How to Calculate Minimum Order Quantity?

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Improved Supplier Relationships: Building a strong relationship with suppliers is key. Understanding the balance between a buyer’s ideal order size (Economic Order Quantity or EOQ) and the supplier’s MOQ is important. If the MOQ is higher than the EOQ, buyers can sometimes negotiate with suppliers for solutions, like splitting orders with other buyers.

There’s no one-size-fits-all MOQ (Minimum Order Quantity) because each business has different needs. Generally, businesses face a tradeoff: they can pay a higher per unit price for a lower MOQ or set a higher MOQ at a lower price. You may not come across a fixed formula, but here are four steps to help you figure out your MOQ.

1. Estimate Demand
The first thing a supplier and merchant need to do before the supplier actually el-salvador phone number list produces the inventory and the merchant buys it is to understand and evaluate how much stock they want to sell. This phenomenon is known as demand forecasting, and it’s done best with competition, product type, seasonality, and other factors in mind. It gives you an estimate of how many units both parties will sell, which can help determine your next purchase order.

For example, if your forecast says you’ll sell 900 units next quarter, and your supplier’s MOQ is 1,000 units, the difference of 100 units might not be a big deal. Especially if the product is small, like keychains, the extra stock can serve as a backup in case demand increases unexpectedly.

But, if your forecast says you’ll sell only 400 units, and your supplier’s MOQ is 1,000 units, you might need to negotiate for a lower MOQ that better fits your needs.