What is Minimum Order Quantity (MOQ)? How to Calculate & Negotiate It

When you are responsible for inventory management, you’re constantly balancing service level and speed with cash, space, and risk. 

In 2025, inventory distortion—the cost to a retailer of being either understocked or overstocked— totaled $1.7 trillion globally. You need enough stock to meet customer demand, but excess inventory that doesn’t sell cuts directly into profits.

The challenge grows as suppliers impose minimum order quantities (MOQs). MOQs allow large buyers to unlock price breaks and secure guaranteed supply. But they also increase carrying costs, obsolescence risk, and cash exposure.

This can be an obstacle—or an opportunity. In this article, you’ll learn what an MOQ is and strategies for managing them effectively. 

What is a minimum order quantity (MOQ)?

Minimum order quantity is the smallest number of products that you must purchase in one order from a supplier. Suppliers set MOQs to avoid wasting resources on orders that don’t deliver enough profit.

MOQs are set in two ways:

1. By the number of units: You must buy a certain number of items.
2. By the total value: Your order total must reach a specific dollar amount.

For example, imagine a supplier sells pens for 20 cents each and has an MOQ of 1,000 units. To place an order, you would need to spend at least $200 (20¢ x 1,000).

Generally, expensive or complex items have a lower MOQ, while cheaper and simpler items have a higher MOQ.

MOQ vs. EOQ: What's the difference?

Understanding the differences between MOQ and EOQ (economic order quantity) is essential for making informed purchasing decisions. 

In short:

• MOQ is the minimum amount your supplier will allow you to buy.
• EOQ is what your business should buy to be most cost-effective.

The MOQ is a rule set by your supplier. It's the absolute smallest order they will accept. This is based on their own costs and profitability, not your needs.

The EOQ is the ideal order size for your business to minimize total inventory costs. It’s a strategic inventory formula that helps you find the perfect balance between two extremes:

• Ordering too much, which leads to high holding costs
• Ordering too little, which causes stockouts and lost sales

By strategically managing these two metrics, you can optimize inventory planning, reduce costs, and maintain a smooth supply chain, boosting the success and profitability of your retail business.

Why do suppliers set MOQs?

Suppliers implement minimum order quantities for several strategic and operational reasons, all aimed at ensuring their business’s sustainability and efficiency. 

• Covering production costs and ensuring profitability: Suppliers set MOQs to ensure that each order covers their fixed production costs like labor, materials, and machinery setup, maintaining their profitability.
• Streamlining the production process: By producing larger, consistent quantities, suppliers optimize manufacturing efficiency, reduce waste, and manage resources more effectively.
• Enhancing quality control and speed: Higher, consistent production volumes allow for better quality control and quicker turnaround times, ensuring a reliable supply of goods for customers. 
• Maintaining business viability: MOQs ensure that every order contributes positively to the supplier's bottom line, making their business model sustainable.
• Creating mutually beneficial relationships: MOQs help suppliers build better relationships with factories and with business owners like you, thanks to consistent production processes, quality, and lead times.

The impact of MOQ on your inventory and cash flow

Supplier MOQs will have a major impact on your inventory. They will affect the number of days you hold stock, the frequency of your purchase orders, and the space available in your warehouse. 

If you can’t meet your supplier’s MOQ, you may have to look elsewhere or pay a surcharge to purchase less than the minimum order quantity.

High MOQ

A high MOQ means you must place large, infrequent orders. This ties up more capital and requires more storage space.

Advantages:

• Lower unit costs: You can often get better pricing by buying in bulk.
• Reduced risk of stockouts: With plenty of inventory on hand, you’re less likely to run out.
• Fewer admin tasks: You’ll spend less time placing and tracking orders.

Disadvantages:

• Higher capital investment: A large portion of your cash is tied up in stock, which can increase your accounts payable.
• Increased storage costs: More inventory requires more warehouse space.
• Risk of obsolete stock: Products might expire, go out of season, or become irrelevant before you can sell them all.

Low MOQ

Ordering products from suppliers with low MOQs means you’ll have less inventory on hand, but—depending on customer demand—you may need to restock more often.

