What is the minimum order quantity and how to properly useAuthor : Mohammad Ali , Founder and CEO of Inventory Software Services
Published : Last Modified :
Minimum order quantity is the minimum quantity of a product for a supplier willing to sell. In other words, the lowest quantity of product, less than this quantity supplier not willing to sell.
Minimum order quantity may vary product to product or supplier to supplier. By proper using of minimum order quantity, a supplier or retailers(buyer) both can be benefited if they using this business term for their own business strategy.
Here I discuss how a wholesaler be benefited using minimum order quantity and how they calculate the quantity for a product and also discuss how a retailer makes their good decision for this term.
Suggestions to the wholesalers for proper using of minimum order quantity :
1. Keep your minimum order quantity compare to your market. If you are a new wholesaler you can keep a little less than your competitor. For this, some little retailers(buyer) can take the advantages and you can get customers and publicity. But keep at mind price per unit compared to your market and your benefits.
2. Do not miss use this. Due to your one bad decision, you may be lost your market and your business may decrease rapidly.
3. For seasonal products, you change the minimum order quantity for specific products. It's may not a negative effect market but can grow your business.
Suggestions for retailers(buyer) for proper using of minimum order quantity :
1. Compare to your products demand choose your best supplier according to minimum order quantity and price per unit.
2. You may take the advantages of new suppliers in the market, but aware of their products and service quality.
3. If a product minimum order quantity is very high but your customer demands are very low, it's better to avoid that product.
Advantages of minimum order quantity :
Generally, the minimum order quantity for low price products is higher than high price products. Low price products benefit per unit is low so wholesalers want to adjust their expected benefit by the quantity and high price product benefit per unit is high so it's no need to sell very large quantity.
For high quantity sell it's possible to keep the low price for any products. So wholesalers can sell large amount and retailer(Buyer) can buy the product in the low rate, so product demand can keep high.
Disadvantages of minimum order quantity :
Due to minimum order quantity, sometimes the wholesalers lost his or her sell and retailers(Buyers) can not able to buy products because of low funding. For this, it's difficult to carry on business in the competitive market.