Minimums in Production

In previous posts, I’ve talked a bit about minimums (particularly Minimum Order Quantities, or MOQs) - but today I’d like to examine them a bit more. 

MOQs are like Batch Cooking

When we’re producing products en masse, there is a breaking point at which it is simply too expensive to make less than a specific number of items. It’s best to think of this like doing food prep on the weekends: let’s assume that making dinner from scratch every night of the week generally takes 30 minutes each evening. But if you were to make a big batch of food over the weekend, it might only take an hour, followed by five minutes of reheating for each meal. Deciding when to make the tradeoff is a pretty straightforward math problem:

If you were making only 2 days worth of meals (at two a day, for a total of four meals), the math looks like this: 2 days of meals * 30 minutes to cook each day = 60 minutes of cooking per week versus 60 minutes of batch cooking + 5 minutes for reheating * 2 meals per day * 2 days of meals per week = 80 minutes of cooking per week. For 2 days of meals, it takes less time to make the daily meal rather than the batch. 

Alternatively, let’s say you’re making enough for ten meals (two meals a day for five days a week): 5 days of meals * 30 minutes to cook each day = 150 minutes of cooking per week versus 60 minutes of batch cooking + 5 minutes for reheating * 2 meals per day * 5 days of meals per week = 110 minutes of cooking per week, resulting in 40 minutes of savings over the course of a week by batch cooking. What you save in time you sacrifice in variety, but when you’re making the same product over and over again, variety is very much not what you want.

This is obviously a coarse example, but the same general logic applies to apparel production. When you have a team of sewing operators (aka stitchers) doing batch production, it takes more time to set up, but the amount of time they spend per unit is much lower than if they were making a smaller quantity of units. It’s also worth noting that, financially, it makes more sense to do larger quantities, as factories have very small margins and rely on volume to make money!

MOQs in Practice

So when a factory states an MOQ, they’re basically saying this is the minimum number of units that you need to order so that it makes sense for us to commit time and money to run this production run. It is possible to order less than their stated MOQ, but then the price per unit goes up. 

The MOQ term is not just limited to factories - fabric and trims vendors will also have their own minimum order quantities. It is far more efficient to make 50 (or more realistically, 500) yards of fabric than 10 yards, especially with the size of the most popular mills. Just running the machinery alone can be very costly, so of course they want to be efficient with higher minimums. 

In addition to MOQs, there are also MCQs, which are minimum color quantities. Vendors and factories alike must change their entire setup to change a color, which takes time and can kill efficiencies. For example: fabric mills have to drain the dyeing pools to introduce a new color; apparel factories have to change out all the thread on every machine. The less often that they have to make complete changes like that, the better.

Similarly, there are tiers of MOQs - after a certain number of units (usually a factor of ten, e.g. 100/1,000/10,000), factories will often reduce their cost per unit to reflect the improved efficiencies. We’ll dive into the costs of apparel production in a future post, but MOQs are a huge reason why larger brands can offer their apparel at lower price points compared to smaller brands.

MOQ pitfalls for small brands

One trap a lot of smaller brands fall into is focusing too much on individual unit costs, and will opt to produce more product to take advantage of the economies of scale… and then discover that they don’t have enough of a customer base to sell through the full order. Now they’ve wrapped a bunch of their money into inventory and no longer have cash on hand to do the outreach and marketing they require.

What other issues can you imagine might arise from a misunderstanding of MOQs and MCQs?