Understanding MOQ and its Impact on Your Supply Chain Strategy

MOQ rates can vary substantially from one supplier to another, and from one product to the next. Of course, they will set MOQ at a level that ensures your order makes business sense for them – but it has to make sense for your operation too.

Understanding the meaning of MOQ is therefore critical for your business, and this guide will tell you all you need to know. We’ll cover the variables that will define their MOQ decision-making, why MOQ is so important for your supply chain strategy, and how to work out whether a suggested MOQ is right for you.

Jump to:

• What Does MOQ Mean?
• What Influences Suppliers’ MOQ Levels?
• Why is MOQ Important to Your Supply Chain Strategy?
• How to Calculate Your Ideal MOQ Levels
• Need Help With Your MOQ Strategy?
• FAQs

What Does MOQ Mean?

Minimum Order Quantity is the smallest number of units of a particular product that you can order from a supplier at any one time. And the main reason suppliers put MOQ restrictions in place is to ensure that orders are economically viable and profitable for them.

There are several steps in the supply chain that any product has to go through before you place an order for it: design, testing, manufacture, shipping to the supplier’s warehouse facilities, storage and so on. All of these processes cost them money, and so it makes sense for them to do so in bulk, so that they can achieve economies of scale, and keep their production overheads low.

But suppliers also know that if they set their MOQ levels too high, then their offerings will be less attractive or sustainable for potential e-commerce customers, and they won’t be able to take as many orders as they’d like. This makes MOQ a delicate balancing act for manufacturers and suppliers, just as much as it is for e-commerce businesses like yours.

What Influences Suppliers’ MOQ Levels?

No two suppliers and products are the same, and there are several different variables that they’ll take into account when working out their MOQ levels:

Order volumes

If a product is especially popular and in great demand from different e-commerce businesses, then suppliers tend to be in a much stronger position. They can demand much higher MOQ levels from suppliers, which in turn allows them to lower their own supply chain overheads even further, and therefore boost their own profitability. If they can only make so much product at a time, then they will want to sell it on the most favourable terms for them.

Profitability

Every manufacturer and supplier will have a certain level of profit margin that they will want to make on each order, and that will influence the MOQ rate accordingly. This margin doesn’t always have to be substantial: in the case of products they want to move on, it could be very small or zero, which may consequently lead to smaller MOQ levels being applied.

Desire to innovate and compete

There will be some circumstances where it’s in the supplier’s interests to offer particularly low MOQ rates and favourable pricing to customers. This often happens when a new product has been launched and a supplier wants to get it into the marketplace quickly, or when wanting to capitalise on a new social media trend.

Production costs

Some products cost far more to make than others. Using the beauty industry as an example, designing and producing a make-up box containing many different items and features will consume more money, energy and resources than making a simple lipstick. If an item has high production demands, then it will be more viable to sell in higher volumes, meaning a supplier will likely place a higher MOQ on it.

Lead times

Similar to the previous point, some products will take a long time to be ready to sell – especially if manufacturing only starts once an order has been placed. This can also be influenced by seasonal demand, such as ensuring products are available for consumers in time for Black Friday, Christmas or Chinese New Year. Some suppliers may be willing to offer lower MOQ levels to customers that place orders well in advance, or are prepared to wait longer for their stock.

Supplier logistics and inventory

Just like your business, suppliers have their own operational requirements to consider, too. They’ll have their own warehouses and inventory facilities, with all the overheads that come with them. Holding onto stock too long costs money, which in time may make them more open to lower MOQ rates so that they can move stock on, and free up space for other products.

Payment terms and reliability

Suppliers are free to apply different MOQ rates to different customers as they see fit. They are more likely to offer lower rates and greater flexibility to customers they know and trust, i.e. those that consistently pay on time and according to the agreed terms.

Why is MOQ Important to Your Supply Chain Strategy?

MOQ levels have a major impact on how your supply chain operates – and by extension, your e-commerce business as a whole. Even small fluctuations in the rate, or deals that aren’t the best for your financials, can have wide-ranging consequences. For retail businesses big and small, MOQ:

Impacts your cashflow

The larger the MOQ rate, the more stock you’ll have to buy in with each order – and the more money you’ll have to invest into it. It also makes cashflow less regular, as you’ll have larger ‘peaks and troughs’ of spending from one month to the next. Being able to optimise and right-size MOQ to your business needs can help smooth out cashflow and avoid any potential business disruption that it can cause.

