Abbreviations and terms used in the international trade world
The very first step any importer takes into this world is looking into the necessary acronyms – the world of international trade is full of them, and they will have a significant effect on your pricing and contract terms.
You’ll experience plenty of headaches later on if you’re not clear on these terms from the start. In this article, you’ll learn a very common one – MOQ (Minimum Order Quantity):
MOQ: This is the smallest order a supplier will accept. For suppliers, larger orders are always better, as the overhead is too expensive for smaller orders. Even if there is no issue with overhead, suppliers have their own MOQs from their sub-suppliers; hence, they are often not able to take smaller orders as they wouldn’t be able to procure the raw materials/components at costs that would suit them.
Before we go into details of the strategies that will help with lowering MOQs, we should mention some helpful points of guidance for those (especially first-time importers) looking to source from Turkey.
Tips for First-Time Importers
Have realistic expectations
We often receive emails asking for a new product on impossibly short timelines, as well as for rock-bottom pricing with high QC standards. Speed, affordability, and quality tend to exclude one another – they form what’s known as an iron triangle, where you may only achieve two of the three requirements before compromising on the third.
If you manage to get a deal that seems too good to be true from a Turkish supplier, it’s almost guaranteed that they are either attempting to entice you with a disingenuous quote (compromising on cost) or finding ways to cut corners in the production process (compromising on quality). If this is your first time, do not fall for such quotes: think, realistically, are your requirements actually feasible? Manufacturing products takes time and shipment will also.
One of the easiest ways of performing due diligence on any Turkish manufacturer is to analyse their quote – if they appear to offer unrealistically high speed, low cost or high quality on your first order, you should steer clear.
The first order always takes a lot longer than people expect
For the first order, multiply your quoted production time by three to get a true expectation of the production duration. The first order always takes two to three times longer because you will have to set up your process and inevitably iron out some kinks and teething problems.
By ‘process’, I mean the settling communication with your manufacturer. It is not enough to just communicate with your manufacturers – you need to be on the same page on every element of the production process. You need to make sure that they understand what is required of them in terms of design, quality, delivery timeframe, etc.
You will need to provide all the design specifications, mock-ups, sketches, etc. as well as making sure that all this is understood.
You then need to wait for the delivery of sample and approve them – potentially waiting for modified samples (if you ask for specific changes when you receive the first ones) will also take time.
Don’t be put off by this process – it is totally normal and it will only get easier when you are working with the same manufacturer on future projects.
Don’t forget hidden costs
It’s easy to ignore costs like buying and shipping samples, fees involved if you are planning to sell sourced products on platforms like Amazon/eBay, and the price of potential returns in your calculations. If these are neglected, your margins may suffer, which may discourage/prevent you from continuing in business.
Order sizes and repeat potential are king
If you want top quality with low production costs, you’re going to have to order big and order often. Turkish suppliers operate on razor-thin margins, and they don’t want to waste time finding new prospects or adapting their production lines. If you’re a solid buyer, they’ll be more willing to negotiate with you on virtually every aspect of your dealings with them.
Strategies That Will Help to Negotiate a Lower MOQ
More and more businesses are taking advantage of Turkey’s booming manufacturing industry to source their products. But, for small and medium sized enterprises especially, the MOQs required by factories and suppliers can pose significant challenges.
While MOQs may vary from factory to factory and supplier to supplier, it is difficult to bypass this requirement altogether. Fortunately, there are steps a buyer can take to reduce their MOQs while still reaping the myriad of benefits of overseas product sourcing.
1) Try to negotiate a lower threshold
The most obvious step is also one of the most often overlooked: have a go at negotiating a lower minimum order requirement. Turkish factories and suppliers are under no obligation to meet you halfway, so to speak, but price negotiation and haggling is a classic part of Turkish culture. It is very common, and they will not be offended by it – so go for it; attempt to negotiate a lower MOQ that will benefit your business. In many cases an adept negotiator may be able to bargain for a reduction in MOQ by as much as 20 per cent.
2) Consider paying a slightly higher price per unit in exchange for a lower MOQ
You probably think this tip does not make sense – however, by paying a higher upfront cost for a smaller order, you can save money on transport, storage and other costs in the future. If you are just starting with your new venture or planning to sell on marketplaces like Amazon and eBay, you don’t want to order high quantities without testing the product. You may end up with a lot of products that do not sell and you will have spent all your budget on them.
