Minimum Order Quantities
What is your minimum order quantity from the China factory?
That’s a question I hear at least several times a week, and there’s no definitive answer to that question. It depends on many different factors. Let me try to explain:
First and foremost, a China factory (or any factory for that matter) prefers to work with larger quantities because of the set-up costs and planning efforts are the same for a small quantity as they are for a large quantity. They still need to make patterns….still need to calculate the fabric usage and labor per unit….they still need to identify and source labels, packaging and other components…and then they need to file all the necessary forms with the government agencies. So all these costs are the same regardless of quantities, but then they must be amortized over the quantity of units being produced.
Another common issue is when a customer wants, for instance, 1,000 units of an item (not a bad quantity) but then they want it spread over 5 colors and 3 different sizes. That’s a problem. First of all, finding small quantities of a particular fabric/color is difficult. Secondly, now the factory will need to spend a lot more time finding all 5 colors AND will need to make 3 size patterns instead of just one.
Freight: shipping small quantities is expensive. There’s a minimum freight cost that ocean carriers charge and there are also certain fixed costs associated with processing these shipments. Those fixed costs are the same for 500 pieces as they are for a container. So these processing costs (UPS charges, government filings, customs processing etc) must be spread over the number of units being imported. For instance, assume these costs are $250. per shipment. If you were importing 1000 units then the cost per piece for this line item would be $0.25. If you increase your order to 2,500 pieces then the cost would fall to just $0.10
The lesson here is if you have a small quantity you need produced, your best bet is to limit the number of colors & sizes – and to understand that certain fixed costs associated with the shipping will need to be amortized over that quantity.
Why Small Quantities Don’t Work
Why Small Quantities Don’t Work When Sourcing in Asia
One of the most common requests we receive are from entrepreneurs and other start-ups who have an idea, but they only want a small quantity to test the viability of their concept. They may have tried sourcing domestically but found the pricing to be too high. They expect the costs to be less from a China factory because of the lower wages. That is true – but not with small quantities.
Fixed Costs:
Each shipment (LCL “Less than container load”) has approximately $400.00 in fixed costs associated with the shipment. It doesn’t matter if the shipment is for 10 pieces, 1,000 pieces – or even 10,000 pieces, the processing charges are the same. These costs include:
- Customs Entry
- ISF
- Courier Fees
- Handing Charges
- Pallet Fees
- Wire Fees
Examples:
- $400/250 units =$1.60 per unit for fixed costs only.
- If you ordered 800 units, the cost per unit decreases to $.80 a unit.
- Order 2,500 units and the unit burden is just $.16
Set-Up Charges:
The same principles apply to the China factories being asked to make small quantities. Consider; the factory must still acquire the materials and accessories… they must make patterns… they need to set up the line and they must wire monies and communicate with the customer. So just as in the “Fixed Quantiles” paragraph above, the factory will take all the same steps and procedures for an order of 250 pieces as they would for 2,500 pieces. And those costs must be spread over the number of units being produced.
Profit:
Everyone throughout the process needs to make a profit, and when the quantiles are small there is just no place to make any profit. Say, for instance, the factory doesn’t consider any job where they can’t make a $1,000 to not be worth their time. In the case of an order for 250 units they would need to add $4.00 per unit in margin to make it worth their time ($1,000/250 = $4.00). But if you ordered 2,500 units they might say $1,500 would be a reasonable profit. Now the profit per unit they add to their quote is just $.60 each
Hopefully this sheds some light on the difficulties in working with small quantities. It’s not that anyone is being difficult, but instead they are making sound business decisions.
What regions do you source from?
We specialize in Asia—primarily China, Vietnam, and Thailand—depending on your product and goals.
What products can you help us with?
Sewn goods and textiles: bags, uniforms, gloves, medical products, sporting goods, and more—customized to your specifications.
Do you handle all communication and logistics?
Yes. You work only with our U.S.-based team; we manage all factory communication and logistics through local partners.