Negotiating Minimum orders with Manufacturers/Suppliers

[chrisdx]

Hi All,

A number of manufacturers I've approached have had minimum quanitiy orders way above what I can affort (or even think I can sell initially). For example, most suppliers have a minimum order of 1,000, however I only need about 100 to start off with (would hopefully ramp up to 1,000 eventually)

What are good ways to negotiate these minimum orders down ?

Thanks in advance

Chris

[neuromancer]

It all depends on what you are trying to manufacture and who you talk to. It sounds like a really unusual item to not be able to find a company that can manufacture less than 1000 units. Just about every industry has microproduction capabilities. I have a tee shirt biz and I specialize in limited run production. Plastics have small vacuum presses and digital resin prototyping (its late and i can't remember what it's actually called) and metals have small machine shops. Printing has digital press and desktop publishing.

You are either A, calling the wrong people or B, wanting to manufacture someting so small that it's not worthwhile producing less than 1000 units. If that's true, you might what to try looking for something else to manufacture that has a higher margin on it.Without knowing more about your product I can't say more.

[Vagabond]

i had a similar issue when I first started.. i think you might have to increase the amount, maybe find something more in the middle. 300-500 units?

depending on what youre having produced, it can be very costly to reset the machines to produce your product. My guess is if you paid a high enough price per item they will do it but at that point it may be worth ordering a higher quantity, youll have to do the math. Its a fixed vs. variable costs problem.

If their fixed costs to reset the machines is $1000 and its variable costs are $10 per unit to manufacture. If you want 100 units it costs them $2000 but their incremental costs are now only $10 for each additional unit.

Also, you can try phrasing it as you wanting to try them out versus other comanies you are working with and say you want to try a "pilot production" of 100 units to make sure that it meets your standards and that they are timely and reliable and that further orders at a larger quantity.

[neuromancer]

Also, you can try phrasing it as you wanting to try them out versus other comanies you are working with and say you want to try a "pilot production" of 100 units to make sure that it meets your standards and that they are timely and reliable and that further orders at a larger quantity.

Smart idea. Talk to them as the "second assistant director of production and fulfillment" and say the above. tell them your boss gave you a fixed cost to work with and your are trying to impress him to become the "First assistant director of production" and you'd really owe them one if they could help.

You could also try to get them to spread their initial setup costs over the next larger order. Quite often the big cost on a run is molds or screens which once made don't have to be paid for again. You are asking them to take a risk but promising more work later.

Finally, you could ask for a net 90 on the production. You start selling as soon as they go into production. 3 months later when you've sold the 10 or so units to recoup the cost, you pay them.