MOQ is the abbreviation for minimum order quantity. MOQ is very important to a factory. Vietnam is a manufacturing country where the prevailing business strategy is based on offering low pricing and high volume. If you would like to produce less than 1,000 pieces in Vietnam for a low price, most factories will refuse your order.
Why is the MOQ so high?
If you only order 500 pieces, the factory will finish the order before they are able to reach their maximum productivity. As the client, you will want to calculate labor costs based on maximum productivity, however, the factory will calculate labor costs based on minimum productivity; and therefore will need to charge a high labor cost. Because of this, the benefit to manufacture clothing in Vietnam is now compromised and your company would be better off producing locally. To manufacture clothing in Vietnam you need large quantities.
In contrast, a 20,000 piece order will take one sewing line 22 days to finish. The setup time is short enough that the average productivity per day is very close to the maximum productivity of the factory. The factory can offer labor costs at maximum productivity. When you are able to produce more than 1,000 pieces per style then you are ready to manufacture clothing in Vietnam.
Small MOQ is possible, but!
• They are usually mom and pop operations. Here today, gone tomorrow.
• They don't have additional services like sourcing fabric, sourcing trims or sourcing accessories.
• The day they get a bigger and juicier order, all of a sudden your order will take a back seat.
If your MOQ is below 1,000 pieces, it makes more sense to manufacture your clothes locally. Manufacture clothing in Vietnam when your brand starts to take off, not before.
Do you know your import duty costs and shipping fees?
Are able to travel to Vietnam and see the factory with your own eyes?
Let's discuss these last two points.
How much are the import duty and shipping costs?
The second question you should ask yourself is: How much are the import duties and shipping costs for my garment(s)? In order to manufacture clothing in Vietnam and import into the USA you will have to pay an import duty. Every country has their own import duty rates and the amount you pay will depend on the garment style and fabric composition. To manufacture clothing in Vietnam you need to know about import duties.
Duty Rate Example A t-shirt made with polyester fabric has a duty rate of 22% whereas a t-shirt made with 100% cotton has a duty rate of 16.5% - when importing from Vietnam into USA. Let’s say a factory in Vietnam offers you a price of $2.5 USD/t-shirt. This price does not include import duty. The factory will not be able to tell you what the duty (tax) is because they are not certified USA Customs Brokers. You will need to contact freight forwarding companies who have licensed customs brokers on staff; they will be able to help you. To manufacture clothing in Vietnam effectively you should be all over your duty rates.
The freight forwarding company will offer you a price that includes:
• Picking up the goods in Vietnam
• Getting them on a shipping vessel
• Paying for shipping insurance
• Getting the goods into the USA
• Passing the goods through customs
• Delivering the goods to your warehouse
Bottom line is that your import duty cost and shipping costs might be more than you expected. So much more, that the price offered to you by a local sewing factory is the same or cheaper than the Vietnam price. It is important for you to do some research in advance and to take into consideration all of the costs from making the garments to importing them. Once you know all of your options, you will be able to calculate the benefits of manufacturing in Vietnam versus in the USA.
Ok, now that you are able to do 2,000 pieces and you know your import duty and shipping costs, consider this one last question.
Do I need to visit the factory in Vietnam?
Do I need to fly to Vietnam? My advice is, yes. It is important for you to meet the owner and walk through the factory before you spend time and money developing samples. I even recommend being there during the development and production phrase. It is risky to trust any factory in any foreign country. Having eyes on the ground increases your chance of success.
Let’s talk some numbers. Let’s say you are producing 5,000 garments and each garment has a cost of $4.5 USD (manufacturing, import duty and shipping cost.) You are looking at an investment of $22,500 to make your goods. Two trips to Vietnam will cost you $6,000 USD.
Your first visit will be for factory visit and development. Your second visit will be a month or two later for production. Are you prepared to spend 21% of your total manufacturing budget on travel? What is the opportunity cost of your time spent in Vietnam as opposed to spending that time at home doing marketing and sales?
Ask someone who has been cheated by a factory. After hearing their story you will understand why I recommend you visit the factory. My opinion is that you will not find a trustworthy business partner in a foreign country via the Internet. It's Russian roulette.
When you are in Vietnam, you will need to have a translator and travel guide to interpret for you and get you from A to B without hassle. Ask me and I will recommend guides for you. They speak English well and have experience in the garment sector.
In conclusion: You are ready to manufacture clothing in Vietnam, when you can produce more than 2,000 pieces per style. You are ready to manufacture clothing in Vietnam when you know your import duty costs and shipping fees. You are ready to manufacture clothing in Vietnam when you have the money to travel to Vietnam and see the factory with your own eyes.
Otherwise, I recommend producing locally first. If you need help sourcing a reliable sewing factory in the US then please ask me. I know one.
I wrote this book for you to be able to make your tech packs and understand how hard it is. If you have well done tech packs than half the battle is done.
TABLE OF CONTENTS
MY BEST ADVICE
VALUE OF A TECH PACK
27 DECISION POINTS
BILL OF MATERIALS
EXAMPLE TECH PACKS
TECH PACK SOFTWARE
Contact me today!
1. Which styles do you want to manufacture first?
2. Do you have tech packs?
3. Do you have any special factory requirements?
4. Have you produced before? If yes, then in what country?
5. What quantity per style per color do you order?
6. Does your company have a website?
7. Do you want to work with an agent or directly with the factory?
8. Do you plan to visit Vietnam?
Fashion Start-up Consultant
Ho Chi Minh City, Vietnam
Author and Dad