Wouldn’t it be great if you could order the exact amount of products you need from suppliers to satisfy demand?
Unfortunately, minimum order quantities mean this isn’t always possible. These limits force you to buy a certain number of goods per order — often more than you need.
But MOQs don’t have to be a hindrance. By understanding what they are and how they work, you can better manage your costs, optimise your inventory and maintain excellent supplier relations.
What is a minimum order quantity?
A minimum order quantity (MOQ for short) is the smallest number of units you can purchase from a supplier in a single order. This is different to a minimum order value, which refers to the minimum monetary value of an order and is typically used by retailers
You’ll find that MOQs vary significantly between industries, product types and suppliers. Where a global electronics distributor may enforce an MOQ of 100 products, a small print-on-demand operator could have an MOQ of 10.
While MOQs can present challenges to retailers, they also offer a couple of benefits. For example, MOQs encourage buying in larger quantities, which often results in volume discounts and lower per-unit costs. This can improve your margins and price competitiveness.
What are the different types of minimum order quantities
There are several types of MOQs, each tailored to different business needs and supplier considerations. Here are the ones you’re most likely to encounter:
- Supplier-set MOQs – The most common type of MOQ, where the supplier or manufacturer determines the minimum quantity they are willing to accept in an order. These MOQs are usually based on the supplier's production capabilities, cost efficiencies, and material procurement needs.
- Brand-set MOQs – Some brands set MOQs for their wholesale or retail partners to ensure order sizes justify production and handling costs. This means the brand itself dictates the minimum purchase amount or quantity, often for better inventory control or to maintain profitable partnerships.
- Simple MOQs – A straightforward restriction, usually a single minimum number of units or a minimum purchase cost. For example, a printer might require a minimum of 100 copies per print run to cover setup costs.
- Complex MOQs – More complicated restrictions using multiple criteria, such as minimum number of units per style, fabric length or colour, combined with monetary minimums. Complex MOQs typically apply to industries with bespoke production processes.
- Tiered MOQs – Minimum quantities vary depending on order size, product category or contract terms. For example, a supplier may require 100 units for standard products but only 50 units for a promotional product.
- Time-sensitive or Seasonal MOQs – Suppliers may adjust MOQs based on seasonal demand or inventory cycles. Higher MOQs during peak seasons enable efficient production and logistics, while lower MOQs off-season encourage continued purchasing.
MOQs vary widely depending on supplier goals, production methods and product characteristics. It’s important to understand which type of MOQ each supplier uses to negotiate terms effectively.
Why do suppliers use minimum order quantities?
Suppliers use minimum order quantities to maintain efficiency and profitability. Understanding why a supplier sets a specific order quantity can help you negotiate effectively.
Here are the most common reasons:
To cover fixed costs and overheads
Every order has fixed costs like order processing, packaging, invoicing and customer service. The supplier incurs these costs regardless of the size and value of each order. When orders fall below a certain level, these fixed costs erode profit margins, making some orders unprofitable. By setting an MOQ, suppliers ensure the value of each order covers these overheads.
To optimise inventory management
Just like retailers, suppliers need to maintain a balanced inventory to meet demand without overstocking. Smaller or irregular orders complicate stock management and forecasting, which can lead to stockouts or overstocking.
MOQs encourage retailers to place orders that are large enough for the supplier to justify replenishment or production runs. It makes things more predictable for suppliers, allowing them to plan manufacturing schedules and warehouse spacing more efficiently.
To enhance logistics and shipping efficiency
Shipping and logistics are among the largest expenses a supplier incurs. By consolidating orders into large shipments, suppliers can reduce the frequency of deliveries and the number of packages, thereby lowering their per-unit transportation costs.
This is particularly important for intentional suppliers or those with complex supply chains. It also reduces handling errors and minimises environmental impact by reducing packaging and carbon emissions.
To encourage larger and more consistent orders
You can think of minimum order quantities as a marketing tactic that encourages retailers to increase their order size. Large orders mean more revenue and stronger cash flow for suppliers. It also acts as a barrier to entry, which stops suppliers from doing business with smaller retailers who may not be able to meet payment terms or become long-term customers.
Seasonal or promotional considerations
Suppliers may adjust MOQs during peak periods or at other times of the year to manage cash flow and inventory turnover. Increasing thresholds during peak periods controls surges in demand and increases revenue. Lowering them during the off-season can stimulate purchases and generate more sales.
How to use minimum order quantities to your advantage
You don’t have to see MOQs as a hurdle or roadblock. There are plenty of ways you can transform a potential challenge into a competitive advantage. Here’s how:
Build open and collaborative supplier relationships
Minimum order quantities are rarely set in stone. Instead, suppliers will set different MOQs for each customer. It’s therefore in your interest to build honest and open supplier relations by being as friendly, open and honest as possible.
One way to do this is by sharing your sales forecasts, growth plans, and seasonal demand with suppliers, so they know when you’ll want to place additional orders and how your orders may change in the future. Better relations may make suppliers more willing to offer flexible MOQ terms or customise thresholds to your needs.
Consolidate your suppliers
Buying as many products from the same supplier is one of the easiest ways to meet MOQs without ordering excess stock. Be careful about putting all your eggs in one basket, though. Working with only a handful of suppliers leaves you vulnerable to sudden price increases or supply chain problems.
Negotiate new MOQs based on your history and buying power
There’s nothing wrong with using your size or relationship to your advantage. If you have a track record of consistent purchases or can commit to frequent orders, you should negotiate with your suppliers for lower MOQs.
It’s in a supplier’s interest to have regular and reliable partners, and so they may be willing to offer better terms to retain your business. For additional leverage, consider creating multi-year agreements or offering early payment options.
Consider dropshipping partnerships for products with prohibitive MOQs
If MOQs for certain products are too high, consider a dropshipping arrangement instead. By partnering with a supplier that ships directly to your customers, you can expand your product range without tying up capital or occupying inventory space.
Plan orders strategically around sales cycles and promotions
Align your purchasing schedule with peak sales periods, promotional events or seasonal spikes to make the most of minimum order levels. This approach will accelerate inventory turnover on large orders, increasing your cash flow.
Monitor supplier performance and fees
You should be getting an excellent service in return for abiding by minimum order quantities. Keep a close eye on lead times, fulfilment accuracy, additional charges and delivery times to ensure you get value for your money.
If standards slip, you can use this data to renegotiate minimum order levels or change suppliers.
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MOQs don’t have to be a problem if you can expand your business across borders and get products out the door efficiently. Pro Carrier lets you do just that.
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Learn more by reading our case studies. Or find out how we can integrate with your eCommerce platform and deliver a range of shipping options to your international customers by speaking to one of our experts today.