Minimum order quantity
The smallest quantity a supplier will accept on one order, set by its setup costs, packaging units or production batch size.
Also called: MOQ, Minimum order, Minimum batch size
A supplier who needs two hours to set up a press does not want to run 50 parts. So it sets a minimum order quantity, or MOQ: 5,000 pieces, one reel, one pallet, one heat of steel.
For high-runners, MOQs are irrelevant. For the long tail, they decide the real cost. If a plant uses 400 of a special washer a year and the MOQ is 10,000, it is buying 25 years of stock. The piece price looks fine. The cash tied up, the storage and the parts thrown away at the next design change do not.
Where they come from
- Setup and changeover. The fixed cost of starting a run, spread over the batch.
- Material lots. Coil, bar or resin bought in minimum quantities from the supplier’s own suppliers.
- Packaging units. A box of 1,000, a reel of 5,000.
- Plain policy. A distributor that does not want small orders.
Getting them down
The most effective lever is not negotiation, it is volume. If the same part exists under four references in three plants (see part rationalization), merging them can put the combined volume above the MOQ. One order instead of four, and stock that actually turns.
Otherwise, the options are the usual ones: a blanket order with scheduled call-offs, a supplier-managed stock, or accepting a higher piece price for a smaller batch, which is often cheaper once total cost of ownership is counted.