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If a manufacturer increases their MOQ 5x of your best-seller, is there anything you can do?
I’ve had some experience with manufacturers suddenly and drastically increasing MOQs, this can make perfect business sense, but often it’s done without any forewarning and if with OTCs it can be a lengthy process to find a new one.
Naturally it’s wise to have backups in place, but if you don’t, besides rushing to find a new manufacturer is there anything one can do?
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4 Replies
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I suppose you can sign a longer term contract with the manufacturer locking in a set price for months or years and guaranteeing them some repeat business.
One of the standard procedures we had for any raw material was that we always had a second supplier. That prevents suppliers from doing things like that. And this would apply also to manufacturers. Always have a quote from a second manufacturer who could make your product if you needed to switch.
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A contract is a very good idea if one can get a CMO to agree with it. Although isn’t an implicit agreement a bit of a contract too?
We do typically have quotes from other manufactures, still switching can take a lot of time and significant sales losses can occur from going out of stock.
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As Perry said, we as well have 2+ supplier for most of APIs and excipients. When you register/notify a new product you register both of manufactures.
5x MOQ can be much, but sometimes it can be supported if you have big batches. You can make a contract in which you specify in how many portion you can take the new MOQ in a specific period of time. In this way you don’t have to buy all the quantity at once. -
Zink,
What I have to say will not help you with the current situation you find yourself in, but I did read that by selecting ingredients (when possible) that are multi-functional or flexible (and therefore used in more than one of your products) you can gain some business advantages. For the small business, they can buy in larger quantities because it will be flowing out the door faster in multiple products. Or adapt to a larger MOQ without as much hardship.
Of course there are often ingredients that are unique to a formula and if that supplier ups their MOQ this isn’t a help. But for those who are not locked into a formula yet, I wanted to mention this tactic. One could for instance find one emulsifier that worked for multiple products instead of using a unique one for each.
Perhaps you can negotiate a grace period with your supplier? Or an exception if you do enough other business with them on other supplies? Offer a slightly higher per-unit price for a lower quantity if they are incurring labor costs to repackage the ingredient in smaller batches?
Or launch a new product which also uses the ingredient, thereby increasing your needed demand such that 5X MOQ is viable for you?
Best luck,
Margeaux
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