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MOQ Meaning Version 2- The Most Detailed Interpretation

Arya Shaw
2022/10/27 09:10

moq meaning

Introduction:

The eCommerce business is sweeping the world and become one of the main economic forms globally. Because the business model of eCommerce is "selling”, so it's much more important to know exactly the moq meaning and what moq stands for.


MOQ, which means minimum order quantity. Moq stands for avoiding losses caused by excessive inventory and poor sales, we need to calculate minimum order quantity to strike a balance between the two.


MOQ is playing such a role - in balancing the inventory and sales. It helps both the wholesale suppliers and other buyers to earn a profit. However, some wholesalers may still have questions about moq meaning and do not know how to calculate minimum order quantities, and how to make low minimum order quantity with wholesale suppliers.


In this article, we will discuss what is moq in full detail. How do the low moq and high moq influence your business, and how to calculate moq. Hoping to provide you with some help in your eCommerce business.


    Table of Content

       1. The definition of MOQ

       2. Why dose MOQ exists?

       3. Advantages and Disadvantages of MOQ

       4. How to calculate MOQ?

       5. Tips to Negotiate MOQ

       6. Tips on meet MOQ

       7. How does MOQ impact inventory?

       8. Details and Conclusion


The definition of MOQ

What MOQ is?

MOQ is the abbreviation of Minimum Order Quantity. Just as the words imply, MOQ is the fewest number of products you can buy in one order, and it's also the minimum amount that the supplier sets to sell to you.


For example, if the supplier's moq is 10 pieces for a product, then the minimum number you can buy for this product can not be less than 10.


Different wholesale suppliers have different standards for MOQ according to their profit margins. In conclusion, the supplier moqs can be divided into the following two categories. 

1. Total Price of the Order Quantity

This kind of minimum order quantity doesn't limit to the product category, but the whole order value. When you want to cooperate with a supplier whose moq requirements are the whole value of the order, you can buy many products from different categories for your eCommerce store.


In this way, you can meet the supplier's moqs easily. Because when MOQ means whole order value, there is no limitation to the product categories. You can buy whichever product you want to buy even if they are low value products as long as your order's total price meets the supplier's moq. In this case, the minimum dollar of the order.


For instance, if you cooperate with a porcelain supplier sets the moq price of the order needs to reach 800 dollars, you can buy cups, bowls, bottles as well as candle handles. You can buy whichever you like, but the whole value order of this case cannot be less than 800 dollars.

2. Total Amount of the Order Quantity

Suppliers making this kind of minimum order quantity will have strict standards for product category and amount to protect their profit margins. In normal circumstances, many suppliers will require you to buy one product and the product of your order must reach their lowest moq. Otherwise, the order may be canceled.


Because usually, the MOQ is the supplier's break even point, if you order less than the lowest quantity, they may not make a profit margin or even loss money.


Also, take the porcelain supplier as an example. The MOQ of one order is 800 pcs, if you want to do business with this supplier, you need to order at least 800 bowls to meet the supplier's moq.


To be honest, for most wholesalers, especially those who have just started an eCommerce business, this kind of minimum order quantities is actually a risky investment. Because the more product you buy, the higher price you need to pay.


Not only the overall production costs will be higher, but the delivery costs, shipping costs, and holding costs will also be increased. This may lead to the hoarding of goods, and produce new costs, such as warehousing costs.


We have known that minimum order quantity will cause some risks for both the wholesalers and suppliers. Then we can not help thinking about why does MOQ still exist with such risks? We will answer it in the following paragraph.

Why Minimum Order Quantity Exists?

Looking around the world, the reason most people do business is to earn a profit margin. This is especially true for those who run an eCommerce business. Wholesalers and suppliers are doing business mainly through “money and goods transactions”. So inventory forecasting, unit price, cash flow, and cost effective are all extremely important. Minimum order quantity can balance these factors.


Wholesalers and suppliers need to always pay attention to their inventory and sell goods as much as possible in order to make a profit margin.


So in this situation, if the supplier sets a really high moq, it may force the buyers to order large quantities. That will cause the inventory to be too much to be sold, it will lead to the possibility of hoarding goods and losing money. 


