What is Minimum Order Quantity (MOQ)?

Minimum Order Quantity (MOQ) is the lowest number of units that a supplier, manufacturer, or wholesaler will accept for a single purchase order. If a supplier’s MOQ is 500 units, you cannot order 200—you must commit to at least 500 units per order. MOQs are set by suppliers to ensure that each order covers their production setup costs, raw material minimums, and fulfillment expenses. They are a fundamental constraint in inventory planning, particularly for businesses sourcing products from manufacturers where production runs have fixed setup costs that must be amortized across a minimum number of units.

Why It Matters

MOQs create a direct tension between supplier economics and buyer inventory efficiency. Suppliers need MOQs to maintain profitability on their end—running a production line for 50 units often costs nearly as much as running it for 500 units due to setup, changeover, and quality verification costs. But for the buyer, especially small to mid-sized e-commerce businesses, high MOQs mean committing significant capital to inventory, increasing carrying costs, and risking overstock if demand doesn’t materialize as expected.

Understanding and managing MOQs is essential for several business functions. Purchasing teams need to negotiate MOQs that align with demand forecasts. Financial planners need to account for MOQ-driven inventory commitments in cash flow projections. Inventory managers need to factor MOQs into reorder point and EOQ calculations, since the optimal order quantity may fall below the supplier’s minimum—requiring adjustment to the replenishment strategy. And product development teams need to consider MOQs when evaluating new product launches, since high MOQs increase the financial risk of introducing unproven products.

How It Works

MOQs are established and managed through the supplier relationship:

• Supplier-Set Minimums: Each supplier establishes MOQs based on their cost structure. Factory-direct manufacturers typically have higher MOQs (500–10,000+ units) because of production setup costs. Wholesalers and distributors generally have lower MOQs (1–100 units) because they’re selling from existing stock. MOQs may be set per SKU, per order, or per production run.
• Negotiation: MOQs are often negotiable, especially for established relationships or growing accounts. Common negotiation strategies include accepting a higher unit price in exchange for lower MOQ, committing to annual volume in exchange for lower per-order minimums, or combining multiple SKUs into a single production run to meet overall volume thresholds.
• Impact on Inventory Planning: When a supplier’s MOQ exceeds the calculated EOQ or optimal order quantity, the business must order more than ideal—accepting higher carrying costs as the tradeoff for meeting the minimum. This makes demand accuracy even more important, since overestimating demand with high MOQs leads to significant excess inventory.
• New Product Considerations: High MOQs increase the risk of launching new products. Ordering 5,000 units of an unproven product ties up capital and warehouse space. Strategies to mitigate this include ordering at MOQ for initial validation, using pre-order data to gauge demand before committing, or sourcing initial runs from lower-MOQ suppliers even at higher per-unit cost.
• MOQ Alternatives: Some suppliers offer tiered pricing where ordering above MOQ unlocks better pricing, while ordering at or just above MOQ incurs a premium. Others offer shared production runs where multiple buyers’ smaller orders are combined to meet the production minimum.

How Nventory Helps

Nventory incorporates supplier MOQs directly into its purchase order and inventory replenishment workflows. When generating purchase order suggestions, the system ensures recommended quantities meet or exceed each supplier’s MOQ while aligning as closely as possible with actual demand forecasts. If the calculated reorder quantity falls below the MOQ, Nventory flags the discrepancy and adjusts the order quantity accordingly, factoring the additional carrying cost into the replenishment decision. This prevents ordering errors and helps businesses plan cash flow around MOQ-driven inventory commitments.