Updated: Jun 15, 2020
By Corban Bryant & Alex Berryman
For a brand, a manufacturer's Minimum Order Quantities (MOQs) can seem discriminatory and arbitrary. Smaller brands can’t afford lots of stock and often don’t know how well something new will sell. When your manufacturer requires a higher MOQ than you would like, it can be frustrating. In this blog we lift the veil, giving inside perspective on WHY manufacturers set MOQ's. You may be surprised to learn that it is often to your benefit!
By understanding why a manufacturer establishes an MOQ, you can find one that suits your business. Below are three considerations manufacturers make when establishing their MOQs.
Whether it’s ethical fashion or not, price is among the top priorities for a buyer. In manufacturing, labor efficiency is crucial to getting prices down. Production quantity significantly affects both overhead and production labor efficiency and is key to giving you competitive prices.
Overhead labor - Each style produced requires significant man-hours spent by managers before production,
to define the product,
set up machines,
and document everything.
There is also significant work for every order that is unrelated to production, for example:
Whether a large or small quantity is being ordered, all of this work stays relatively constant, and the people doing this work typically have higher salaries making their time very valuable. The more pieces produced per style, the more the overhead labor cost is spread across each piece, and the lower the price.
Production Labor - Practice makes perfect. Even a highly experienced sewing technician has a learning curve for a new style and there are always a few bugs to work out in a new production line before it’s running smoothly. We find at Purnaa, that our production speed peaks on day 4 of producing a style.
You might be asking,
“Why set an MOQ? Manufacturers could just charge more for lower quantities.”
That’s true, but, manufacturing companies are fine-tuned to operate at a certain scale. Typically, larger manufacturers are responding to price pressure, so they set up for maximum production and minimum overhead and simply can’t handle all the overhead work needed to fill their production lines with small orders. In a big factory, if managers become the bottleneck, lost production time is super costly. Manufacturers that have small MOQs, tend to have small, flexible production teams and more admin staff to be able to handle the work of processing orders. In this way, the MOQs can help guide buyers to the types of manufacturers that can give them the best pricing and service.
A good manufacturer considers the manufacturing run as a whole - not just considering their own factories’ MOQs