If we don't know what moq stands for when doing business, and the supplier sets moq to do as one wishes, it may cause many business problems. Only the appropriate moq will do good for the suppliers, the existing customers, and the potential customers. So for businessmen, understanding the moq meaning is extremely important. 


Let's see the detailed reasons why minimum order quantity exists.


Suppliers Need to Make Profit Margins

Minimum order quantity can help suppliers earn their profit margin. Many suppliers not only provide products but also provide value-added services, such as logistics, warehousing, etc. Those items will all cause an increase in costs.


When we purchase from suppliers, the wholesale unit price itself is relatively cheap because it is different from the transaction mode of store sales. Whether the supplier can make money or not is up to how many units the buyers will order.


So the suppliers need to set their own moq. Whether it's high moq or low moq, it can guide the buyers to order the ideal quantity. In this way, the supplier, trading company, or many manufacturers can balance their average order quantity, so as to balance their break even point.


We might as well imagine that when the unit price of goods is very low and with value-added services if there is no MOQ or the MOQ is very small, it is very difficult for the supplier to make profit margins.


Minimum order quantity stipulates the order quantities wholesalers must book for each order. And the greater the order volume, the higher the supplier’s profit, which is an efficient way for suppliers to earn money.


So in order to guarantee the interest, suppliers need to make minimum order quantities according to their own operation situations. Such as the production run, their business model, and the overall production costs. That's the moq meaning - supplier sets to make a profit margin.

Production Run Nature

For manufacturers, there is no possibility that they only produce one or two products at one time.


In common sense, once the production run process is beginning, it will be mass-produced. Because the suppliers need to control the overall production costs. The cost of operation, manpower, material resources, raw materials, and management of the factory makes it difficult to recover the cost if produced on a small scale.


In addition, some manufacturers will not produce until they receive an order and feel satisfied with the economic order quantity. The order quantity is really important for manufacturers to make a profit.

For manufacturers, the ideal quantity can cover their overall production costs, while the small quantity may not or even cause losses.


And also, someone is running their own eCommerce store and wants to build their own brand. So some products are customized and cannot be produced together with other products, this will divide the production run process. And if the products are low value products, it's impossible for manufacturers to accept low order volume.


The situation we mentioned above leads manufacturers to open a separate production line for these products, sometimes including  mold opening, design, and other production run processes. All these things will increase the overall production cost. Therefore, only mass production and mass sales can be profitable.


That's why suppliers need the minimum order quantity.


What comes with mass production is a large inventory. Manufacturers need to do inventory forecasting otherwise it's easy for them to cause a backlog of inventory. To sell out as quickly as possible in case of overstock, manufacturers will stipulate minimum order quantity. So moq meaning is actually related to the production run process of manufacturers. 

Reduce the Unit Price

There is no lack of low moq in transactions, but the unit price is relatively high, which will cause the moq price to be high, too.


If the purchase price of goods is too high, it will definitely be disadvantageous to wholesalers, because it will not be conducive to selling compared to their counterparts. The higher price of the purchase, the higher price of the selling. And also, the moq price is too high will cause a problem with cash flow.


How many units you order can influence the unit price of the goods. So sometimes the wholesalers will ask the supplier's moqs themselves to reduce the price of the unit. This need to negotiate with the suppliers.


And if the supplier told you that the minimum order quantity will not change the unit price, you may find other suppliers who are willing to change according to the situation.


Someone may wonder, isn't it better to sell as many goods as possible? Then why do we need to negotiate? Wholesalers must make it clear that the purpose of our negotiation of minimum order quantity is to reduce the unit price, not to order more goods.


We just take the method of ordering more goods to reach our goal. Sometimes the suppliers aren't willing to reduce the price even if we increase our order quantity. So negotiation is useful.


In the above, we have introduced what is moq, and three reasons for minimum order quantity existence. Seem like all advantages, right? However, minimum order quantity will also cause barriers during transactions.


That's the reason why we need to understand MOQ meaning deeply - to use it flexibly to reduce business failures. Only we know moq meaning exactly can we avoid the risks that minimum order quantity brings.


