors to know how they priced their MOQ. For instance, a low MOQ t shirt manufacturer receives orders of around 500; trying to implement a MOQ of 5,000 may be difficult.
Moreover, how suppliers “set and define MOQ” will not be far from yours since both of you need to meet halfway. Here are more tips that you can further do to assess the demand:
- Build a strong relationship with the supplier and maintain regular contacts and updates.
- Analyze and audit sales forecasts daily or weekly.
- Adjust the stock to deal with any significant fluctuations in demand.
Know The Profit Margins
Most suppliers put up their MOQ meaning and types because of various reasons. Some have higher MOQ, while others offer it low. Even when you want to lower the MOQ to align with your budget, you also have to think of their profit margins. You can consider the MOQ and calculate the cost of production, materials, shipping, etc. In this way, you can compromise.
Identify The Break-even Point
The break-even point is a vital part of determining the MOQ. This break-even point underlines that total cost and total revenue are equal. It means you will receive no loss or no gain. You need to calculate it as high enough for your business to meet profit margins but low enough for your customers.
Create A Formula
You can now create an MOQ formula after gathering data on what MOQ stand for, its effects, and how the solid MOQ looks. As buyers, the formula must fit your business demands and stock levels. This formula will also define MOQ for each product type and how you will sell them to your customers.
Calculate Holding Costs
According to Operations Management Foundations, the holding cost is the true cost of storing the products. Many items are more expensive to store than others due to sizes, warehousing requirements, etc. So when ordering products based on MOQ, you must remember not to store them for an extended time.
Set the MOQ
Suppliers have a fixed MOQ; in the same way, buyers have their MOQs in mind. If you want to calculate the MOQ that will give you and the suppliers the proper profit; you can set your MOQ formula through the following:
- How in-demand the product
- Supplier factory and production capacity
- Raw materials
- Profit per-unit
Chapter 6: Tips For Lowering MOQ In China
As per the MOQ definition and tips provided by Conor Donovan, there are methods that buyers can take to lower the MOQ. The following are some of the information and actions you can do.
To start, the MOQ stand for; the minimum order quantity that the buyers can buy. This MOQ can come high, especially if you buy new and complicated products. If this is the issue, you need to research how it takes place and the materials used.
If you understand what comes into making your product, you’ll be able to create a design fitted in your budget. You can also request your supplier for the standard materials to know that they are not pricing you overboard.
How MOQ means doesn’t always come as a fixed quantity. Instead, it can also pertain to a door for negotiation and flexibility. If the set MOQ is too high for a particular buyer, you may offer your supplier what we call joint orders. It means that several buyers can have the chance to join the order and produce a small volume.
Look For Sample Orders
One of the ways to reduce the MOQ is to order sample orders first. Most suppliers are enticed to work with buyers that know what they want and are serious. During the sample order process, suppliers will be able to identify if you are a potential long-term client.
The simple act of communicating, paying right, and arranging can be a significant step. It means that you have the possibility of ordering large quantities in the future. So, they can offer you a low MOQ.
Cooperate with Small Factories
The type and meaning of MOQ will depend on the suppliers, factory, or trading firm. The higher chance you can get a low MOQ is when you work with start-up suppliers or small factories. However, it would be reasonable if you were cautious to ensure that you get what you are paying for and meet your standards.
Purchase Ex Works
One of the causes why, for instance, a low MOQ t shirt manufacturer offers a higher MOQ than usual is because of the shipping. Significantly, FOB shipping charges can quickly add up, causing suppliers to lose profit. Supposed you still want to work with your chosen supplier, going with Ex Works options is the most ideal.
Order During the Off-Season
How you “define MOQ” may not be the same case as with the suppliers in China. For this reason, even if they have a set MOQ for all their products, they are still able to adjust it for their customers. However, this case won’t likely happen if you upset them by ordering during the off-season. So avoid ordering or making special requests during Chinese New Year, May Day, or Golden Week.
Build A Strong-Tie
You must consider building a solid relationship with your supplier or factory. The Chinese businesses MOQ business term also relies on how you connect with them. So even if you can’t visit them personally, you can engage through calls and meetings on a personal level.
Use Standard Parts
One indication of the rate and meaning of MOQ is the raw materials, production time, and custom design used to make your products. So if you want to have low MOQ without compromising the quality, use more generic or more common parts.
You will be surprised at how easy and quick it is for suppliers to lower the MOQ if they know you are getting quotes from other suppliers. It means they are willing to make adjustments to retain you as a customer. You can even use these quotes to compare what the MOQ stands for in large and small suppliers or factories.
Choose The Right Products
If you are still looking for the products you want to sell, starting with a common but unique one is best. In this case, most factories can be flexible and lower their MOQ.
Chapter 7: The Way To Deal With MOQs For Buyers
The MOQ meaning for the buyers can either be good or bad. For buyers, how they define MOQ will be based on their inventory needs. However, every seller would have a different meaning of MOQ and types.
Suppose you meet a supplier with a higher MOQ. You must use different tactics. If you are persistent in working with them but with fewer order items, the following are some ways you can use in dealing with MOQ:
Negotiate a Lower Cost
You will be surprised how suppliers can likely agree to lower the MOQ. If they value you as their customers, they can adjust the MOQ for both of you to meet halfway. However, before you can negotiate, there are some things you need to keep in mind.
