Why do you calculate MOQ?

MOQ stands for minimum order quantity and is the minimum size of the order accepted by a particular supplier. The supplier will usually calculate the minimum number of pieces that you will have to order for him to have a profitable transaction with you so that it would be a win-win situation. Some sellers accept small orders but the price per unit might be a bit higher. Most suppliers provide you with the option of getting a greater discount when you order a bigger quantity. Some wholesalers keep a very small margin on each item that they sell and it only becomes profitable when the quantity is large. This also means that a lot of time and effort will go into production if the quantity is small. This is why larger orders are much profitable as the financial gain is higher that way. MOQ is based on factors such as storage costs, shipping fees, taxes and sometimes insurance for the supplier if applicable. True wholesalers however set a very high minimum quantity while placing an order and the MOQ can certainly vary according to the product. The costlier items tend to have a lower MOQ and the expensive ones can typically have a high MOQ. MOQ is a common term used in the wholesale industry and it can differ from product to product. 

So when basically the wholesaler sets an MOQ in order to ensure that they are able to make a profit it is important as the buyer to look into the pricing in detail and see that the MOQ set is reasonable in every way. The need for MOQ is because the supply chain process is such. Every time a manufacturer develops a product, a lot of time, energy, effort and money go into designing it, outsourcing suppliers and to purchase equipment and tools. They also need to work through the process of creating samples and prototypes as many suppliers tend to request for them before they make any purchases. It is all a lengthy process.  And therefore to make a profit, it becomes necessary to make numerous quantities of each item that they have designed. This is why MOQ needs to be calculated.

Author: Todd Johnson
Email: Todd@australianwebsitedevelopment.com.au
Mobile: 0449 041 815