Now, let's take a quick look at the advantages and disadvantages of MOQ to understand moq meaning more thoroughly.


moq meaning-the definition and reasons

Advantages and Disadvantages of MOQ

Advantages: - MOQ Meaning

1. Ensure the profit margin

We have mentioned above that MOQ can protect both the suppliers' and the wholesalers' profits if using it reasonably. Now let's explain it in detail.


For suppliers, MOQ can guarantee the order volume of each order. Usually, the formulation of MOQ is based on the break even point, which means that MOQ ensures that suppliers are profitable on every order whether high moq or low moq.


They won't make a number that cannot guarantee their profit margin, so once the client's minimum order quantity number meets their MOQ, the suppliers can get a profit. They will make the MOQ according to their situation.


Customer acceptance, average order quantity, average order per month, and unit price are all reference standards for MOQ. MOQ stands for minimum order quantity, and the suppliers will calculate moq a compromise under which they can make a profit without losing the deal because of the high moq.


The moq calculated is more difficult to handle for wholesalers than that for suppliers. Because they need to balance not only the order quantity, but also the unit price. However, this problem can be easily solved as long as we keep one point in mind-wholesalers can reduce the unit price by asking for higher MOQ.


Asking for higher moq according to your actual market situation, this method makes it easier to hold your profit margin. But you can't give the minimum order quantity number to the supplier casually, or you would spend too much money.


Wholesalers need to know exactly your average order volume in the past. The higher moq you use to lower the unit price should not be higher than your average order volume, or you may lose money by overstocking. Sometimes if your other customers have high demand, higher moq can also do better for you.

2. Ensure no excess output

From the part of manufacturing process, we have known that many manufacturers produce according to the order quantity they have received. That’s an efficient way to avoid excessive output.


However, there are still some factories that produce before selling, for those factories minimum order quantity is vital, need to be stipulated carefully, otherwise, there may be overcapacity. And also, it's very hard to handle your minimum spend on raw materials. How to control your minimum dollar amount that spend on raw materials if you produced before selling?


In the usual manufacturing process, the manufacturers need to be familiar with their monthly or daily production run, as well as their monthly average order. How many orders the business owner will receive in the common situation and how many can be sold in one order, what can we do if the buyers need smaller quantities than the lowest moq, data like this is important.


Then the minimum order quantity will be settled based on these figures, which will not only ensure that each order is profitable but also ensure that the factory will not have overcapacity.


Everyone in business knows that overcapacity is a depressing thing. Oversupply will lead to lower prices, which makes it difficult to make a profit. Not to mention the wasted manpower and material resources.


So using MOQ to ensure that there is no overcapacity is an ideal way for manufacturers. That's why we need to get the moq meaning deeply when we do business. The answer to what is moq can help us solve a lot of problems in business.

3. Build strong relationship

It is an immutable law that business pays attention to long-term development. A long-term win-win and mutually beneficial relationship is undoubtedly profitable to both suppliers and wholesalers. Minimum order quantity helps with that.


For suppliers, clients who are willing to place an order that meets your minimum order quantities, are more likely to cooperate with you again.


Doing business, whether large businesses or small businesses, especially selling on an eCommerce store is a very cautious process. Unless wholesalers do enough research to determine the market value of the products, they will not take the risk of placing large orders.


Ordering the goods that reach the minimum order quantity shows that they recognize the suppliers and their products, and feel satisfied with the supply chain, which will lay a hard foundation for long-term cooperation.


In continuous business dealings, the suppliers and wholesales will gradually build up solid trust. Once trust in the business is established, it is beneficial to both sides. MOQ plays a role in establishing trust and building strong relationships. We can even say that moq means a strong relationship. Understanding this moq meaning can make your business go more smoothly. 

Disadvantages: - MOQ Meaning

1. May cause the transaction to fail

This result will occur when the MOQ is too high or the wholesaler does not have the ability to reach the initial order quantity. There are two reasons that can explain why MOQ is too high in some orders.


