![]() Note: To learn more about other costs to consider when it comes to production runs or to get an overview of what a production run looks like from start to finish, check out our Ultimate Guide to Safely Sourcing from Alibaba, which has many helpful tips and insights. It’s just the cost of actually producing the items. This cost also doesn’t cover other costs related to doing business with your supplier such as the cost of shipping the products to you once the production run is over, or the necessary paperwork required to get the products through customs, etc. For example, 1000 units at $10 per unit means that the production run will cost $10,000 upfront, which, if you’re a new business may be intimidating or impossible to meet. The biggest disadvantage of MOQs is the upfront cost required to be able to get your units produced. This means you’ll be paying less per unit that gets produced so you can maximize the profit you earn when you actually sell that product. ![]() Oftentimes, the more in bulk you buy from a supplier, the more it drives down the cost of each unit. The biggest advantage of MOQs is that they give you the best possible price per unit available. Note: We touch on this and other important aspects of working with manufacturers in our How to Source Products from Chinese Manufacturers article and The Untold Secrets to Cutting Manufacturing Costs and Lead Times article. Because of this, they set their MOQ to match what it’s worth for them to set up a production run both time and cost wise. It may not be time or cost effective for them to set up their materials and run their machinery unless they’re guaranteed to be compensated for a certain amount of units their production run produces. Since manufacturers produce items in bulk, they purchase their materials in bulk as well. If suppliers were to produce fewer units than their MOQ they may not be able to cover the cost of their production, or make a profit.Īnother reason why suppliers set MOQs is because the amount that they set may actually be the fewest amount of units they can produce in one single production run. Suppliers set Minimum Order Quantities because it costs them a certain about of money to produce a production run, and the MOQ they set ensures that they’re able to cover all the costs of production, plus make profit. These businesses need to make sure they find a supplier that can meet their demand and have the materials, machinery and personnel available to product the amount of units they need. Other businesses operate on a large scale and need hundreds of thousands of units produced. These businesses need to find a supplier that can comfortably match their low MOQ requirements. Some businesses operate on a small level and need a very low amount of units produced. By setting MOQs, suppliers can easily communicate with businesses how many units it takes for them to be able to work together. MOQs are extremely important for suppliers because it determines which businesses they’re willing and able to do business with. MOQs cover the cost, effort and energy it takes to produce a production run and ensures that the supplier will be able to earn a profit as well. MOQ is calculated by each supplier independently and depends on what it costs them to produce each unit. MOQs are most often defined by the amount of units produced in a production run, such as 100 units or 10,000 units, for example, but sometimes MOQs can be defined by currencies as well, such as $1000 or $10,000 of product. MOQ is a supplier’s Minimum Order Quantity which is defined by the minimum amount of units they’re willing to produce (or sell) at one time. Occasionally, suppliers that produce custom orders or bespoke products may even have MOQs as low as 1 unit. Some suppliers will have large MOQs such as 100,000 units, other suppliers may have low MOQs such as 100 units. MOQs are sometimes negotiable, within reason, but it’s up to a business to be able to meet a supplier’s MOQs or negotiate a reasonable MOQ in order to do business with them. MOQs are set by suppliers to cover their cost of production and ensure that they make a profit off of each production run. MOQ stands for “Minimum Order Quantity” and refers to the least amount of products or units that a supplier is willing to produce at one time.
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