What does "minimum order quantity" (MOQ) mean?

The concept of "minimum order quantity" (MOQ) refers to the smallest amount of a product that a supplier is prepared to sell to a buyer. This is an important term in supply chain management and purchasing because it helps suppliers ensure that their production and shipping costs are covered. By setting a MOQ, suppliers can optimize their operations by not processing small orders that may not be cost-effective.

Understanding MOQs is vital for businesses when negotiating with suppliers. It allows buyers to plan their inventory purchases effectively, ensuring they have enough product to meet demand without overextending their resources. It also encourages buyers to purchase in bulk, which can lead to more efficient inventory management.

In contrast, other options present concepts that do not align with the definition of MOQ. The maximum amount of product a supplier will sell, discount thresholds, and average monthly sales figures do not relate to the minimum quantity aspect that defines MOQ.