Different Ways to Address Quality Control Defects in Shoes
Inventory is one of the most important parts of a business. Inventory has to be optimized in such a way that the demand can be met easily without overstocking which leads to a high level of unsold products further causing high overhead and warehouse costs. The art of purchasing inventory may appear to be difficult at first as you need a manufacturer willing to sell the right supplies at the right price at the optimum amounts of units you require.
Purchasing inventory or raw materials includes navigating through the much-feared MOQ requirements imposed by the manufacturers. Most of the manufacturers have to implement a MOQ to compel buyers to buy the units at a specific level so the production is cost-effective and manufacturers make a decent profit. A simple example can be that buying 100 pens from a manufacturer may not be cost-effective to them, so they will at least set a MOQ at 1000 units of a pen. At the same time what is feasible for the manufacturer to sell may not be feasible for the buyer to purchase. In this article, we will discuss what does MOQ stands for and as a buyer how you can deal with it and find ways to lower your MOQ requirements.
What Does MOQ Mean
The full form of MOQ is minimum order quantity which is sometimes also called minimum purchase quantity.
What is MOQ
Let us look into detail what is meant by minimum order quantity requirements. The MOQ is the lowest preset amount of stock or the lowest number of units that a supplier or manufacturer is willing to sell at a time. They will generally not go below this level as it may not be cost-effective for them. For the buyer, it leads to two issues, either they will have to purchase more units than they optimally need, or they have to wait unless they can match the minimum level requirements.
Minimum order quantities may also vary depending upon the items. If the items are high-end and sold at premium prices, then the manufacturer may lower the MOQ requirements due to the high margin of profits at low quantities. But for low-cost items, the MOQs will be higher as it requires high quantities and high shipping costs to make a decent profit.
How to Lower Your MOQ Requirements
So, how do we resolve this conundrum? Well, there are some ways through which buyers can reduce their MOQs. Let us look into this below.
- Negotiate for a low MOQ
Many times, buyers get deterred by the MOQ requirements of the supplier and do not even get in touch with them. Get your skilled negotiators and let them do what they do best. A good negotiator will empathize and forge a relationship with the supplier and at the same time persuade them to lower the MOQ requirements. Good negotiators have been known to lower the minimum order quantity levels by nearly 20 percent.
- Think Outside the Box While Negotiating
Continuing on the thread of negotiating, take a different line and try to think outside the box during discussions. For eg.
If the seller is willing to combine different types of items required under the same minimum order quantity level, instead of identical units.
A. Inquire if the manufacturer has excess or leftover stock. Or some other customer had canceled the products which you require. In this case, they won’t have to manufacture anything from scratch and thus you can get the benefit of low MOQ.
- Pay a slightly increased price per unit for Lower MOQ
Some will recommend this method and some will veto it but it is an effective option nevertheless. The buyer may agree to pay a bit higher price for a small batch of products going under the minimum order quantity level. The expense incurred on the price may be offset by the expense on transport, storage, warehousing, and several other costs in near future.
- Buy Conventional Items Instead of Customized Ones
Opt for standardized items instead of customized ones. Buy the items regularly produced and commonly used. These items due to their prevalence will not have high MOQ requirements. However, if you deal in customized, bespoke, or rare products, then you may have to settle for high MOQ levels instead of low MOQ.
- Use the Same Items Across All Product Categories
You can use the same raw materials across all product categories. Let us take the example of mobile phones. Many mobile phones today have the same processor and configurations. With some small differences, they are marketed to different segments. Another example is watching. They may have different straps or dials, but the inner components are the same. Thus, in this way, you can get a low MOQ requirement for these components.
- Get Rates from Both Small and Large Firms
Try to cast your net wider. Get quotes from manufacturers of all sizes. You may benefit from both small and large manufacturers. Large scale manufacturers may offer better terms due to economies of scale and smaller firms can be much more malleable in offering low MOQ terms and accept much smaller orders.
- Buy from a trading Company Instead of Direct from Factory
Trading firms can make joint orders on behalf of many customers at the same time, serving as intermediaries between buyers and factories. This permits a supplier’s minimum order quantity to be divided among many customers, reducing the MOQ for everyone.
- Eradicate Slow Moving SKUs
Keeping your SKU count as simple and low as possible. It helps in correct inventory forecasting. Do not store excess stocks having minor differences like a slight color changes etc. It has been observed that around 3 SKUs make up for fifty percent of sales for most brands. It is better to have a smaller catalog of quality and high selling products instead of numerous products that are not getting sold in high quantities.
What is MOQ and how to lower the MOQ requirements? We hope our article helped in answering this query. MOQs are common but also flexible. The optimal MOQ requirements may differ across different sectors and businesses and identifying the correct benchmark involves thorough research, careful sales planning, and a bit of luck as well. Finding a MOQ that works for you can assist you in growing your business and getting high revenue and profits.