MOQ (Minimum Order Quantity) – Why Chinese Manufacturers Require it?
If you are successful in quoting in China, you should receive a quotation sheet with MOQ (Minimum Order Quantity) requirement or term from Chinese supplier, manufacturer or factory. MOQ or Minimum Order Quantity means that supplier is unwilling to sell product or parts to buyer if he or she places a purchase order but can’t reach the requirement of the lowest quantity of each product.
MOQ is a rule from real manufacturers due to they think they may be loss of money if they sell the products to you less than the certain quantity. No matter where you purchase products in China, import from manufacturing company directly, or hire a sourcing services company and sourcing agent to help you, there are still minimum order quantity requirement.
Manufacturers or factories from low-cost manufacturing countries, such as India and China, are always require their customers to place an order at fairly high quantity (High MOQ). In this article I will try to explain why MOQ is required by Chinese suppliers and how to import small quantity from China when your volume is lower than Chinese supplier’s Minimum Order Quantity term or requirement.
How to Import Low MOQ from China
All of us know that China is a manufacturing country and can produce everything to overseas customers. Walking into a supermarket, such as Carrefour or Wal-Mart, you will find that most of products are made in China. I know it is easy for them to import those goods from Chinese suppliers because their volume are very large and don’t need to consider the MOQ problem. However, most of Chinese Carrefour or Wal-Mart suppliers are not only also sell their products to these supermarkets, but also sell to all the people or customers who are interested in their products. Safety inventory management is available for some hot products and already has specified client (such as supermarket) who will purchase those goods regularly. If you can find such as a supplier and they don’t have exclusive term with their customers, I think MOQ is not a problem for them.
You are intending to import low volume from China at low-price and sell in your country at higher price.
- Start to source suppliers or manufacturers on Alibaba or made in China.
- Contact some sources and quote with them.
- Receive some quotations but with a high MOQ which exceed the expectations of you.
High MOQ requirement, now what should you do? Accept the high minimum order quantity and import the large volume from Chinese supplier, give up importing products from China and buying from domestic wholesale market, trading company who imports high volume from China.
Negotiate with suppler for a good MOQ
Most people think that the manufacturer often has very limited space to reduce the minimum order quantity. But in fact, it is not true. You can negotiate with your manufacturing suppliers for a lower MOQ requirement.
Supplier will offer a low MOQ to you if your products made from common materials and standard requirement. Some manufacturers can offer importers a lower MOQ, in return for a higher unit price. However, some of suppliers suggest you to change the material of your product or design for getting low MOQ and easy to manufacture and management. As an outstanding Chinese sourcing agent we help lots of overseas customers develop reliable suppliers and source products at low MOQ, we don’t suggest our customer to change the material of their products, the solution requires serious consideration. So, learning manufacturers’ quantity requirement structure is often far more efficient to find the solutions of reducing the minimum order quantity.
Why MOQ Is Required by Chinese Supplier and how do we deal with them
Start devices or machines and then produce products are the daily actions of a manufacturing company in China. Keep the machines running can obtain certain of capacity. But do you know that supplier need to do some preparatory work before making the machines run, such as purchase raw material from the raw material suppliers, handle those raw material and make the tooling or fixture. This is one of the reasons that suppliers require the lowest quantity of a product. It’s a reasonable request. All of the companies are not non-profit organizations and they need to earn money. MOQ requirement can reduce the risk of money loss. Here are some reasons for why Chinese supplier requires customer to reach their MOQ.
- The Running cost.
- No Inventory.
- Minimum profit requirement.
- The small profit margin of products.
- MOQ requirements from other related suppliers, such as upper stream suppliers, accessories suppliers, raw material suppliers, and treatment suppliers.
- Package Supplier Requires MOQ requirements.
Require MOQ Due to The Running cost
Most of manufacturers in China are unwilling to produce the low volume which the quantity is less than MOQ requirement. As is mentioned above, money is spent when starting the machine, cost of labor, power, material and time. All of those are not free, supplier needs to hire workers, buy electric power from the power administrative department under the government and purchase raw material from their supplier. The supplier can manufacture products for other high quantity customers who can place an order which can reach their MOQ if they don’t produce the products for you that your purchase order cannot reach their minimum order quantity. Manufacturing company is always willing to keep the machine running and producing as more as products within the scope of their capacity. The more products are produced continuously, the lower average’s running cost.
In order to purchase products from manufacturing supplier who said they cannot offer products to you due to you cannot reach their MOQ requirement, we suggest you to pay a payment of set-up cost of machine if you think the supplier is your right manufacturer in China. At least in some fields, such as plastic injection molding and die casting, this is a common solution.
Require MOQ Because Of No Inventory
Most of Chinese suppliers can sell you any quantity even you cannot match their MOQ if you can bear the shipping cost or freight of low quantity, unfortunately, most of them often don’t keep stock.
