What is a minimum order quantity (MOQ)?

A minimum order quantity (MOQ) is the smallest order a supplier will accept for an item. Behind it is often a fixed cost on the supplier’s side, such as setting up a production run or handling a shipment. Quotes often add a pack size or order multiple too: the order must be a whole number of cartons, layers or pallets.

MOQ and EOQ. The EOQ is the order size that is cheapest for you; the MOQ is the smallest the supplier allows. If the EOQ is above the MOQ, the MOQ changes nothing. If it is below, the best you can do is order the minimum, rounded up to the pack. In the Order quantity example the EOQ is 849 units, the MOQ 1,000 and the pack 24, so the smallest order is 1,008, and it costs €25 a year more than the EOQ. The minimum would cost nothing extra at €0.002 a unit off the price.

When it gets expensive. The cost is flat near the EOQ and steep far from it. With the same item, a minimum at twice the EOQ adds 25% to the yearly ordering and holding cost, three times 68%, four times 113%. That is when it pays to ask for a lower minimum, a price for smaller lots, or a split delivery. The full comparison, with price breaks: EOQ vs minimum order quantity.

Sources

• Caplice, C. (2006). ESD.260 Logistics Systems, Lecture 7: Inventory Management I, slides 22–27. MIT OpenCourseWare.
• The cost figures: the Order quantity engine with the example above.