Advantages:

• Less capital required: You don’t have to invest as much money up front.
• Lower storage needs: Smaller orders take up less space.
• Reduced risk of obsolete stock: You can quickly adapt to changing trends without getting stuck with unsold products.

Disadvantages:

• Higher risk of stockouts: You might run out of products during unexpected demand spikes.
• Increased admin and shipping costs: Placing orders more frequently can lead to higher administrative and delivery fees.
• Potentially higher unit costs: You miss out on the discounts that come with buying in bulk.

💡 PRO TIP: Want to take the guesswork out of restocking? Set reorder points in Shopify Admin to get low-stock notifications and ensure you have enough lead time to replenish inventory of a product before quantities reach zero.

Benefits of a well-managed MOQ

MOQs are not only beneficial in helping suppliers maintain healthy profit margins, but they can also help you improve inventory control and keep purchasing costs down.

Benefits for suppliers

• Better cash flow: When setting MOQs, suppliers take their total cost of inventory into account and pair it with any other expenses they have to pay before reaching the desired profit level. When this is managed well, their cash flow is healthier and more predictable.
• Reduced inventory costs: Some suppliers don’t even produce goods until a buyer who can meet their MOQ makes a purchase. This keeps stock out of their warehouse and reduces both inventory and manufacturing costs. 
• Increased profit margins: Supplier MOQs are usually set up in a way that ensures a certain profit margin. Often, they will only order new stock when their sales reach a level that creates an operating profit. This means that even a relatively low MOQ will offer the safety net they need.

Benefits for buyers

• Savings on bulk purchases: If you work with suppliers that have MOQs, you’ll know you’re getting the best price per unit. Buying products in bulk results in savings and more profit on each unit sold. 
• Enhanced relationships with suppliers: Your ideal purchase quantity may differ from your supplier’s MOQ. Negotiating with your supplier to reach a solution can create stronger relationships.

How suppliers calculate their MOQ

To negotiate effectively, it helps to understand how your supplier arrives at their MOQ. While every business is different, they generally follow a four-step process to find the order quantity that ensures their profitability.

1. Determine demand
2. Calculate holding costs
3. Find the break-even point
4. Set minimum order quantity

1. Determine demand

Demand will vary and be influenced by a variety of factors, including product type, competition, and seasonality. Suppliers review historical data to forecast demand and use it to define the inventory quantities needed to satisfy market fluctuations. More advanced operations now leverage AI inventory-management systems to create highly accurate forecasts that account for trends and market shifts. 

💡 PRO TIP: Want to know how much stock to order from a vendor? If you’re using Shopify POS, install the Stocky app to get purchase order suggestions based on historical sales data or a product’s seasonality.

2. Calculate holding costs

Depending on the products sold and their storage requirements, the costs to store products (also known as inventory carrying costs) will vary. Refrigeration, for example, will incur energy costs, and odd-shaped items may take up extra space. 

No matter the variations, suppliers will not want to store products for too long, as their finances will benefit from a quicker turnaround. This is worth remembering when you’re looking for deals.

3. Find the break-even point

Whether you want to set minimum order quantities for wholesale purchases of your products or understand when you’ve earned back customer-acquisition costs for direct-to-consumer orders, knowing your break-even point is key. This is when your product sales (or your supplier’s sales) are equal to business expenses.

When it comes to MOQs, suppliers consider how many items they need to sell before they can break even and eventually make a profit. Their costs generally include the price of materials or supplies as well as labor costs, storage costs, customer acquisition costs, and anything else directly connected to a sale. 

💡 PRO TIP: Only Shopify POS unifies your online and retail store data into one back office—including customer data, inventory, sales, and more. View easy-to-understand reports to spot trends faster, capitalize on opportunities, and jumpstart your brand’s growth.

4. Set minimum order quantity

Once suppliers determine demand, calculate holding costs, and find a break-even point, they set their MOQs for each product type. Having this in place weeds out customers who want to buy lower quantities, which leads to unprofitable orders.

To persuade their customers to buy in higher quantities, suppliers sometimes offer incentives like bulk-buying discounts. This helps their inventory management and your bottom line.