The first reason is that the production cost is too high. For example, the raw material they used is better than others in the market, or they will bear the shipping, packing cost, and so on. In this situation, the low minimum order quantity will lead to the failure of the supplier to get back to the cost. So, some suppliers will set a high MOQ.


Secondly, some suppliers are eager to make money and sell goods, so they want to achieve these goals by setting a high MOQ. However, sometimes this method can be counterproductive, and the loss outweighs the gains.


Because wholesalers, especially novice wholesalers, do not have the ability to purchase so many goods to meet the MOQ. Although the products may fit well, they will have to abandon the deal to avoid losing money.


And they do not want to take risks, because when purchasing, more is not necessarily better than less.  We want to know the moq meaning not only to use it to strengthen but also to avoid the cons. 

2. Raise the total price

MOQ means that you can't place an order with any quantity at will. You will have a threshold at the time of purchase, and you cannot order products less than this price. Usually, the minimum order quantity will not be set at one or two, its units are hundreds, thousands, or even tens of thousands.


Under this circumstance, although one product is cheap, the total price of the order will still be high. As the saying goes, many a little makes a mickle. Moreover, according to the current market situation, the order quantity of goods with a lower unit price is relatively high.


This market consensus undoubtedly increases the burden on wholesalers, the cost output is too high, but the return will not have an effect immediately.


And for those products with high unit prices, maybe they have low MOQ, and the total price will not be very optimistic. At the same time, the sale of high-priced goods is also a difficult problem.


To sum up, one of the moq meanings is that when setting MOQ, the suppliers need to take the wholesalers' financial ability into account in case the total price is too high to cause the transaction to fail. And the wholesalers also need to carefully consider the input-output ratio.

3. Damage the relationship

The water that bears the boat is the same that swallows it up, as does the moq meaning and business relationship. Using moq meaning reasonably can be of great help in establishing business connections. However, if you set a high moq that it's difficult to reach, sometimes the wholesalers may think their partners are too “greedy”. So you need a lower moq.


Especially for existing long-term partners, may think that the suppliers value interests more than relationships. This may affect their thought on continuous cooperation. All the wholesalers and the suppliers have some “old friends” in business, and rules are not so important when doing business with these friends. when you set a MOQ, or you want to bargain, remember to grasp the degree, so as not to damage the relationship.


Meanwhile, for new partners, maybe you are cooperating for the first time, the “degree” is also vital. Because the first cooperation can basically determine whether a long-term cooperative relationship can be established next.


Suppliers should never screw away potential customers with high MOQ, and the wholesalers also should never screw away suppliers with low intended prices. Respect for each other, and respect for the market, that's the foundation of long-term development. And that's also the moq meaning.


We have discussed many things about moq meaning from now, including does MOQ mean, why MOQ exists, and the pros and cons of moq meaning. Now let's talk about how to calculate MOQ for suppliers and wholesalers on the basis of moq meaning.


moq meaning - pros and cons

How to calculate Minimum Order Quantity?

Since we have known what is moq, we need to know how to calculate it. Only in this way can we make the best use of moq meaning in business.


The calculation of MOQ is relatively flexible, and there is no clear formula or rule, which requires users to carry out according to their own actual business conditions. We have mentioned this point many times above. In this part, I will summarize and integrate the points mentioned above, to make the knowledge more systematic and easy for readers to understand.


Here are a few tips to calculate moq:

1. Actual reality

The actual reality we mentioned here, of course, includes the suppliers' and the wholesalers' actual ability but is not limited to these. The most important factor which we need to consider is the market situation of a product.


No matter how low the unit price is, no matter how low the minimum order quantity is, it is difficult to sell a product with no market prospect.


Selling is actually a circular process. The manufacturer produces the product and then sells it. The wholesalers buy the product and then carry on the second sale. Sales are interlinked, and the key to selling a product lies in the attractiveness of the product itself.


Therefore, in the formulation of MOQ, suppliers should conduct research to determine whether this product has a market prospect. There is no shortage of suitors for products with good market prospects, even if the MOQ is relatively high. While products with a poor market prospects can reduce the minimum order quantity to attract orders.


