What is the MOV surcharge?

Under Hula Global’s Co-Pilot Program, the MOV (Minimum Order Volume) surcharge is an example of a strategically structured fee that makes small-batch production economically viable while also offering professional manufacturing standards, prioritized factory access, and quality production.

It is essentially a fee charged to the brand when their total order value is below a certain MOV threshold set by Hula Global. This fee does not penalize brands for ordering lower quantities, but instead serves to help pay for the operational, administrative, and production costs that are the same for the factory and Hula Global, regardless of the size of the order.

In order to comprehend the reasoning behind the MOV surcharge, it is essential to comprehend the economics behind apparel manufacturing first.

Manufacturing facilities and sourcing partners like Hula Global incur certain fixed costs that do not vary based on order quantity.

For example, whether a factory is producing 300 garments or 30,000 garments, there are always costs associated with production planning, pattern making, sampling, machine setup, quality control, scheduling, coordination, documentation, compliance, and logistics.

These types of work require time, manpower, and resources, and all of that is being put to work for even the lowest quantity orders when brands do not meet the MOV standard and place very small orders; manufacturing those garments results in a loss.

Most manufacturing models mean that any brand unable to comply with the required minimum order value (MOV) will get rejected completely, or will need to increase their order volume.

Hula Global’s Co-Pilot Program does the opposite. Rather than turning away small and growing brands, Hula Global permits them to continue production with an MOV surcharge.

This approach allows brands to have professional manufacturing, even with small volumes, instead of waiting until they are larger.

The surcharge is deliberate, meaning that it is a calculated charge that allows the process to be kept within bounds (as an order with a quick turnaround and low volume may require much more time and effort than a high volume, quick turnaround order).

This means that, while the charge may be large, it enables equitable pricing to be maintained regardless of the size of the brand, while also ensuring that the factories are motivated to take smaller orders as well as larger ones.

Without this surcharge, the factories would be right to prefer large-volume clients.

Production priority is one of the major advantages of the MOV surcharge. When a brand pays the MOV surcharge, that order is considered to be of the same priority as private label or large volume orders.

This means that no additional processing time will be required, there is no secondary tier of treatment that is given, which may push other orders to take priority over it, and there are no reductions in the quality or in the level of effort put into the order.

The level of production planning, quality control, and supply chain management is equivalent to that which is provided to larger brands.

MOV surcharges offer advantages to small brands starting or entering new markets. Small brands typically struggle with manufacturing support because small-volume orders are deprioritized by most factories.

With MOV surcharges, even new brands can be offered support, communication, and professionalism throughout the manufacturing cycle, including potential production timeliness.

Surcharges facilitate easier operations at the factories. When factories estimate order volume, they estimate the necessary utilization of their machinery and workers to determine output. When small orders are placed, it destabilizes machinery, labor, and scheduling frameworks.

The MOV surcharges are compensation for the aforementioned disruptions, which creates operational ease for low-Minimum Order Quantity (MOQ) production.

Best case scenario for brands is to see MOV surcharges as an expense they can afford as long as it is an asset to them. Without having to allocate high-volume commitments, surcharges afford brands an opportunity to take advantage of global manufacturing standards, quality, systems, and structure, which can be operationally transformative.

Being able to test the waters is invaluable for new brands because it can prevent them from losing time and money by needing to wait to scale operations.

Moreover, there is flexibility in business strategies due to the MOV surcharge. A brand can now release smaller collections and test out different designs without the fear of having to go into bulk production too early. They can start growing gradually.

It is noteworthy to highlight the fact that the MOV surcharge is a transparent one. In other words, brands are made aware of the MOV surcharge from the onset, even as they assess their feasibility.

Thus, as a result, it is not surprising that brands do not have to incur extra costs midway through the process.

Additionally, the surcharge aligns with the overarching mission of Hula Global, which is to provide support and empowerment to small and medium-sized fashion brands. In this case, instead of designing a system that will favor larger brands, they came up with one that will provide support to emerging entrepreneurs.

In practical terms, the MOV surcharge applies only when the total order value is below Hula Global's standard minimum order volume.

If a brand eventually scales up and meets or exceeds the standard MOV in future orders, this surcharge might not be necessary. This encourages long-term growth while still providing immediate manufacturing support.

The MOV surcharge also contributes to gaining trust with suppliers and factories over a long-term perspective. By showing that they will commit to professional manufacturing processes even at relatively smaller volumes, brands can position themselves as serious business partners rather than hobby projects.

In summary, the MOV surcharge fee under the Co-Pilot Program is a fixed fee that includes factory fixed costs for a brand’s order when the amount is below the set minimum order volume.

It is charged to guarantee that small and emerging brands do not miss out on high-end, full-scale production services with production priority, workflow organization, and quality control services.

It is therefore a bridge for small-MOQ brands, which would otherwise be unable to enter and actively participate in the global apparel manufacturing ecosystem.

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