Minimum Order Quantity (MOQ)
Also known as: MOQ, Minimum Order, Order Minimum
Definition
Minimum Order Quantity (MOQ) is the smallest amount of product a supplier is willing to sell in one order. Suppliers set MOQs to ensure orders are profitable after accounting for production setup, handling, and shipping costs.
Why Suppliers Set MOQs
| Reason | Explanation |
|---|---|
| Production efficiency | Machines have setup costs |
| Material minimums | Raw material suppliers have MOQs too |
| Shipping economics | Full pallets/containers cost less per unit |
| Handling costs | Picking/packing small orders is inefficient |
| Profitability | Orders below MOQ aren’t worth the effort |
Types of MOQs
Unit-Based
- Minimum number of units
- Example: 500 units per order
Case/Carton-Based
- Minimum number of cases
- Example: 10 master cartons
Value-Based
- Minimum dollar amount
- Example: $1,000 minimum order
SKU-Based
- Minimum per item in an order
- Example: 100 units per SKU
Impact of MOQs on Buyers
Challenges
- Ties up capital in inventory
- Risk of dead stock if demand is low
- Storage costs for excess inventory
- Cash flow strain
Strategies to Manage
- Negotiate lower MOQs
- Group orders across products
- Partner with other buyers to split orders
- Order less frequently in larger quantities
- Use just-in-time suppliers for flexibility
Negotiating MOQs
Leverage points:
- Long-term relationship commitment
- Willingness to pay slightly higher per-unit price
- Consistent order volume over time
- Taking slow-moving or excess inventory
- Early payment terms
MOQ Considerations by Channel
| Channel | Typical MOQ Approach |
|---|---|
| Direct import | High (container loads) |
| Domestic wholesale | Moderate (case packs) |
| Distributors | Lower (may break cases) |
| Drop shippers | Often no minimum |
MOQ Trade-offs
Lower MOQ = higher unit cost but less inventory risk Higher MOQ = lower unit cost but more capital tied up
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