According to Chinh Tran, you should first understand why the supplier has their own set of MOQ definitions. By knowing how they define MOQ, you can respect their POV and propose a negotiation that will not solely benefit you but also the supplier.
Browse Other Options For MOQ
There are new MOQ supply chain techniques that will allow you to avoid paying more. The first one would be focusing on prices rather than units. Second, focusing on individual products rather than the entire order. Third, avoid MOQ wholesale; instead, use the drop shipping method.
Comply To The MOQ
For instance, you seek low MOQ private label cosmetics but end up with the finest one with high MOQ. Then what you can do is compromise and comply. The suppliers set MOQs for a reason. It may come as an inconvenience at first, but later, it can provide numerous benefits.
Purchase From A Trader
If you want a flexible MOQ and buy a diverse product collection in one, the trading companies are for you. Trading firms buy a vast range of products from multiple suppliers. You can purchase products without meeting suppliers’ MOQ or even paying the total price.
To understand this concept better, instead of buying from a low MOQ t shirt manufacturer that can offer you products in the clothing industry, you may choose to buy from a trading firm that will provide low MOQ in various sectors.
Beyond Minimum Order Quantities
The MOQ meaning in business is like an obstacle buyers must overcome when sourcing in China. If you plan to buy based on MOQs, you should adjust your reorder point, MOQ formula, and inventory turnover rate. These two can maximize your stock, so you will know how many to order, when, and how much you will spend.
Buy From Trusted Wholesale Markets
A tip that you can do to source from a wide range of suppliers is through B2B marketplaces like Alibaba. Alibaba has numerous suppliers, so you can browse and compare the prices, shipping, and those who can meet your requirements. The best thing about finding suppliers on these platforms is how versatile the MOQs are. You can typically find lower or non-existent MOQs.
Chapter 8: Way To Transition To MOQs
As per the MOQ meaning, it can directly or indirectly affect your business. If you do not know how the MOQ works in Chinese marketplaces and B2B platforms, you need to know how to transition. You can take the following steps to familiarize yourself with the MOQ business term.
Know Your MOQ Requirements
It would be best to reflect that you should have MOQ requirements on-hand when looking for a supplier. The suppliers’ power to make the highest grade of products and meet your demands depends on how high or low their MOQ is. If you have a large-scale company, you should also look for a factory or supplier to keep up with your production.
Request A Sample
Before you partner with any supplier, you must first be sure that they can provide high-quality products, are transparent, and are the best. For this reason, you should request a sample; for sure, the supplier will provide it for you. If the supplier is trustworthy and confident, they can provide you with samples and guide you. So a supplier that refuses and is unreliable during the sample creation, you should avoid them.
Learn The Suppliers’ History
There are hundreds of suppliers in China with their MOQ definitions. But the real question is, how can you know that the supplier is unique and the best among the rest? Simple, look at their history and track record.
When researching the supplier, you must first ask what MOQ means for them. Do they cater to low MOQ or more on the high MOQ, or perhaps both? It would also help look into their previous clients, customer service, and past works. If they have poor representation, you should reconsider doing business with them.
Chapter 9: FAQs With MOQs
What is the MOQ Supply Chain?
In an MOQ supply chain, there are numerous options that both the buyers and sellers can take. For instance, a low MOQ packaging company can set a minimum number of units required to purchase a specific product like an eco-friendly box. They might also put a different MOQ for another product on package labels.
What is the distinction between MOQ and EOQ?
MOQ stands for minimum order quantity, which means it is the smallest number of units that buyers must purchase at one time. In contrast, EOQ stands for economic order quantity, an equation used to calculate the highest amount of supply to stock in your warehouse. This EOQ will help determine the correct list without overspending on storage or running out of products.
What are the low MOQ manufacturers in China In Various Industries?
Based on the list provided by List Of Companies In Worldwide, there are numerous low MOQ manufacturing companies in China. The top 10 on this list are as follows(in various industries):
- Dongguan Biaodao Garments Manufacturer
- Jiangxi MSQ Cosmetics Co., Ltd.
- SOOMES Industry Co., Ltd.
- RMB Industrial-Houseware Co., Ltd.
- Hangzhou Shengtex Linen Co., Ltd
- Ruian Youfeng Household Products Co., Ltd.
- Yiwu HLX Jewelry Firm
- Yiwu Guo Xuan Commodity Limited Company
- Nanjing Superstar Island Import And Export Trading Co., Ltd.
- Yiwu Long Way Fashion Jewellery Co., Ltd.
Chapter 10: Conclusion
You can find the meaning of MOQ in the simplest or most complex way. For this reason, navigating it in-depth can be tricky, mainly for first-timers and growing businesses. If you are beginning out, you need to note that MOQ is there for a reason. It may be hard to meet; however, it’s not impossible.
If the information above entices you or perhaps leads you to need professional help, we got you! JustChinait has helped hundreds of customers seek sourcing, shipping services, and China processes like MOQ. Contact us if you want to learn more about what we can offer you.