Some manufacturers and wholesalers have minimum order quantities that must be met when placing an order (MOQ). That means that if a consumer is unwilling or unable to satisfy the minimum order quantity, manufacturers, suppliers, and distributors may turn them away.
While it may seem odd that turning away business could result in increased profits, it's critical to understand how minimum order quantities work and why some suppliers use them, especially in low-margin or highly specialized firms. Minimum order numbers, if managed properly, can help you boost your profits.
What Is Minimum Order Quantity?
As a business person, whether you are a customer or a seller, you are likely to have come across this abbreviation, but your odds of understanding what it means are slim. MOQ is one of a thousand different terms that you should be aware of as a buyer or seller to help you be more profitable.
Starting with the acronym MOQ, which stands for Minimum Order Quantity. It's also known as MQO, which stands for minimum quantity order. It's the quantity that's used as a starting point for orders. In simpler terms, it is the unit of goods that, if sold, would cover the producer's manufacturing costs and, at the very least, guarantee a break-even.
Here is an example that will help you understand.
You approach a furniture maker, negotiate the price per unit, and place an order for ten tables, but you don't understand why he demands on producing no fewer than twenty tables at a time.
You've probably come across manufacturers who claim they can't produce anything less than a specific number of units. That is, in fact, their Minimum Order Quantity.
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