Following on from our article about negotiating price, we are giving you here some points to consider about Minimum Order Quantities (MOQ) with suppliers.
MOQ is arbitrary
The MOQ is set by the supplier based on the value that the supplier needs to generate in order to make your order worthwhile while offering the product at a reasonable market price. Whether an order is 1 piece or 1000 pieces, there are order processing costs they need to cover (such as administrative costs and production set up costs). If a $1 product has an MOQ of 1000 pieces, of course the supplier wouldn’t mind to sell you 1 piece for $1000, but you’re not likely willing to pay that.
To get an idea of what higher volume pricing looks like request prices for 2-3 different quantities. Don’t request pricing at more than 3 quantities. You look more focused that way. If the supplier is strict on their MOQ, tell them you expect to pay a premium for lower volume.
Consider the impact of customizations
A simple customization with a low fixed cost such as logo printing won’t have much impact on the MOQ. In this case the fixed cost is making the film for printing the logo. The printing cost per unit is the variable cost. More substantial physical or functional changes have a bigger impact on cost.
We recently saw a comment posted in a Facebook group by a buyer who asked for a quote for 250 pieces of a customized product which has plastic molded components. The supplier insisted on an MOQ of 5000pcs. The buyer seemed to think this was unreasonable, but the customization they were requesting costs thousands of dollars. It makes sense that the supplier needs to cover this cost through a large order. Otherwise, they cannot make a profit.
When requesting customizations, consider the impact fixed cost divided by the total volume of your order. The smaller the quantity the higher the fixed cost on a per unit basis.
What type of supplier are they?
Whether the supplier is a trading company or a factory can also impact MOQ. If the supplier is a factory, this is your first order with them, and they are not desperate for business, then they are not likely to be flexible on MOQ. However, if the supplier is a trading company which has a relatively low order processing cost (no production line to set up, etc) and they are a regular customer of the factory they plan to use for your order, they may be able to convince the factory to accept a lower MOQ. This is particularly relevant for items with very little or very basic customization.
