A MOQ (minimum order quantity) agreement is one type of the many contracts often between a vendor or supplier, such as a non-OEM components manufacturer, and a OEM manufacturer (or contract electronics provider) in which the OEM buyer agrees to purchase a minimum quantity of components from the vendor or supplier over a specified period of time.
MOQ agreements are often used in situations where the OEM (or contract electronics provider) has high fixed costs and needs to sell a certain volume of goods in order to break even or make a profit.
The minimum order quantity (MOQ) specified in the agreement is usually a number of units or a dollar value of goods, and the buyer is obligated to purchase that minimum amount over the agreed-upon period of time. The supplier, in turn, agrees to provide the components at a specified price and delivery schedule.
One benefit of a MOQ agreement is it can help vendors and suppliers to plan and forecast production better, and also gives the buyer (OEMs and contract electronics providers) the opportunity to purchase and pipeline components at a lower price per unit, as both manufacturers (OEM and CM) are able to spread the fixed costs over a larger quantity of goods, or customer programs. (Read more about contract electronics industry terms and definitions)
SEE ALSO
Reasons for breach of contract in contract electronics industry
Contract electronics financial indicators and due diligence
MOQ agreements are commonly used in manufacturing and wholesale (white box and ODM) industries, but can be applied in any industry where a vendor or supplier has high fixed costs.
Materials obligation reduction (MOR) clauses and agreements
A materials obligation reduction (MOR) agreement is one of types of contracts used in the electronics manufacturing industry that outlines the material requirements and expectations of both the manufacturer and the customer.
Get list of EMS manufacturers for your requirements (Its free)
Save time and money. Find quality EMS manufacturers. Fast. Venture Outsource has a massive, global database of contract electronic design and manufacturing capabilities. Speak with a Provider Advisor.
“Was able to very quickly find details on the important elements of setting up EMS and ODM partnerships, talked with an advisor for personalized info on quality providers matching our requirements while getting up to speed quickly about the industry and connect with key staff from like-minded companies and potential partners. Great resource.”
— Jeff Treuhaft, Sr. Vice President, Fusion-IO
Advisors tell you matches we find for your needs, answer your questions and, can share EMS industry knowledge specific to your industries and markets.
