What is MOQ (Minimum order Quantity)? MOQ (Minimum order Quantity) Review

MOQ is short for Minimum Order Quantity. In international trade terms, MOQ stands for Minimum Order Quantity, which refers to the minimum quantity of a particular product that a specified supplier is willing to sell. If the importer cannot meet the minimum order quantity requirement, the supplier will not deliver the goods.

About MOQ

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

MOQ is one of the ways to replenish stocks by setting a recommended order quantity for each product. In addition, you should pay attention to the validity of the order, which is the rules set by the supplier. For example, the minimum order quantity, packaging quantity and method, etc. The buyer's recommended order quantity is set on this basis.

MOQ is the minimum order quantity accepted by a supplier. Generally speaking, this is based on the minimum order the supplier needs in order to make the deal favorable for them. Sometimes they may accept a smaller order in exchange for a higher price per unit. With most suppliers, the more you order, the bigger the discount.

While some suppliers don't enforce minimum orders, they are essential to many wholesalers who rely on large orders to make a profit. Most wholesalers only make a small profit on each item they sell. Sometimes this means that small orders can take a lot of time and effort to process with little financial gain, so large orders are more profitable.

calculate

Assuming that the cost depends on: order quantity Q (quantity), unit cost C (amount), annual occupancy cost as a percentage of unit cost Z (%), each order processing cost S (amount) and annual demand D (quantity), three variables can be obtained: average inventory Q/2, number of orders per year D/Q and annual occupancy cost per unit ZC. Then the cost T is:

T = annual ordering cost + annual occupancy cost = number of orders per year × processing cost per order + average inventory × occupancy cost per unit;

That is, T = (D/Q)S + (Q/2)ZC, let dT/dQ = 0, and the optimal order quantity = √2DS/ZC.

Reasons for setting MOQ

1. Low profit margins require larger sales volumes: Most Chinese manufacturers tend to operate on thin profit margins, usually as low as 3 to 4%, which requires suppliers to produce large quantities of products to break even.

2. Supplier MOQ requirements reflect the MOQ set by their material subcontractors: Chinese suppliers tend to keep a minimum inventory of raw materials and components. Therefore, they must purchase materials and components from subcontractors based on orders, which in turn requires the factory to be able to meet the subcontractor's MOQ.

3. Chinese suppliers do not keep products in stock, they generally make to order: If the factory only keeps the product in stock, it is easy to sell low quantities. However, they rarely do this, at least for products that are prepared for export.

How to deal with the buyer when the buyer cannot meet the MOQ

In foreign trade business, it can be said that there are customers from time to time, but the MOQ cannot be met. Especially with the popularization of small orders with lower and lower foreign trade thresholds, such situations are very common. This situation is even more troublesome for customized products. Especially for newcomers, there is no order, or it can be said that the other party has potential, not the overall MOQ is not met, but each variety is not met, but this still has the potential to develop into a big customer. If the seller wants to take this kind of order, he can do the following: increase the price; negotiate with the customer to increase the quantity; produce some common specifications; several customers make orders; order to reach MOQ, shipment in batches; extend the delivery time. Using these methods, sellers can try to make more profits when buyers cannot meet MOQ.

Notice

Moq is a computer term in the computer industry. Moq is a Mocking library designed and developed for .NET using features of .NET 3.5 such as Linq expression trees and Lambda expressions.