While negotiating with your outsourcing company in China, there is one very important issue that you have to discuss, and that is regarding the requirements of MOQ (Minimum Order Quantity).
As an example, if MOQ has been set for 500 pieces then you cannot order for below that quantity. Therefore, if you are a small buyer or you are interested to evaluate the capability of your China outsourcing company, then you will be compelled to buy 500 pieces.
It is here the necessity for Negotiation of MOQ arises. However, there can be many ways to reduce your MOQ requirements, and also, you can let your Chinese suppliers keep their fair profit margin. So, let us discuss this issue in this article.
What is the MOQ?
As explained above, the MOQ requirement will be required by you, if you are trying to outsource for the first time or you are a small buyer. Here you have to negotiate with your supplier for minimum quantity that you want to order.
Since your supplier will have to make an extra effort to customize their production line or he may have to do a certain R&D to develop your product, hence your supplier will prefer that you must order a substantial number so that he can compensate for the extra efforts that he made for customizing your product.
Therefore, your supplier will like to compensate for his efforts and also profitability by asking for ordering higher numbers as MOQ. It is for this very reason, a negotiation of MOQ will be needed by you.
Few strategies for reducing MOQs
- Find the right supplier company
Generally, you will find that any bigger company will not be ready to agree to lower MOQ as their overhead is going to be pretty higher. With lower MOQ their profitability can be affected.
Therefore, one strategy that you can adopt is to find any small manufacturing company, who may be ready to work with your company and agree to a smaller MOQ. Any smaller companies will be more interested to get a business even with smaller quantity and their profit margin is also much smaller than any bigger companies.
- Try to find the right time for ordering
In a manufacturing industry, there is always a peak time and a lean time. During the peak time, no company will be ready to produce smaller quantity especially to cater to your need.
However, during the lean period, they will accept any quantity, and hence that is the proper time to push for lower MOQ. Therefore, you must carefully plan the time of ordering and you will notice that during the lean period negotiation of MOQ will be much easier.
Also, you must ensure that you do not order during the period when the major Chinese holidays will fall. Your small quantity order will be ignored when there can be many other larger orders that are pending with the supplier company.
- Use the proper materials
If your product needs a very rare kind of material that is not easily available then your supplier company will be reluctant to accept for lower MOQ because he has to buy the material in bulk quantity. Therefore, he is going to ask for a higher MOQ from you.
Therefore, you have to order for that item, which is a regularly used item in their production line and it is easier for them to produce within a shorter time and effort.
- Build relationships
It is also important that you must develop a long-term relationship with your supplier companies so that they can feel that you are most likely to be a regular customer for him.
Once the supplier will sense that you are likely to order in bulk quantity after approving the sample order then they will be ready to reduce your minimum order quantity too.
You must also select the right Chinese sourcing agent, who can play a very important role in the negotiation as well as build a professional relationship with the supplier. This can also help in reducing your MOQ.
- Explain the reason for your ordering a smaller quantity
While negotiating for MOQ, it is important that you must properly communicate your genuine reason to go for lower MOQ. If you are buying the product to test at your end whether it will meet your need in the environment of your country then it must be explained to your supplier.
Once your supplier is reasonably convinced about your reason for ordering lower MOQ then chances are there that they may agree for accepting your order for lower MOQ.
- Discuss with multiple suppliers
You will find many companies in China who will quote for their MOQ and you will find they will quote for different MOQs. It will certainly be very tempting to discuss with the company offering you the lowest MOQ. However, before going ahead, you must check their quality too while doing negotiation of MOQ.
If the reputation of the company is not good then all your efforts may go down the drain. However, when you have multiple choices available then it will empower your negotiation, and can deal with a better company to reduce the quantity.
- Increase the quantity slightly
If you feel that you have found the right supplier who is capable of producing your product of the right quality, but is too adamant on the issue of MOQ then you may settle the deal by slightly increasing your MOQ.
At the end of the day, your success and failure to clinch a deal for MOQ will depend upon the negotiation skills of the Chinese sourcing agent that you have appointed. A good sourcing agent will know the local industrial environment and offer you the right suggestion during the negotiation.
Also, you must ensure that your negotiation should not generate any hard feelings but it should generate a win-win situation for both your company as well as for the Chinese supplier.
Your good negotiation skill is an art of doing business and you must try to master this skill while doing negotiation of MOQ with your Chinese suppliers.