At the same time, when stipulating the MOQ, the wholesalers also should consider the financial resources of their past clients. Make sure MOQ is within the affordability of these clients.

2. Break-even point

For wholesalers, it's really crucial to choose a reasonable MOQ. This will at least ensure that you will not be living beyond your means.


How do wholesalers determine the most suitable MOQ for them? They need to be very precise about the costs they will pay and the profits they will be able to make in each transaction. That means, they need to know their break-even point exactly.


The cost includes not only the cost of purchasing goods but also logistics, warehousing, packaging, damage, discounts, and so on. The wholesalers need to take all the factors above into account when choosing the MOQ.


There is a method. Count the sales quota of each month in the past and calculate the average of these sales. If this average is less than the minimum sales, then the wholesaler can choose the MOQ around the number.


If the average is higher than the previous minimum sales. Wholesalers can consider the overall sales situation, and choose whether to take the minimum sales as their ideal MOQ.


There is no lack of some merchants with good overall sales but low minimum sales, so it is no problem to use the average to do MOQ. Just remember not to pursue too high or too low moqs in case losing money on goods hoarding or selling out.

3. Inventory and logistic cost

Now we will carefully analyze the impact of inventory and logistics on MOQ.


Different minimum order quantities will lead to differences in transportation and warehousing charges. Higher orders mean more goods, so there will be higher costs in transportation and inventory.


Before calculating such corresponding incidental cost, many people think that the minimum order quantity is acceptable, but once the incident cost is calculated, the cost will be much higher than they expected.


So we need to have this way of thinking: when considering MOQ. We need to consider not only the price of the total number of products but also the incidental price of these products. Only in this way can we get more complete cost data, so that we can reach a more secure transaction. The cost that is not considered but actually exists may be a big reason for your business loss.


MOQ needs to be calculated because all businessmen need to make a profit. However, MOQ is not as rigid as a mathematical formula, it is flexible, and it is negotiable. How to negotiate MOQ with the wholesalers and suppliers? There is some advice as follows:

moq meaning-how to calculate?

Few Tips to Negotiate MOQ

With suppliers:

1. Purchasing specific number of goods.

This method can be used when wholesalers need less goods than minimum order quantity, and the suppliers are unwilling to reduce the MOQ. The core of this method is to pay the same prices as MOQ, but only need the supplier to provide the quantity of goods we need.


In the short term, this approach will make the wholesalers to “sacrifice” some of their interests. But in the long run, the advantages outweigh the disadvantages.


First of all, it looks like there is a loss on the purchase of goods, but in fact it reduces logistics and warehousing costs. It is very troublesome to buy more products than you can actually sell in order to meet the moq.


Transportation and storage all cost money. Transport needless to say, the more goods, the higher the cost. The cost of goods storage is the actual trouble, not only the high inventory fee caused by the goods, but the longer storage time.


The fee will continue to accumulate according to your storage time. The overstock of goods is not only a matter of sale, but also a problem of storage. The cost of long-term inventory accumulation is not low.


Secondly, sometimes sacrifice part of the interests in exchange for long-term partners, which is very beneficial to long-term development.

2. One order, two transactions.

This method is also used in situations where the actual selling capacity does not allow itself to reach the supplier's order quantity. That is, to order the product with the minimum order quantity at one time, complete a transaction first, but require the supplier to deliver the goods in two stages.


This can reduce the risk of not selling out of goods, but also reduce logistics and warehousing costs. But first we need to ask the supplier if he or she is willing. Usually, in order to conclude a deal, the supplier will not refuse.


When we learn about the moq meaning, we don't need to use it rigidly. In this way, we reach the transaction volume and reduce a lot of trouble.

3. Increase the unit price

Sometimes, wholesalers are reluctant to adopt the first method and suppliers are not willing to adopt the second method. We also have a compromise based on the moq meaning, that is, to reduce the MOQ by raising the unit price. The existence of the MOQ is nothing more than to make a profit.


When the unit price of the commodity increase, the vested interests of the supplier becomes larger, and the seller will be willing to reduce the low quantity. This is a good way to reduce the initial order quantity. Although this method will lead to an increase in procurement costs, it will not affect the logistics and warehousing, let alone the overstock. When selling, it will also reduce the pressure on wholesalers.


