Maintaining the right amount of inventory at all times is crucial for your business to thrive. Carrying too little poses a risk of stockout, while carrying too much can mean reduced cash flow.
When purchasing the right level of inventory for your business, a supplier may require your order in minimum order quantities – often referred to as MOQs. This means that a supplier will require you order a certain minimum number of products as a condition of entering into a transaction with them.
At first glance, this might give the impression that the supplier is willing to lose sales. But in reality, for them, it’s the opposite. Suppliers have margins to meet, which can only be met if their customers order a certain minimum level of goods.
This article will show you how MOQs work, what benefits you can reap from them as a purchasing business, and how to manage them effectively.