Minimum Order Quantity
What Is Minimum Order Quantity
Minimum Order Quantity (MOQ) refers to the lowest number of units that a supplier or manufacturer requires an order to have before they fulfill and ship that order. The minimum order quantity is typically set to ensure orders are large enough for the supplier to efficiently and cost-effectively process and ship the order.
Types of Minimum Order Quantity (MOQ)
MOQ can be divided into simple MOQ and complex MOQ. Your supplier's financial restrictions on your orders will vary depending on the things they supply. Costs for equipment, supplies, shipping, bookkeeping, and billing are a few examples.
- Simple MOQ
Simple MOQs are absolutely simple to grasp, as the name implies. When placing an order with your provider, you must both agree on a minimum expenditure or minimum quantity. This indicates that there is just one order constraint. This lower restriction might be a minimum order quantity or a minimum spend.
Example: Being a book printer. Most printers would simply be unable to make a profit by setting up their presses, ordering printing plates, and carrying out a full print run for a small number of volumes. They'll probably set a minimum order quantity to ensure that the print run is profitable.
- Complex MOQ
In addition to the one currently in place, you will need to deal with two or more criteria when trying to buy from a supplier that has a complex MOQ. Complex MOQ is driven by factors like high customization requirements, the use of special materials/equipment, complex assembly processes, and supply chain complexity.
Example: Being a company that makes clothes. It's more complicated for customers buying things than just a basic minimum quantity. There are typically additional restrictions, such as minimum cash amounts, minimum numbers of pieces or units, and minimum lengths of fabric per color and fabric type.
Why Should You Consider Minimum Order Quantity (MOQ)
So for e-commerce stores and online sellers, MOQ is an important term to consider.
- For suppliers/ wholesalers
- Economies of scale: It reduces the cost per unit for the supplier by producing in larger quantities. Large runs allow the supplier to optimize production.
- Reduce overhead: Large orders allow the supplier to amortize the costs of production setup, materials ordering, and administration over more units, lowering overhead costs per unit.
- Limit small orders: Small orders can be operationally inconvenient and uneconomical for suppliers, so an MOQ helps limit minimal orders.
- Inventory management: The MOQ helps the supplier maintain an efficient level of inventory and production.
- For customers
- Cost-effective with bulk orders: Purchasing in bulk will save you money since you'll know you're receiving the best price per unit if you engage with suppliers that have MOQs. Purchasing goods in bulk results in cost savings and increased revenue from each unit sold.
- Improved relationships with suppliers: The MOQ set by your supplier may not match your preferred purchasing amount. This implies that finding a solution will need collaboration with your provider. Stronger connections may result from these discussions.
