Minimum Order Quantity or “MOQ” as it is known in the manufacturing industry simply defines the number of units that a manufacturer requires before accepting an order.
Manufacturers make their profit margins and keep costs down by producing products in large quantities. This cost savings practice directly impacts the manufactured product.
M.O.Q.s affects every type of manufacturing from screws to complicated medical devices and consumer products. Understanding how an M.O.Q. works is vital to the success of a product.
If you are an entrepreneur, startup or small businesses and negotiating minimum order quantities is not your specialty, I recommend that you find someone to work with that can help use an M.O.Q. to your advantage.
There are several factors that affect the M.O.Q. – Here are a few.
1) First off, not all manufacturers have the same M.O.Q. for a product. Shop your prototype around and get quotes to compare. What you are likely to discover is that there will be large discrepancy between some quotes and others. This could be for a number of reasons – all of which should be explored before signing on the dotted line.
2) Core Competencies –
The core competency of a manufacturer can impact the M.O.Q. of a product. A manufacturer may or may not have experience building a product like yours. If they do and they can re-purpose a strategy or equipment already set up the M.O.Q. may be reduced.
3) Manufacturer Relationships
Like many other industries, great relationships go a long way with manufacturing. Working with a team or individual that has built a relationship with manufacturers will give an entrepreneur, startup team or small business a BIG competitive advantage. An example of this would be working with a top tier manufacturer while producing a relatively low number of products on the first round. The benefits of a large manufacturer are quality control, stronger core competencies and sometimes more efficient workflows that help reduce costs.