Requires careful inventory and logistics management

When MOQ rates are low, you have more flexibility in your inventory and logistics. Each order naturally takes up less space, costs less to store and should take a shorter amount of time to be sold onto customers. It also allows you to diversify the range of products you hold and widen your range of availability. However, you don’t want to go too far, understock and end up selling out of products customers want.

Demands strategic planning well in advance

Both of the first two points need covering by careful strategic planning. You’ll need to think weeks and months ahead to work out how much stock you’ll need for each product, when it will arrive at your inventory facility, and how long it’s likely to take to be sold on to customers. If an MOQ rate is higher, you’ll be making fewer orders at longer intervals, and this will need to be accounted for in your planning.

Influences supplier relationships

If you’re consistently able to sell stock in a timely manner, and come back to them at regular intervals for orders of similar volumes, it gives them more predictability in their manufacturing and procurement processes. This will help you build trust with a supplier – and the longer the trusted relationship you have with a supplier, the better MOQ rates you may be able to access.

How to Calculate Your Ideal MOQ Levels

Working out your ideal MOQ rate for a particular order is often like aiming at a moving target: there are so many different variables to consider each time. However, these four steps will normally put you on the right track:

Establish your likely demand

Firstly, you should work out the likely level of demand for your product and how many units you’re likely to sell at any given time. Don’t forget to factor in external factors like seasonal variation, the emergence of new trends, and wider fluctuations in consumer and retail performance.

Work out your storage and shipping overheads

Take into account how much it will cost per unit to ship the items into your warehouse, and how much they will cost to store (based on your expected demand and speed of sales). The more stock you have to buy in and the longer you have to hold onto it, the greater these costs will be.

Define your ideal profit margin and break-even point

Obviously you will want to make a certain amount of money from each sale, so it’s also important to know how many units you’d need to sell to recoup your initial outlay. This lets you know how many units in the order are remaining to generate your profit margin, and in turn informs how often you may need to re-order from your supplier.

Review and recalculate regularly

All of those factors – and the supplier factors we highlighted earlier in this guide – are subject to constant change, often at short notice. For example, the international trade tariffs put in place by the Trump administration in 2025 suddenly made imports and exports involving the United States much more expensive. Ideally, you should recalculate your ideal MOQ each time you order, just in case anything has changed since last time.

Need Help With Your MOQ Strategy?

MOQ can be tricky and time-consuming to get right, especially with there being so many different influences and potential fluctuations. If you feel you might need help with perfecting MOQ for your e-commerce operation, then working with a trusted third-party logistics partner can make all the difference.

At ILG, our expert team is on hand to advise on the best way forward for your business, we can help you make ordering decisions in the context of your inventory and logistics needs, so that you can minimise unnecessary storage and transportation spend.

To find out more or to discuss your e-commerce fulfilment needs, get in touch with our team today.

FAQs

How often might a supplier change their MOQ levels?

As often as they feel they need to – and there are a wide range of reasons why a supplier might need to make changes. A good supplier will keep you abreast of any changes as and when they happen. Additionally, if your relationship with the supplier is good, then they are more likely to come to a compromise and minimise the impact of any changes they feel they have to make.

What can I do if I’m not happy with a supplier’s suggested MOQ?

There are several options available to you if the MOQ you’ve been offered doesn’t suit your business requirements. Perhaps the simplest one is to look for an alternative supplier, although this risks sacrificing a trusted relationship that may have taken you a long time to establish. Alternatively, you can look at reducing order frequency, or try and negotiate. Internally, you can mitigate the impact by varying your inventory arrangements to reduce your overheads.

Can MOQ figures for certain products be linked to my inventory requirements?

If you partner with a good inventory provider or 3PL, yes. As you’ll need to establish MOQ levels and place orders a long time in advance, you’ll have a good idea of how much stock is arriving and when. If your logistics partner can offer you flexibility, then you can constantly scale your inventory and warehousing needs to suit stock fluctuations, so that you never waste any money on storage space you don’t need.