If you want to import small quantity but don’t reach the MOQ from your Chinese supplier but your supplier told you that there wasn’t any stock now, we suggest you to source product on wholesale sites, such as Aliexpress and Dhgate. There are lots of wholesalers who have products in stock on those websites. Most of them have a very low MOQ requirement but the price maybe higher than import from primary sources.
Someone said Taobao is also a good place to find products that didn’t have a MOQ requirement. Yes, most of the products can be found there, but, there are some issues, such the language, products’ labeling requirements, product packing and safety standards. As a sourcing agent in China, we know that some products listed Taobao cannot be sell to other countries directly. For example, 3C Certification is for Chinese market only and UL Certification is for USA market, all the product export to US should be in English but most of the products you discover on Taobao are in Chinese. So, MOQ is only one of considerations to import from China.
So, let’s get back to the question. Accept supplier’s MOQ, wait for a period of time that someone order it and can produce your order together, or import from an internationalized wholesale site are the 3 methods to import small quantity cannot reach supplier’s minimum order quantity requirement from China. And import from wholesale site is the best choice for small size products in low quantity.
Require of minimum profit, Chinese Supplier Needs to Control Minimum Order Quantity
It’s about five years ago, a stamping supplier told us that please transfer your tooling to other manufacturers because you cannot meet our MOQ requirement in the past two years. It can be understood that some of companies request their International Trade Sales to reject small business due to they make little money but still need to spend a lot of time and energy. So, they set a MOQ requirement filter their target customer.
It is hard to import low volume cannot meet MOQ requirement from those Chinese suppliers. They do not lack for customers and only consider the large order. Maybe you will say those supplier are arrogant. Yes, they are arrogant but it is understandable due to different companies have different positioning. The best way to solve it is to source a new supplier who can provide good services and low MOQ which you can meet.
The Small Profit Margin of Products Made in China, High MOQ is Required
In order to winner over competitors and get more clients, Chinese supplier offer a competitive price via lower profit margin, often as low as 3%~5%. They offer low price and request customers to purchase as more as possible. So, the raise the minimum order quantity. Here is an example. We assume that the total cost without profit of a product is $1/Piece.
- 100PCS, profit margin is 20%, and unit price is 1.2/Piece. Supplier sells them and Earns 20USD;
- 200PCS, profit margin is 10%, and unit price is 1.1/Piece. Supplier sells them and Earns 20USD too;
- 400PCS, profit margin is 5%, and unit price is 1.05/Piece. Supplier sells them and Earns 20USD too;
- 500PCS, profit margin is 5%, and unit price is 1.04/Piece. Supplier sells them and Earns 20USD too;
If a supplier intends to earn 20USD, the smaller profit margin, the higher minimum order quantity. Through the above example, Chinese supplier will give you the quotation according to the below MOQ.
- 20% of profit margin: MOQ100;
- 10% of profit margin: MOQ200;
- 5% of profit margin: MOQ400;
- 4% of profit margin: MOQ500;
Tell you supplier that you can increase a reasonable cost if they can offer you a lower MOQ when a supplier told you that their profit margin is very small.
Minimum Order Quantity is required from other related suppliers
Product includes many parts or components and some of them are sourced from different sources. The minimum order quantity requirement is different due to the different sources and manufacturing process. So, it is impossible to produce every part in a factory and most of Chinese manufacturers actually outsource other parts which they don’t specialize in. For example, a die casting Assembly includes die casting parts, stamping parts, plastic parts, package, and surface treatment. The supplier can manufacture die casting in their factory but need to outsource other parts. And here is the MOQ information for each parts.
- Die Casting Parts: MOQ 2000PCS;
- Stamping Parts: MOQ 3000PCS;
- Plastic Parts: MOQ 2500PCS;
- Package: MOQ 500PCS;
- Surface Treatment: MOQ 100PCS;
According to the MOQ list of parts for die casting assembly, it is reasonable to get the MOQ3000 which is decided by the high one. With some effort, it is possible to negotiate a lower minimum order quantity term for your products imported from China, such as MOQ2000 by keeping the extra parts in stock.
Sometimes, Chinese supplier is willing to offer a low MOQ to their customers but they cannot purchase small volume of material from their raw material supplier. Chinese manufacturers tend to keep a minimum stock of raw material, components and semi-finished product.
How we get a lower MOQ
As a China sourcing agent, we ever make a die casting generator housing for US customer. It is an aluminum die casting that requires four steel inserts cast in place. These steel inserts are made up of stamped electrical steel laminates pinned or welded together. The volume is very low, it is only 1500 sets per year. We quoted with many die casting manufacturing supplier and found the Issue. The MOQ of electrical steel is 3000 kg but we only use 500kg per year. It is quite clear that our stamping supplier is unwilling to purchase 3000kg electrical steel and keep in stock for 5~6 years. And it is also a quality problem for a raw material to keep a long time, the warranty is about 2~3 years. We final purchase these electrical steel from trading company at higher price than primary sources.
