{"id":46134,"date":"2022-10-13T14:56:23","date_gmt":"2022-10-13T13:56:23","guid":{"rendered":"https:\/\/softco.com\/glossary\/minimum-order-quantity\/"},"modified":"2023-06-07T15:26:15","modified_gmt":"2023-06-07T14:26:15","slug":"minimum-order-quantity","status":"publish","type":"glossary","link":"https:\/\/softco.com\/uk\/glossary\/minimum-order-quantity\/","title":{"rendered":"Minimum Order Quantity (MOQ)"},"content":{"rendered":"\n
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Minimum Order Quantity (MOQ)<\/h1>\n<\/div><\/div>\n\n\n\n
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Most vendors require buyers to purchase a minimum quantity when ordering inventory. This is known as the minimum order quantity (MOQ), which is the fewest number of units that a vendor requires you to purchase.<\/p>\n\n\n\n

What is Minimum Order Quantity (MOQ)?<\/h2>\n\n\n\n

Minimum Order Quantity is the lowest number of units of inventory that a vendor is willing to supply to a customer on a single order. For instance, a company may decide that they won\u2019t sell less than 1,000 units of a particular product.<\/strong><\/p>\n\n\n\n

This becomes their minimum order quantity, as any order below 1,000 units may result in a loss for the vendor. The minimum order quantity is calculated by vendors to ensure profitability per order and varies from one product to another. <\/p>\n\n\n\n

Companies can define the MOQ based on a dollar value or based on per unit. The reason why companies generally use a MOQ is because they have to bear administrative expenses, raw material costs, and also have to pay for setup costs, all of which affect their bottom line.<\/p>\n\n\n\n

Reasons Why Vendors Use the Minimum Order Quantity<\/h2>\n\n\n\n

Here are just some of the major reasons why vendors generally impose a minimum order quantity. <\/p>\n\n\n\n

Maintaining a Sales Margin<\/h3>\n\n\n\n

One of the main reasons why companies use a minimum order quantity is because it helps them maintain a sales margin. This is defined as the minimum profit that the company intends to generate by selling the product or service. <\/p>\n\n\n\n

If the sales margin is incredibly tight, the company may increase the minimum order quantity to a higher amount in order to break even and eventually turn a profit. <\/p>\n\n\n\n

Factoring in Additional Costs<\/h3>\n\n\n\n

Apart from the profits that the company intends to generate, there are other costs associated with the product too. For instance, the company wants to recoup its upfront expenditure, and in some cases, they need to plan for the sunk costs incurred in the development of the product or service. <\/p>\n\n\n\n

Other costs that most vendors factor in are as follows:<\/p>\n\n\n\n