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Langsey Newsletter
Hate MOQ?
 
       

If you are a start-up fashion brand owner, you may find yourself struggling with MOQ on a daily basis. Sound familiar?

MOQ, which stands for Minimum Order Quantity, is the lowest set amount of stock that a supplier is willing to sell. If you can’t purchase the MOQ of a specific product, then the supplier won’t sell it to you.

MOQ is a very normal concept in the fashion industry: manufacturers have MOQ for brands, and brands also have MOQ for wholesalers. People call the MOQ “a necessary evil”. Almost all my clients who own start-up businesses complain about the MOQ, but they also know they have to face it and deal with it.

What are the Reasons for MOQ?

Chinese suppliers tend to have fairly higher quantity requirements than local suppliers from developed countries like Australia.

There are at least three reasons for this:

1) Most Chinese manufacturers tend to operate on low profit margins, so they have to produce a larger quantity in order to break even. As a buyer, you can’t enjoy a low purchasing price and at the same time expect a very small order quantity.

2) Fashion products always vary for designs, so require different technical skills, meaning workers need a period of time to be familiar with a new product. During this period the worker’s efficiency is low, so labor cost is high – why? Because a worker is paid for fixed daily salary amount. That is, if he or she makes five pieces of garment per day then the unit labor cost is 1/5 of the worker’s daily salary; if he or she can make ten pieces per day then the unit labor cost is 1/10 of the worker’s daily salary. This low efficiency period is called setup time. A setup intensive operation means a fairly high cost.

3) Sometimes the suppliers’ MOQ requirement is a reflection of the MOQ set by their components and materials subcontractors. For example, you may find a cutting and sewing factory willing to make you a small quantity, such as 100 pieces of garments. But if you want to do a customised fabric (such as your designed printing), normally fabric MOQ is big. Printing fabric may need MOQ for 1,000 meters, so you will be faced with a much bigger MOQ than 100 pieces, even though the cutting and sewing factory is fine with it.

What Can We Do to Work With MOQ?

You can negotiate a lower MOQ with your supplier, but I don’t encourage you to do that. This is because normally the supplier has very limited room for reducing the MOQ, unless the supplier wants to attract you as a new customer by taking a loss.

But of course, we don’t want to hold big quantities of any product and try hard to sell this product for a long time. Fashion changes so quickly, and no brand owner would want a fashion product to stay on his/her shelf for more than several months. Here are my recommendations to help you out of the MOQ dilemma.

First, get a good inventory planner to help you. Don’t just jump in the market with three or four products. You should do research about your target market, forecast the potential sales, and plan your products strategically and sustainably.

Many start-up brand owners don’t think about next season or next year, but just focus on a few designs that they are very excited about. They tend to test the market with these products and think that they will design and manufacture more if they could sell out these first products. I have to tell you, unless you are an internet influencer or have other established sale channels, you will easily end up with holding your first several SKUs for a long time without getting rid of them – then you can give up your dream of running a fashion brand.

Don’t expect to sell out your first batch of products and then plan the next ones. You should at least plan two seasons together or even more. By showing your supplier your long-term plan (e.g. you are going to do 10 dresses, 5 tees, 5 skirts and 2 jackets in the next year’s round), you will have more negotiation power with your suppliers as they know you are a long-term buyer, even though your first order has only two dresses. Here, I am only talking about the benefits of inventory planning from the perspective of supply chain management. Certainly, there are even more advantages for marketing and sales if you have a long term plan, but I’m not going to discuss that in this article.

Second, allow flexibility about your schedule and consult with your supplier. Manufacturers know best about their own production capacity and their production schedules. They tend to accept small and hard orders for their slow season just to make sure their workers have a job to do, but they won't want to do that during their busy seasons.

Again, you have to come up with a long-term plan, so that your supplier can look at it and say, ok, we can do these orders for your desired quantities in March and April because we don’t have other orders to do in those two months. If you haven’t consulted with your supplier, but just stick to your idea of making some product by some specific deadline, you are at risk of not finding a supplier to take your order, or your supplier taking on your order with undesired terms such as bigger MOQ and longer lead time.

When I say flexible schedule, I certainly understand brand owners need summer items for sale before summer and winter items for sale before winter. Therefore, you have to plan everything as early as possible, otherwise it’s hard to achieve the flexibility.

Third, try to streamline your components and fabrics. Streamlining your components and fabrics across multiple SKUs may allow you to meet the minimum quantity and simply allocate the components among several SKUs. For example, if you want to order your customised fabric (which requires 1,000 meters MOQ), you can design 5 or 6 different items using this same fabric so that you have several SKUs to sell.

Sometimes you can also review your customised needs to see whether you really need to customise some specific component, or you can actually use an in-stock one. Custom components and materials cost more than standardised items. Suppliers require lower MOQ for in-stock fabric and components.

I hope this article has given you some ideas about how to deal with the MOQ issues. Please don’t hesitate to contact me if you want to discuss further about your specific problems.

 

Li Zhang
Langsey Company
Suite 431, 1 Queens Road, Melbourne, VIC, Australia 3004
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Mobile: +61 402 279 257
www.langsey.com

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Address: Suite 431, 1 Queens Road, Melbourne, VIC 3004
Email: li.zhang@langsey.com
Phone: +61 402 279 257

Address: Suite 1513, Building 2, No.268, Jiqingmen Street, Nanjing, China 210019
Email: ken.chen@langsey.com
Phone: +86 186 0619 7016