💡 PRO TIP: Once you've set your MOQ, you need a way to enforce it. If you're on Shopify Plus, you can use B2B quantity rules and volume pricing to set minimum or maximum purchase quantities and minimum order values per company or catalog. 

How to negotiate MOQs with suppliers

You don't have to accept a supplier's MOQ as set in stone. In many cases, it serves as the starting point for a negotiation. 

With the right approach, you could get a smaller MOQ that works for your business. Here are four solid strategies to try:

Offer a higher per-unit price

This might sound counterintuitive, but offering a higher per-unit price is a common way to get a lower MOQ. 

Suppliers set MOQs to cover their fixed costs (like machine setup and administrative costs) for each production run. If you pay a bit more for each item in a smaller batch, you help them cover those costs, so they don’t lose money on your order. It’s a pretty clear trade-off.

Ask for alternative materials or components

Sometimes, a high MOQ isn’t about the final product but about one specific component the supplier has to buy in massive bulk. 

Ask them if there are alternative materials or substitute parts you could use instead. Small substitutions can lower the minimum order requirement and make your supply chain more resilient by expanding your options.

Schedule staggered delivery dates

In another mutually beneficial situation, you can agree to purchase the supplier's full MOQ but ask for staggered deliveries.

A supplier can agree to ship your order in smaller, separate batches over an agreed-upon timeline. The supplier gets the security of a large sale, and you get to manage your cash flow and warehouse space better.

Propose a long-term contract

If you plan on working with a supplier for the foreseeable future, you can offer to sign a long-term contract. This makes the supplier happy by giving them predictable, guaranteed business. 

In exchange for that commitment, they are often much more willing to be flexible on terms like MOQs.

Strategies to manage high MOQs

Form a purchasing group with other businesses

A practical option for smaller buyers is forming a group purchasing organization (GPO). It’s a term for you and other businesses pooling your orders together. 

To the supplier, you look like one big customer, which gives you the power to negotiate a lower MOQ. It’s a proven strategy— in the healthcare industry, 88% of hospitals report that their GPO gets them lower prices.

For example, if your GPO’s combined annual spend is $1.2 million and pooled buying trims unit prices by a conservative 5%, the savings is about $60,000 before any rebates.

Find suppliers that specialize in smaller quantities

Tired of trying to convince a mass production factory to do a small run? Find one that already specializes in it. Many suppliers specifically target businesses that require smaller batches.

Use supplier directories like Thomasnet or Maker's Row and filter your search for terms like "low volume," "short runs," or "small batch." For example, apparel manufacturers like Argyle Haus of Apparel advertise MOQs as low as 25 units.

Just think: if you avoid an extra 250 units at $18 each, it prevents you from tying up $4,500 in cash. If your carrying cost is 20%, you also save $900 per year in holding costs. 

Use a third-party logistics (3PL) provider

A third-party logistics (3PL) company is a partner that manages your warehousing and shipping for you. When you get a big shipment from your supplier, you can send it straight to their warehouse. This is great because:

• Many 3PLs have a multi-node network, meaning warehouses all over the country, which allows for faster, cheaper shipping to your customers.
• You avoid high carrying costs, money you spend just to store unsold products.

If last-mile delivery spend is $400,000 per year, cutting it by 10% through multi-node placement saves $40,000. Even a 3%–5% improvement offsets a meaningful share of 3PL fees.

Standardize components across products

If you can, use the same screws, fabrics, or electronic chips across multiple products. Known as component standardization, this lets you place bulk orders for those common parts, which makes suppliers happy and gets you a better price.

Regularly review supplier relationships

Some suppliers increase their MOQs or have a price point that makes it difficult for you to make a profit. If you have a strong relationship with them, your best option is usually to negotiate via supplier relationship management. But when that becomes too difficult, it may be time to look at other supplier options.

PRO TIP: Always try to negotiate supplier pricing before you start the relationship (even if it’s $1 or a few cents less than the listed price). The supplier is likely expecting some negotiations, and they will set the tone for your relationship. The worst-case scenario is that the supplier will say no.

Use MOQ to your advantage

Now that you know what MOQs are, how they’re calculated, and the impact of high and low MOQs on your inventory, you’re ready to start sourcing suppliers, negotiate pricing, and build long-term relationships.