MOQ Meaning in Supply Chain & What You Need to Know About It

If you’ve searched for suppliers on Alibaba or other sourcing platform, you might have come across MOQ many times when focusing on the manufacturing price section.

What is MOQ exactly? How is MOQ going to affect your product manufacturing process? And the most frequently asked question would be, how can you maintain your product price competitive edge in the face of MOQ? 

What is MOQ?

MOQ stands for minimum order quantity. It’s the smallest amount of order acceptable for a manufacture or a supplier to produce at a time. Pretty easy to understand. 

To make it easier to understand, let say that you are to source for a microphone for your whole product. You’ve talked to some highly potential suppliers, and their MOQ is 100 pieces. It means that you have to order at least 100 pieces of the microphone component from them. Any number under 100 pieces is just a deal breaker. 

Why suppliers have MOQs? 

The next thing you may want to know is why would a manufacturer or supplier set a minimum order quantity. Well, the short answer is, they need to cover all the costs and still make profits from the cooperation. 

For a manufacturer or a supplier, the following factors are influencing the final price for the product or commodity:  

Raw materials and components

Suppliers, especially Chinese ones, always keep the minimum stock of materials and components in their production site as a way to reduce inventory costs. Therefore, they must buy from their sub-contractors raw materials and components on an order to order basis. 

Apart from the cost for production materials and components, your supplier needs to make sure that they can profit from working with you. Thus makes the MOQ all the more necessary. 

The make-to-order working style

You can usually see off-the-shelf products sold with a small MOQ, but this is not the ideal way to go. 

This is because the off-the-shelf products meet the regulations of one region don’t really meet those of a different region. For example, off-the-shelf products that are produced in China meet Chinese regulation but not that of the US. 

Minimum order quantity from the factory

In addition, the sub-suppliers also have minimum order quantity as well. This is why the minimum order quantity in many cases can’t be eliminated. That said, different sub-contractors have their unique number of the MOQ, so you would see different MOQ from different manufactures. 

Can you get a lower MOQ?

Well, as the joke goes, there is nothing impossible when dealing with Chinese manufactures. So a lower minimum order quantity is not totally impossible. 

But the problem is, how far are you willing to go for a lower minimum order quantity. 

As mentioned, the MOQ is set by the manufacturer or supplier for certain reasons. If you insist on a lower MOQ from the manufacturer, you might end up getting a low quality product made by sleazy raw materials. 

How to get a lower MOQ? 

But all hope is not lost. If your organization is rather small, or that you have little starting fund, it’s reasonable that you want to spend as little as possible up-front. This makes the pursuing of a lower minimum order quantity the natural thing to do. 

Remember what we said about doing business in China? Nothing is impossible. You just need to earn it. Here are some tips that might be of help. Try them and see if you can get yourself a great deal. 

Work with a smaller supplier

Smaller supplier or manufacturer means a smaller minimum order quantity. 

In most cases, small suppliers take customers more seriously than big corporations. The latter have the resources and people to get whatever you demand done, but they do so at a rather high cost. 

But the down side is, it may take you quite some time to find the ideal supplier that caters to your needs. Save more time or money, it’s your call. 

Be strategic about your product customization

Generally, the more customization for your product, the higher the minimum order quantity. 

It’s easy math: more customization on the product means that the supplier needs to make more changes to the tooling machines, and possibly train its employees to work accordingly. All these cost money. And where does the money come from? Of course the one who asked for the changes in the first place, that is you. 

So think strategically about your product customization.  

Try negotiating

Of course, you can try to make your supplier believe that you’ll be a trust-worthy, long-term cooperation partner, and that by giving you a lower MOQ, they will end up making more. 

The rule of thumb here is, make sure the other party feel safe and comfortable working with you while always remember to respect them enough to not ask for a crazy low number that will hurt their profit. 

Pro tip: Beware of suppliers with extraordinary low MOQ

Even though we say that it’s possible to lower the minimum order quantity, and there are certain ways to get a lower MOQ, you should be wide alert when you encounter an extremely low MOQ. Because: 

  • The manufacturer won’t cut their profit, or even risk to lose money out of no reason; 
  • The product could have compliant problems with the industry or safety standards; 
  • The low minimum order quantity at the beginning could mean a higher product price once you get fully engaged with the manufacturer. 

With that being said, you can’t be too careful when it comes to working out an ideal MOQ that both you and your supplier or manufacturer can benefit from. 

Should you have any questions regarding minimum order quantity, feel free to give us a shout. We’d be more than glad to help. 

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