Explaining the Meaning of MOQ

Matt Suggs

For small brands venturing into the food and beverage industry, navigating the production process can be complex. One crucial aspect to consider is the minimum order size required by manufacturers. In this guide, we will provide a brief overview of minimum order sizes for different categories of food and beverage products, offering rough estimates to help you plan your production effectively.

What is an MOQ?

Minimum Order Quantity (MOQ) is a critical term in the manufacturing and supply chain sectors, representing the smallest amount of a product a supplier is willing to sell. Its significance extends across various aspects of production and procurement, directly influencing inventory management, cost structures, and market responsiveness.

The Role of MOQs in Manufacturing

MOQ is pivotal in manufacturing, balancing production efficiency with market demand. It ensures manufacturers produce economically viable quantities, optimizing resource utilization and minimizing waste. This balance aids in efficient production planning and inventory management, crucial for meeting consumer demands without overproduction.

MOQ’s Impact on Supply Chain Dynamics

Within supply chains, MOQs influences inventory levels, supplier-manufacturer relationships, and product pricing. It dictates purchasing decisions and inventory strategies, ensuring a smooth flow of goods and reducing the risks of stockouts or excess inventory. By setting appropriate MOQs, suppliers can maintain efficient supply chain operations.

Production Timelines and MOQ

MOQ affects production timelines by determining batch sizes, influencing how manufacturers schedule their production. Higher MOQs can lead to longer, more efficient production runs but require more planning and resources. Conversely, lower MOQs offer flexibility to adapt to market changes but may lead to less efficient production due to frequent setup changes.

MOQ and Cost-Effectiveness

The relationship between MOQ and cost-effectiveness is complex. Higher MOQs can reduce per-unit costs through economies of scale but also entail higher upfront investments and inventory holding costs. Lower MOQs decrease these risks and enhance market adaptability but may increase per-unit costs and affect overall profitability.

Minimum Order Size Estimates by Category

It’s important to note that minimum order sizes can vary significantly depending on the manufacturer, product type, packaging, process complexity, and other factors. The estimates provided below are meant to serve as a general guideline, but it’s always recommended to reach out to specific manufacturers for accurate information based on your unique requirements.

  1. Packaged Food Products: Minimum order sizes for packaged food products typically range from 1,000 to 10,000 units, depending on factors such as product complexity, packaging type (e.g., cans, jars, pouches), and production capabilities of the manufacturer. Simple products with standardized packaging may have lower minimum order requirements, while more specialized or custom packaging options may require higher quantities.
  2. Beverages: The minimum order sizes for beverages can vary significantly depending on factors such as the type of beverage (e.g., carbonated, non-carbonated, alcoholic), packaging format (e.g., bottles, cans, tetra packs), and production capabilities. Generally, minimum order sizes for beverages can range from 1,000 to 20,000 units. Customization, such as unique flavors or specialized packaging, may require higher minimum order quantities. Overall, beverages tend to have higher minimums than other food products.
  3. Fresh or Perishable Food: For fresh or perishable food products, minimum order sizes can be more challenging to estimate due to factors such as shelf life, production timelines, and transportation requirements. It’s common for minimum order sizes to be higher than packaged food products or beverages. Estimates can vary widely, starting from a few pallets or cases to several truckloads, depending on the manufacturer and the specific product.

What are MOQs based on

MOQs are set in order to optimize manufacturing time. Some things manufacturers based their MOQs on include:

  • Kettle size (MOQ of 1,000 gallons b/c kettle cooker is 1,000 gallons)
  • Daily capacity (minimum 1 shift of production)

It is crucial to start by realistically assessing the range of volumes you believe you can sell or are targeting to sell. Consider factors such as market demand, your marketing efforts, and your production and distribution capabilities. Once you have a clear understanding of your sales goals, take into account your shelf life and storage needs to determine ideal production volumes and frequency. Generally, the absolute minimum production size for contract manufacturers is between 1,000-2,000 units per SKU. The smaller the production volume, the higher the cost per unit because of the overhead costs associated with each production (set-up, clean up, down time between productions, etc). However, increasing your production volume does leave you with product you need to store, so keep in mind shelf life and storage conditions, as well as storage cost.

Some examples of MOQs – these have been taken from manufacturers we work with of varying sizes:

  • Jarred nut butter: 10,000 units/sku
  • Pouched nut butter: 25,000 units/sku
  • Cookies/bars in overwrap: 10,000 units/sku
  • Fruit juice: 1000 gallons per run
  • Biscuits: 20,000 lbs/sk
  • Sauce: 40 gallons
  • Gluten free snacks: 10,000 – 25,000 units/sku
  • Granola: 60,000 – 75,000lbs
  • Coffee: 1,000 lbs
  • Granola: 2,500 lbs
  • Bakery items: 1,000 lbs
  • Coffee or plant-based beverages: 7,500 gallons/sku
  • Dry seasonings: 50,000 lbs
  • Bars: 100,000 bars/sku with 3-4 run annual comittment
  • Nut butter: 2,500 units
  • Ice cream: 4,500 cases of pints
  • Dressings: 1 day (10 hr) production
  • Tortilla chips: 12,000 lbs

MOQ Best Practices for Supply Chain Optimization

Implementing Effective MOQ Strategies for Improved Production Planning

To optimize supply chain operations, businesses should tailor their Minimum Order Quantity (MOQ) strategies to align with their production planning and market demand. Effective MOQ strategies involve analyzing historical sales data, forecasting demand, and understanding the production capabilities and constraints. By setting MOQs that reflect both the supplier’s and the manufacturer’s capacities and market needs, businesses can improve inventory turnover, reduce storage costs, and enhance production efficiency.

MOQ and Supply Chain Resilience: Mitigating Risks

Incorporating flexibility into MOQ agreements enhances supply chain resilience, helping businesses to adapt to market volatility and unexpected disruptions. Diversifying suppliers, negotiating variable MOQs based on demand forecasts, and incorporating clauses for adjustments in response to market changes can mitigate risks. This approach ensures a steady supply of materials and products while avoiding overstocking or shortages.

Collaborative Approaches to MOQ with Suppliers

Building strong, collaborative relationships with suppliers is crucial for optimizing MOQ. Open communication about production needs, future projections, and potential market shifts allows for more flexible and mutually beneficial MOQ arrangements. Collaborating on inventory management and production scheduling can lead to innovative solutions that benefit both parties, such as consignment inventory or shared warehousing, further optimizing the supply chain.