Prod x Stock x MOQ

Imagine a bakery making fragrant croissants from a bag of flour. How many croissants can be made from one bag? What is the minimum number of croissants that must be made to keep production cost-effective? Now imagine that this delicious croissant is made exclusively for you. To purchase one at regular price, you may need to be an important friend of the bakery.

MOQ Bread

Most hand tools are made from alloy steel and undergo three main stages of production:
1. Raw material forming (e.g., forging or punching)
2. Dimension and material processing (e.g., CNC lathe or heat treatment)
3. Surface treatment (e.g., electroplating).

The minimum economical production volume is determined by factors such as raw materials and equipment.

Take China Steel, Taiwan’s largest steel manufacturer, as an example. When producing steel raw materials, China Steel uses one furnace as a unit. The resulting steel can be divided into disk elements or wire rods and is typically sold in quantities measured in tons. If you require special materials with different chemical components, you may need to purchase 10 or 100 tons of customized raw materials from an entire furnace.

In simple terms, let’s assume that you need to order a minimum of 100 tons of special raw materials (China Steel may produce at low profit if the customer is Tesla-grade). If each finished product weighs only 500 grams, this means that your batch of raw materials can produce over 200,000 pieces. This is how raw materials are converted into minimum order quantities (MOQs). It’s normal to order several hundred tons at once. You could also find a middle-market supplier but must consider factors such as price, quality and delivery time.

Tien-I’s R&D team tends to be cautious when dealing with special materials due to market and production uncertainties. There is no direct relationship between risk and profitability. If sales are poor, inventory can quickly pile up.

Raw material forming,take cold forging as an example. This process involves cutting metal at room temperature using a disc or bar as the base material. The metal is then extruded into a series of dies using a punch. Think of steel as clay: a cold forging machine can quickly cut and shape each block into the desired form. This speed means that thousands of pieces can be produced per hour.

However, this speed comes with drawbacks. Molds are precise and complex, and changing them can take hours or even days. Cold forging machines cost over one hundred million dollars. To maximize returns, manufacturers try to minimize mold changes, resulting in minimum order quantities (MOQs) of hundreds of thousands at once.

These restrictions make it difficult for manufacturers to control inventory levels. It’s not feasible to ask China Steel or a cold forging plant to produce just 1,000 units of an untested product.

Factories have limited capacity to carry inventory due to factors such as capital, factory size, land prices and equipment costs. The longer inventory is held, the harder it becomes to sell. This is why MOQs are imposed on customers: not to extract more money from them but rather to share reasonable production risks.

We hope this explanation helps you understand more about hand tool production. If you have any questions or needs,please contact Tien-I’s sales team.

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