Inventory
What does MOQ mean?
MOQ stands for minimum order quantity: the smallest order a supplier will accept, in units or as a minimum order value. MOQs exist because every order has setup costs for the supplier. For an online store, a high MOQ can force you to buy more than you need, tying up cash and raising the risk of dead stock.
How MOQs are set
| Type | Example |
|---|---|
| Per product | 500 units of each SKU |
| Per order | 1,000 units across any products in the order |
| Per variant | 200 units per color |
| By value | Minimum order of $5,000 |
MOQ vs EOQ
MOQ is the supplier's rule. EOQ (economic order quantity) is your own best order size: the one that minimizes the combined cost of placing orders and holding stock.
EOQ = √(2 × Annual demand × Cost per order ÷ Annual holding cost per unit)
Worked example: when the MOQ is bigger than EOQExample numbers
| Input | Value |
|---|---|
| Annual demand | 1,000 units |
| Cost per order | $50 |
| Holding cost per unit per year | $2 |
| Unit cost | $8 |
| Supplier MOQ | 500 units |
- EOQ = √(2 × 1,000 × $50 ÷ $2) ≈ 224 units
- Ordering at EOQ: 4.47 orders a year × $50 = $224; average stock 112 units × $2 = $224. Total ≈ $447 a year
- Ordering at the MOQ: 2 orders a year × $50 = $100; average stock 250 units × $2 = $500. Total = $600 a year
The MOQ costs about $153 a year more in ordering and holding costs. It also needs $4,000 of cash per order (500 × $8), against about $1,790 at EOQ.
How MOQs affect cash and dead stock
- More cash tied up. Every order above what you need is cash sitting on a shelf.
- Longer time to sell through. At 1,000 units a year, a 500-unit order lasts six months. Days inventory outstanding rises.
- Higher dead stock risk. If demand drops, or you were testing a new product, you're left holding the excess. The dead stock calculator shows what it costs to carry.
- Less room for variety. Per-variant MOQs make it expensive to offer many colors or sizes.
Tips for negotiating MOQs down
- Offer a slightly higher unit price for a smaller order. A small increase per unit can be cheaper than carrying excess stock.
- Combine variants. Ask whether the MOQ can apply across colors or sizes of the same product.
- Commit to repeat orders. A schedule of smaller orders over the year can be more attractive to a supplier than one big order.
- Pay a setup or tooling fee once, in exchange for lower MOQs on later orders.
- Start with a trial order. Many suppliers will accept a smaller first order to win a new customer.
- Use the supplier's existing materials, such as stock fabrics or standard packaging, which often carry lower minimums.
When a high MOQ is worth accepting
- Proven best-sellers with steady demand will sell through anyway.
- Large volume discounts can outweigh the extra holding cost. Compare the total cost at both order sizes.
- Long lead times may mean you'd need a big order to cover the wait regardless.
For how order size fits with when to reorder, see the guide to inventory replenishment and the EOQ calculator.
FAQ
What does MOQ mean?
Minimum order quantity: the smallest order a supplier will accept, set in units or as a minimum order value.
Why do suppliers set MOQs?
Each production run or order has fixed setup costs, such as machine setup, materials bought in bulk and admin. MOQs make sure each order is large enough to be worth producing.
Can I negotiate an MOQ?
Often, yes, especially with repeat orders, a slightly higher unit price, or by combining variants. It's usually easier to negotiate once you have a track record with the supplier.
What's the difference between MOQ and EOQ?
MOQ is the minimum the supplier will sell you. EOQ (economic order quantity) is the order size that minimizes your own ordering and holding costs. If MOQ is higher than EOQ, you'll hold more stock than is ideal.