So, if you are not willing to use the first method of losing money, and the supplier is definitely unwilling to divide two order for you, you might as well adopt this method to achieve the desired effect.

With wholesalers:

The positions of wholesalers and suppliers are different. Usually, suppliers want to improve the MOQ to earn money, while wholesalers need to reduce MOQ. Therefore, in negotiation, the approach to the two can be exactly the opposite. If you understand the moq meaning very deeply, you can easily get this point.

1. Increase the unit price

If wholesalers want to buy product that is lower than the minimum order quantity, we can ask if he or she is willing to pay a higher unit price. In this way, the interests of wholesalers and suppliers can be guaranteed to a certain extent.

2. Reduce the quality of products

There is another way to reduce the moq, that is to reduce the cost. When selling high-cost goods, suppliers must set a relatively high moq, otherwise it will lead to their own losses. To do business is not to do charity.


No one will lower your standards because you are not up to standard, so you have to take other measures. When the quality of goods declines, the prices of raw materials used will be reduced, the production process will be simpler, and manpower and material resources will be reduced. In this case, suppliers do not have to pay that much, and they will be willing to accept orders with lower MOQ.


But at the same time, suppliers need to emphasize the risks that may be brought about by reducing the quality of goods with wholesalers, such as unqualified product quality inspection, substandard products, increased after-sales problems, reduced credibility and so on.

3. Reduce the price

It is common sense that the accumulation of goods will lead to a rise in the total price. Many times wholesalers are unable to meet the MOQ because they do not have enough funds. In view of this phenomenon, as long as the problem of capital is solved, a deal can be reached. The simplest and most convenient way is for suppliers to reduce prices as far as they can.


There are two ways to reduce the price, one is to reduce the unit price, and the other is to reduce the total price. In fact, lowering the unit price will reduce the profit more, but it will be easier to close the deal. 


Reducing the price of a single commodity to achieve the goal of reducing the total price, so that wholesalers can afford it. Another way is to reduce the total price, keep the unit price of the goods unchanged, discount on the overall price of the order, and also achieve the way of price reduction. This approach will harm the interests of suppliers to some extent but will facilitate the conclusion of the deal.


Want to get more useful information about moq meaning and negotiation skills? This link will help you.


tips to negotiate moq

Few Tips on Meet Minimum Order Quantity

According to common sense, the lower the MOQ, the higher the unit price, and vice versa. It seems that unit price and MOQ are difficult to have the best of both worlds. Because if pursuing a low price, then one needs to order in bulk, but that may cause overstock. On the other hand, if the wholesalers don't want to bear the risk of overstocking, small batch orders will also lead to high unit prices and difficulties in sales.


Then the problem appears, how can we strike a balance between the two sides? Do we have any ways to achieve the minimum order quantity without increasing or lowering the unit price too much? Please read the following paragraphs. We will introduce three useful tips for you.

1. Direct communication

Direct communication is especially efficient for new sellers who are running an eCommerce store. As we all know, whether it is doing business or making friends, sincerity is the basis of all communication. And doing business is actually can’t apart from making friends.


So, for wholesalers, no matter what kind of wholesaler you are, try to communicate with the suppliers about your actual situation directly, maybe you will get some unexpected results. For example, as a new wholesaler, you can’t afford the total price of the minimum order quantity, or you just want to place a small order first to test the market situation of this product.


Thoughts like the above can be understood by the suppliers. In addition, new wholesalers are actually potential long-term partners, they will not let such chances go away. Try to negotiate with them, you can also use some interest temptations.


Such as you can tell suppliers that once your business starts smoothly, you will work with them for a long time, but you need to see their sincerity first. At the same time, you can introduce your existing resources to them to increase their sales, for example, your other partners. Usually, a merchant will have many customer resources.


Know your strength, and use them wisely, that's the key to success. And in here, our strenthen is the moq meaning.

2. Take advantage of competition

Actually, MOQ doesn’t exist in just one or two stores, all suppliers will set a order threshold. But by the same token, as wholesalers, we have more than one choice. During negotiation, we can take advantage of business competition.