3) Use standardised components rather than custom ones
You may have a great product idea and you feel that you should definitely produce it. However, you should not forget to consider all the elements of the manufacturing process that requires a custom designed parts and components. The manufacturer will need to design these parts and components in house or outsource them. And, because this process is expensive and time consuming, they will probably demand a higher MOQ. The best thing to do is to think about the product itself and consider to opt for standardised or more common parts: you may be able to create an identical/very similar product this way.
Don’t forget, though, to start with a small amount in order to test out your demographic.
4) Use the same components across product lines
This tip only really applies for the manufacture of products that have unseen inner components, like watches. Because these won’t be visible (or of much interest) to the consumer, you can ask manufacturers to use the most common/readily available components for the inside. You might want to customise the outsides of these products (by using different faces/straps, in the case of watches, to provide variety and pleasing aesthetics) but with the same inner components, thereby making it easier to meet MOQ requirements for those components. The manufacturer will likely quote you a better price with lower MOQs and quicker turnaround times.
5) Get quotes from both small and large manufacturers
While larger Turkish manufacturers are most of the time able to offer lower rates due to economies of scale, smaller Turkish factories can often be more flexible on MOQ terms. Don’t forget the Turkish factories (especially small ones) will love to be producing for a UK company – they will add the British company to their client’s portfolio and rely on this to impress their German prospect client, and so will be more willing to take on smaller orders from Britain.
You can use this to negotiate better terms. When comparing quotes, don’t forget to survey manufacturers of all sizes.
6) Buy from a trader rather than direct from a factory
Trading companies (explained below) act as brokers between buyers and factories and can place joint orders on behalf of several buyers at once. This allows a particular supplier’s MOQ to be split among multiple buyers, lowering it for everybody.
What Are the Different Types of Suppliers?
You will find that there are three major types of suppliers: factories, traders, and sourcing companies.
Factories
Factories will provide the best possible price and in-house manufacture will allow you to better control quality. If working with a factory is your best option, you will have these two things going for you:
- You understand the product and its manufacturing process really well
- You need almost no customisation for the product – customisation will increase the price and MOQs
Trading Companies
Trading companies are middlemen who source products from multiple factories and mark-up the products before reselling them; often, they specialise in certain industries or product categories. Trading companies often serve as the sales and marketing arm for factories, but that is currently changing as more factories decide to invest in direct sales. Because of their affiliate relationship with factories, they may be able to get deals importers can’t ordinarily get, such as small MOQs.
However, working with a trading company means you may have to deal with inflated prices, have difficulty in customising a product, or have a harder time controlling quality due to lack of direct communication with factories. Finally, as they sell on behalf of factories, their loyalties are split between their clients and those manufacturers, which may make them ineffective for resolving disputes with suppliers.
These disadvantages should be considered against their advantages. In most cases, importers prefer to work directly with the manufacturer, but there are good trading companies out there that do high-quality work with strong customer service, so they can be of definite use to your enterprise as long as you’re aware of the disadvantages involved.
Trading companies should not be confused with sourcing companies, which sound similar but work very differently.
Sourcing Companies
Sourcing companies fully manage importing and other operations for their clients, essentially becoming their client’s office in Turkey by managing their sourcing, development of product samples, negotiation and management of contracts, ensuring quality control, and frequently handling logistics. They differ from trading companies by maintaining independence and not earning commissions from sales on behalf of factories. Consequently, they have no vested interest in protecting manufacturers and instead represent their client importer’s interests in Turkey to retain their business.
Sourcing companies also tend to better understand compliance, certification, and international trade procedures, which helps ensure that the product being imported meets the compliance standards and regulations of the domestic market.
7) Source with an online directory
Using an online directory such as Turkish Manufacturers Directory (which has over 3000 fully vetted Turkish manufacturers to source products from) comes with both risks and rewards. Just because an online manufacturer directory has vetted a supplier does not mean you should not then vet them yourself – one should always carry out their own due diligence on any manufacturer when importing from overseas.
One advantage of the use of our Turkish Manufacturers Directory to the UK companies is that in the vetting process we have secured lower MOQs for UK-based companies who contact the Turkish manufacturers on our platform.
8) Let us manage the sourcing and manufacturing for you
TM Sourcing offers an easy, safe and transparent way of obtaining an on-the-ground purchasing and sourcing department for a reasonable cost. There is no sure-fire method of lowering a supplier’s minimum order quantity, but by hiring an experienced Turkish sourcing company with a local base and a professional faculty, you can rest assured that you’re getting the best quality service for a fair price.
Conclusion:
At TM Sourcing, we’ve been sourcing products for our customers for the last decade. We understand that when customers come to us, they may already feel stressed and annoyed with MOQ-related issues they’re having with suppliers.