What are Minimum Order Quantities (MOQs) in product manufacturing? - Ep. 01
00:00 Intro 01:58 What is MOQ? 03:07 Setup Time 03:54 50 piece example 05:02 Ordering custom fabric – 500 meter minimum 06:20 Cost/Meter – Cotton VS Linen 07:30 Peacocks?! 08:18 Do you have fabric? 09:18 Fabric per project example 10:18 Beyond prototype 12:35 MOQ work around – dyeing 14:50 Future ideas and growth 15:45 Closing remarks 16:48 michael@naturalmaterials.pl 18:15 Products we make 18:55 Future topics for MakeNatural My name is Michael Klepacz, founder of the conscious capitalist company Natural Materials Unlimited in Poland. Here I will cover the concept of Minimum Order Quantities (MOQs) in product manufacturing. MOQs are the minimum amount of a certain unit required by a manufacturer to do business with them. MOQs can be monetary or volume-based and are set to cover the manufacturer’s costs and maintain economies of scale. MOQs can create challenges for startups or small businesses, but there are alternative solutions such as ordering similar products or dyeing fabric at home. Resources Books Wild Color by Jenny Dean is the “bible” on plant-based dyeing. Natural Color by Sasha Duerr is also a very cool book; it, it’s not as deep as Jenny Deans, but it has some practical projects and has some different every day objects that can get cool results. Stores If you want to buy mordants and pigments, here is a great place. They ship globally – maiwa.com
Product Prototype Example - Ep. 02
Let’s talk about prototype costs. I know that is a huge “it depends”! Let me tell you a story about a $2,000 prototype. A yoga mat. As I was saying in the previous video MOQs can be an issue for everyone. Myself included. So let’s break apart in your mind what a yoga mat is. What are the functions? What are the technical features? Ok so in this case we want to design something natural, not just a gross synthetic mattress. Functions. A yoga mat needs Grip and cushion, should be easy to carry and store. Technical features Well you need some type of natural cushion like felt. A fabric for the top and bottom. A fabric tape (which is called webbing btw) to finish the edge. And a Diamond sew pattern, this is called “mattressing”, to keep it all together.
So what are the costs? Well in this case it was all over the place. Firstly, you have to buy samples of fabrics and cushion material. Each vendor or mill will probably cost around $50 with sample and shipping. No freebies. Once you decide on a fabric you have your MOQs! A yoga mat is about 180x60cm but the fabric meter 145cm. Remember from the last video the width of the loom. So maybe it’s worth it to make an extra wide yoga mat. After all you pay for the material, whether you use it or not. Now what about the cushion? The cushion machine is 2 meters wide but I convinced the producer to sell me the width needed. Then you order dye ready fabric from the mill and you have to order at least 20 meters at 15 euro a pop. So that’s 300 plus shipping. Now you need to find the right webbing to make the edge look pretty. That’s 2 euro per meter for linen tape. Ouch. Now here is the next issue. I need a “mattressing” machine to sew all of this and I don’t have $100,000.
So, I found a sewing partner in Ukraine. That’s cool but there is another problem. Taxes. And that was before the war. You send all the materials to Ukraine and they pay a tax on it. Then they have setup fees and labors costs too. Once the work is done a month later, because you know – life, they send it to you and it gets taxed on the way back to the EU. So there you have it. That is one way to make a super expensive prototype. But it looks beautiful and you know with the right partner and planning you will be able to produce it for less than $30. And with the rule of 5, your customer wanted to sell this for $200 and the rule of 5 is showing $150. What’s the rule of 5? We will get to that soon. Thank you for joining me on this story about a prototype. This was a true story! Don’t forget to like and subscribe. This is a brand new channel and that’s the best way to grow it. Also I would love to get some more comments and feedback rolling in. Let me know how else to help you. Join me next time when I talk about what the heck the rule of 5 is.
Rule of 5 - Pricing your product to sell. - Ep. 03
Factory – brand – distributor – store – customer. As a disclaimer. This video is full of generalizations. I highly recommend that you learn your own market and the sales channels within it.
I would also like to say that the Rule of Five does not apply to all industries because of profit margin differences, but it works well in retail markets for non electronic products. This is a rule to ensure that all parties can earn revenue in the supply chain. And while you might be tempted to “cut out the middleman”, and I definitely encourage you to try to do so, the fact is that some stores will only buy from a middleman and let’s call them by their real name, distributor. Why would stores only want to buy from a distributor?
The answer is, if they had separate invoices for every product that they sold in the store, they would need a team of accountants and paper pushers. So instead, they work with distributors and purchase from their catalog. A pro tip from me is if you are making sales calls and you run into a store who tells you that they only buy from distributors, please ask them if they would be willing to give you an introduction.
These markups are important because if you decide to cut out the middleman but you still price yourself too low, you will NEVER be able to sell to a distributor. So here is an example. Ball Cost = 10 Your Markup = 130% 10*130% = 13 13-10 = 3 which is your gross profit. Profit margin = (Selling Price – Cost)/ Selling price = %