The point is let the supplier who are communicating with you to know that you have other better choices. Everyone in business knows how competitive it is, and they naturally know that we can’t just pick one supplier. The advantages are all through comparison. Let the supplier know, “if you can’t, we can change the next one at any time.” you must have this kind of thinking so that you won’t lose money in doing business.


At the same time, comparison is very important when selecting suppliers and corresponding MOQ. There will be no problem with the comparison of goods. Once the wholesalers are aware of competitive pressure, they will lower their standards in order to retain you as a client.

3. Find other channels

What should we do if both the methods above are not useful? We can find another supply chain.


When they really want to buy the corresponding products but really do not have the ability to reach the minimum amount. But this is completely unnecessary, we need to know that there is no shortage of other supplier in the market.


Among the tens of thousands of suppliers, there must have some suppliers that are suitable for us. At the same time, when purchasing, the supply chain is very important.


China has so many wholesale websites and trading company. Alibaba, and Aliexpress, most people are familiar with those platforms. Generally, such platforms not only do wholesale business, but also sell products separately, and there are basically no MOQ requirements. Most customers who buy in Alibaba may not know what’s MOQ and what dose MOQ mean.


However, there are some differences in the unit price of goods when ordering different quantities of products. Similarly, the more you buy, the lower the unit price.


It's a lot easier to find some china sourcing agents. Ruizhi sourcing is a sourcing agent that is committed to helping clients find the most suitable products at the most competitive prices.


We have been talking about what is moq and inventory forecasting, and some people may be wonder, what is the relationship between MOQ and inventory? How dose MOQ affect inventory? To answer this question, we must have a deeper understanding of moq meaning. 


How does MOQ impact inventory?

MOQ impact inventory from three aspects. Now let’s explain them separately.

1. From production

The factory does not produce products at will, and there is a certain plan for how much it will be produced within a long period of time. One of the bases for this plan was MOQ. As we mentioned earlier, the monthly sales quota and the quantity of each order are the basis for determining the production of the factory. Therefore, the existence of MOQ is the reference standard for factory production.

2. From storage

MOQ also impact inventory from daily storage quantities. This point should also be divided into two aspects: wholesalers and suppliers.


The inventory of each product of the supplier can not be lower than the minimum order quantity they set. It can be seen that the minimum order quantity is equal to the minimum inventory quantity.


Because once the stock quantity is less than the minimum order quantity, they will not be able to process the new order in time. In order to ensure the smooth completion of the transaction, the supplier must have an inventory of goods not lower than MOQ. At the same time, the same is true for wholesalers, whose inventory is only higher than or equal to MOQ.


Sometimes, due to inaccurate judgment, wholesalers may purchase products with high MOQ and sell poorly, and then there will be an overstock of goods.

There are some details need to be emphasized:

1. MOQ should not be too high

When the supplier is setting the MOQ, the only criterion is the actual situation, do not set too high for the sake of profit. This will not only lead to a low possibility of transaction, but also affect the relationship with apparent customers and potential customers.

2. Don’t fall into the low MOQ trap

If you are a wholesaler who pursues product quality, don’t be confused by products with low unit price and low MOQ. For the sake of others, why do some products have low prices and low MOQ?


This is contrary to what we know that the unit price is low and the MOQ is high. These products may have sacrificed some things, perhaps quality. Therefore, in the face of similar products, we must reconfirm their quality to avoid constant after-sales problems.

Conclusion:

In this article, we dissect the meaning of MOQ in detail. We have introduced everything from the existing reasons to the advantages and disadvantages, tips, calculation and negotiation methods. It is difficult to avoid the existence of MOQ on the process of trading. We should abide by the market rules, and at the same time, we should also judge what kind of MOQ is worthwhile and what should not be accepted. Only by clearly understanding the MOQ meaning can we use it flexibly. 


Article by:
Arya Shaw
Customer Manager:More than 2 years of experience in product sourcing
Contact with me at Linkedin
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sahra
September 27, 2022 20:01pm
good sharing
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