What Is MOQ In Supply Chain | Best Guidance-Xiongda

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What is MOQ?

MOQ (minimum order quantity) is the minimum order quantity, which is commonly encountered by sellers in the process of looking for suppliers to purchase products. For an order, the supplier is willing to start production only if the order quantity exceeds the MOQ.

Note: The minimum order quantity is closely related to the supplier’s cost. The supplier will determine the MOQ based on the customer’s order quantity based on production and cost control. That is, above this amount, the supplier can ship the goods.


What is MOQ

What is MOQ?


It is assumed that the cost depends on:

Order Quantity Q (quantity), Unit Cost C (amount), Occupancy Cost per Year as a Percentage of Unit Cost Z (%), Processing Cost per Order S (amount) and Required Quantity per Year D (quantity), three variables can be derived: average inventory Q/2, number of orders per year D/Q and Occupancy Cost per Unit per Year ZC. then the cost T is:

T = cost of ordering per year + cost of occupancy per year = number of orders per year x cost per order processed + average inventory quantity x cost of occupancy per unit

That is, T = (D/Q)S + (Q/2)ZC

Let dT/dQ=0 to get the optimum order quantity = √2DS/ZC

The minimum order quantity is generally dependent on the cost of production required by the supplier, which includes not only labor and material costs, but also the cost of opening the machine, and even adding other special cost charges, which are not only complex and time-consuming, but also more costly overall.


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What is MOQ?


The unit price offered by the supplier is usually the most favorable because the cost of a single product is lower when a larger quantity is produced. Minimum order quantities are usually at least a thousand or even as high as ten thousand per order.

However, there may be some suppliers who will be willing to offer test orders, usually in quantities of 50-200 pieces.

B2B vendors have higher minimum order quantities because their customers are not regular small sellers, but large corporations with more purchasing power, and these types of vendors are less suitable for small sellers.

How do Amazon sellers decide on MOQ?

Small sellers need to make calculations based on the quantity that the supplier is willing to produce as well as the price. If you purchase too much at once, you will incur a lot of warehousing costs, as is the case for FBA or FBM sellers.

You also need to determine if the supplier is reliable, conduct product testing, and make sure you won’t receive defective products. And if the MOQ is low, it’s a little better for small sellers, big orders come with high risk and high loss.

What determines the MOQ is the seller’s purchasing cost.
With a small MOQ, the supplier will increase the unit price of the product to avoid losing their own profit. You can order from a small supplier, but you can’t get it at the best ex-factory price.


What is MOQ

What is MOQ?


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What is MOQ?

What is MOQ?

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