Inventory Basics - Minimum Order Quantities

Inventory Basics - Minimum Order Quantities

What is a minimum order quantity?
A minimum order quantity (MOQ) is set by the wholesale supplier. It can be applied to an order as a whole, often as a value. So you might stipulate that only orders over $250 will be accepted. It can also be set on a per-item level, to indicate the lowest quantity of a given item you are willing to accept orders for. e.g. if the MOQ of an item is set to 12, your customers must order at least 12 of that item to successfully place the order with you.

How do you work out MOQ's?
There are many variables to take into account. Wholesale is all about selling in bulk anyway, and the MOQ's function is to make sure that every order is profitable for the wholesaler. When you are thinking about your MOQ's you need to bear in mind the costs of manufacture/purchase, storage, shipping, taxes, insurance and any other overheads. Keeping it simple and applying a minimum spend value to each order is the most straightforward solution, but if you have certain product lines that you need to churn more quickly then a per-variant MOQ can help move these along.

Do I have to impose MOQ's?
Absolutely not! However, they do serve a few useful functions. Firstly, if correctly set up, they ensure each wholesale order is worthwhile for you and allow you to streamline fulfilment and shipping as you're not having to handle lots of smaller orders. Secondly, they can really help you with your forecasting and ordering/manufacturing. And thirdly, they act as a barrier-to-entry, which sounds like a bad thing but it just means you should attract the right kind of stockist. You may consider relaxing your minimum order quantities for first time orders if they are unfamiliar with your range.

Orderspace allows you to create minimum order quantities on a per variant basis and a minimum spend per order. You can also set a minimum spend per-customer, so you can be truly flexible with your MOQ's.

If this has helped you, check out some of our other posts about wholesale management and strategy.