The Minimum Order Quantity for Carton Makes Unreasonable MOQ for Product
For some customized products, the size is different from off the shelf and the type is various. Here is an example for manifold exhaust products.
- Black paint, manifold for Audi: 500mmX300mmX300mm;
- Ceramic treatment, manifold for Audi: 500mmX300mmX300mm;
- Chrome treatment, manifold for Audi: 500mmX300mmX300mm;
- Stainless steel, manifold for Audi: 500mmX300mmX300mm;
- Black paint, manifold for Chevy: 600mmX350mmX200mm;
- Ceramic treatment, manifold for Chevy: 600mmX350mmX200mm;
- Chrome treatment, manifold for Chevy: 600mmX350mmX200mm;
- Stainless steel, Manifold for Chevy: 600mmX350mmX200mm;
These are two types of manifold, but we need to order 4 types of carton for each type. Because the different of surface treatment uses different carton. Two types of manifolds need 8 types of carton. And the MOQ of the carton is 200 PCS each. But the MOQ of manifold is 30PCS and we only need 50 PCS each.
After discussing with carton supplier we know that the main cost of high MOQ is cutting tools. If we can pain the cutting cost (one time only) they will give us a MOQ 50PCS. And here are the solutions.
- Pay cutting cost, and the MOQ will change to 50PCS;
- Meet MOQ 200PCS and purchase them to keep in stock;
- MOQ 100PCS and the price is double;
Solutions to get a smaller MOQ
MOQ requirement should not be the hindrance that give up importing from China. Through above analysis, it is possible to import low volume cannot reach suppliers’ minimum order quantity requirement from China manufacturers.
|Minimum Order Quantity Problem||Solutions|
|Running cost||Pay set-up cost|
|No Inventory||Source on wholesale sites|
|Minimum profit requirement||Develop new supplie|
|Small profit margin||Increase to a reasonable price|
|Other related suppliers||Negotiate|
|Packaging||Pay cutting tools fee or raise unit price|
Import Small Quantity From China Manufacturers Directly Via China Sourcing Agent
Import from China manufacturers directly can save a lot of money, the price is lower than purchase from trading company. The following sheet is an useful MOQ list for new importer who is planning to import low volume from China.
|Product||MOQ||Manufacturers||Modes of Transport|
|Die Casting Parts||500~2000 PCS||Shanghai, Kunshan, Ningbo, Wuxi||Ocean shipping|
|Sand Casting||20~100 PCS||Shanghai, Ningbo, Wuxi||Ocean shipping|
|Plastic Injection Molding Parts||500~5000 PCS||Shanghai, Kunshan, Jiaxing||Ocean shipping|
|Manifolds||30~50 PCS||Jiaxing, Hangzhou, Ningbo||Ocean shipping|
|Headers||30~50 PCS||Jiaxing, Hangzhou, Ningbo||Ocean shipping|
|Carburetor||30~100 PCS||Wenzhou, Wuxi, Shenyang||Ocean shipping|
|PMMA Sheet||2000 kg/Color||Shanghai, Hangzhou, Foshan||Ocean shipping|
|PC Sheet||2000 kg/Color||Shanghai, Hangzhou||Ocean shipping|
|Tips and Mufflers||20~100 PCS||Qidong, Ningbo||Ocean shipping|
|Carbon Rims for Bicycle||20~30 PCS||Xiamen, Hangzhou||Express via EMS|
|Bicycle Hubs||25 Pairs||Hangzhou||Express via UPS|
|Grinding Tools||100~500 PCS||Qidong, Yongkang||Ocean shipping|
|Angle grinder||100~500 PCS||Qidong, Yongkang||Ocean shipping|
|Marble Cutter||50~500 PCS||Qidong, Yongkang||Ocean shipping|
|Screw Driver||100~1000 PCS||Qidong, Yongkang||Ocean shipping|
|Grinding and Cutting Disk||3000~10000 CS||Jinhua, Yonkang||Ocean shipping|
|4G LTE Router, Power Bank||10, 100, 500, 1000, 3000||Foshan, Zhongshan||Ocean shipping, Express|
|USB flash disk for Phone||50, 100, 200, 500, 1000||Shenzhen||Express|
Those are common products, and the MOQ requirement depends on when you import product from China. For off the shelf goods, you may get a low minimum order quantity from Chinese manufacturer at busy season due to your order can be produced together with other customers. DiscoverSourcing.com is a manufacturing sourcing services company and product sourcing agent in China, our goal is to help overseas companies import high-quality products from China manufacturers at low-cost, as well as low MOQ requirement.