MOQ, lead time, and landed cost: the three numbers that decide a sourcing program
Unit price gets the attention, but three other numbers quietly determine whether a sourcing program is profitable. Here is how to read them together.
Ask most buyers to compare two suppliers and they will line up the unit prices. But unit price is the one number that is easiest to quote and hardest to trust. The three numbers that actually decide whether a program works are minimum order quantity, lead time, and landed cost — and they only make sense read together.
Minimum order quantity (MOQ)
A low unit price behind a high MOQ is a financing decision disguised as a discount. If the MOQ forces you to hold twelve months of inventory, the carrying cost, the cash tied up, and the obsolescence risk can erase the saving entirely. Always convert MOQ into months-of-demand before you compare it to anything.
Lead time — and its variance
The quoted lead time matters less than how reliable it is. A supplier who quotes eight weeks and delivers in eight is worth more than one who quotes six and delivers somewhere between five and ten. Variance is what forces you to hold safety stock, so ask for the actual on-time-delivery rate, not the promise.
Landed cost, not unit cost
Landed cost is the unit price plus everything it takes to get the goods to your door: freight, duties, insurance, customs handling, inspection, and the financing cost of the time in transit. A factory price that is 8% cheaper but ships from a port with higher freight and longer transit can land more expensive than the “pricier” option.
Reading them together
- Low price + high MOQ + long lead time = a cash-flow and inventory trap, even if the unit looks cheap.
- Slightly higher price + low MOQ + reliable lead time = lower total cost and far less working capital tied up.
- Always model landed cost per unit at your real order size, not the factory’s headline price.
Why a partner changes the maths
A sourcing partner that consolidates multiple buyers can often secure a low MOQ at a volume price — because the factory sees aggregate demand, not your single order. That is frequently where the real saving lives: not in squeezing the unit price, but in restructuring the order so the three numbers line up. Glacz quotes every program on landed cost, with MOQ and lead-time reliability stated up front.