New to wholesale buying or managing supplier relationships? Then, you have a long way to go in order to stay on top of your game and how you can turn orders to your advantage. Coastal Surplus Solutions helps you understand Minimum Order Quantities (MOQs) and why they matter when bulk buying.
Before we start, remember that wholesaling entails many steps and elements. It can be quite tough to keep up with every term, step, and part of the process, but knowledge is key.
Understanding the basics and moving towards the central aspects of bulk purchasing will help you maintain your needs aligned with supplier options.
This is why we want to break down what MOQs are and how you can work with them to grow your business or benefit your project.
What Is a Minimum Order Quantity (MOQ)?
It stands for the smallest number of units a supplier is willing to sell in a single order. Since this is based on the supplier and not a standard number or quantity, the smallest number is never fixed.
Unlike retail stores that sell one product at a time, wholesalers and manufacturers won’t be as happy. Because of price differences and how the market moves, they are happy to sell… if you get the minimum, at least.
You are required to buy in larger quantities to make production and shipping cost-effective. Also, to get the prices that make it possible for you to sell one or stock for your projects.
But how does the MOQ work in terms of numbers and specifics?
A supplier might require a MOQ of 150 units, but this can also be set on a minimum dollar amount per order. This means you can play with the order depending on the supplier or if the same wholesaler offers both:
- You can buy the exact number of units or around it.
- Or you can buy multiple products, but fulfill the minimum dollar amount.
This method ensures they cover fixed costs like manufacturing setup, packing, and more.
Are all MOQs set with a number of units or a minimum dollar amount? Not really. There are three options most suppliers follow:
- Product-level: Based on the minimum number of units required per product.
- Order-level: Which is the minimum total quantity or dollar value per order. This is the option that allows product flexibility and works for those looking for more than one type of product.
- Complex MOQ: It is a mix of the previous two, but several suppliers can set more conditions or minimums in the process.
Why Do Suppliers Set MOQs?
It is all about strategy and profit.
Suppliers need to ensure they are gaining from the sales. Hence, they establish MOQs to checkmark their list:
- Ensure profitability since MOQs guarantee their cover production, shipping costs, and yield profits.
- Reduce costs since larger production means lower investment per unit cost. The economies of scale are what make them operate.
- Improve inventory control, which is mostly related to optimizing production schedules and avoiding excess.
- Cash flow thanks to how MOQs stabilize predictable revenue and resource allocation.
Imagine you are a buyer who needs a large quantity of notebooks. The notebook or stationery manufacturer won’t be able to sell you 1, 2, or only 10 notebooks.
To cover expenses in raw materials and labor costs, you will be requested to buy around 50 to 100 notebooks. This ensures the suppliers’ production and keeps it financially viable.
How MOQs Impact Your Business or Project
It is crucial for your inventory and cash flow management.
Understanding MOQs helps you have more control over how much you will spend and whether you can invest that amount. While it seems overwhelming, it is a good opportunity to achieve cost savings, bring product variety, and improve negotiation leverage.
Buying in bulk is what makes a business profitable. The most common example is how clothing stores buy multiple pieces of a single product in different sizes. For individuals with projects, it is about making it more viable.
You may have a project around building houses or handling your office. This requires suppliers for construction or to provide your workers with simple instruments for paperwork. Concrete, wood, appliances, paper stacks, pens, and more.
Getting a large quantity saves you long-term expenses, and while inventory might give you a hit, you get overall cost reduction.
However, as stated by Investopedia, MOQs can create challenges for buyers, especially small businesses. This can strain cash flow and lead to increased inventory holding costs.
This is why proper planning and demand forecasting are crucial. Avoid MOQs posing challenges to your business or success.
Coastal Surplus Solutions Helps You Navigate MOQs
Dealing with those complex quantities is exhausting and time-consuming. Businesses end up spending more than what they are winning, and time is just as precious as money.
Our team and experts specialize in sourcing surplus and wholesale goods while managing MOQ challenges for you.
Our experienced team handles anything:
- Negotiating favorable terms and prices so that you don’t overextend with bulk buying.
- Sourcing products strategically, which optimizes inventory and your cash flow.
- Streamline logistics to reduce storage burden and achieve cost reductions.
- Provide expert guidance so you can make informed decisions.
NetSuite highlights the complexity of MOQ management and stresses the value of being careful and balancing buyer and supplier needs. For this, expertise is what leads to victory.
Allow us to be the expertise you need and ensure your bulk buying is a complete success.
Contact Coastal Surplus Solutions for more information and get started on wholesaling.
