Every wholesaler has a minimum order value, and in most businesses that figure is a point of friction. Yet the number is not arbitrary; it marks the threshold at which delivery cost can be spread across the goods.
Where does a minimum order value come from?
The cost of a delivery is independent of the goods.
Vehicle, fuel, driver time, refrigeration and route planning are incurred regardless of order size.
That cost is generally fixed per delivery. As the order value falls, the ratio of delivery cost to goods value rises.
The minimum is the threshold at which that ratio stays acceptable. Below it, the delivery makes a loss.
The threshold rises with distance. The same wholesaler may apply a lower minimum within a city and a higher one to an outlying district.
Order often or order rarely?
Both carry costs, and those costs run in opposite directions.
Frequent ordering reduces the need for storage. You hold less stock, tie up less capital and turn product over fresh.
But frequent ordering creates pressure to reach the minimum every time, and the time spent managing orders rises.
Infrequent ordering lowers the unit price. Volume discounts apply and delivery cost spreads across more goods.
But infrequent ordering demands storage space, ties up capital and raises the risk of waste.
The right point is where those two curves cross, and it differs for every business.
How should economic order quantity be thought about?
There is no need to memorise a formula; understanding the logic is enough.
There are two costs. Ordering cost is incurred with every order and rises with the number of orders.
Holding cost rises with stock: storage space, electricity, insurance, tied capital and waste.
Total cost is the sum of the two, and it reaches a minimum at some point.
The practical approach: raise the order frequency by one step and try it for a month. Compare storage occupancy and the waste log. If the difference is clear, make the change permanent.
| Frequency | Storage need | Waste risk | Unit price | Suitable scale |
|---|---|---|---|---|
| Daily | Lowest | Lowest | Highest | Large city, fresh-led |
| Twice weekly | Low | Low | Medium | Mid-sized |
| Weekly | Medium | Medium | Good | Most businesses |
| Fortnightly | High | High | Best | Frozen and dry-led |
Should frequency differ by product group?
It should, and setting a single order calendar is the biggest mistake here.
Fresh products demand frequent ordering. Two or three deliveries a week make sense for vegetables, dairy and fresh meat.
Frozen products can be ordered less often. Their shelf life is long; fortnightly or even monthly ordering is possible.
Dry goods and packaging are the least frequent group. Monthly ordering suffices for most businesses.
That split also makes the minimum easier to reach. Combining frozen and dry items in one order gets past the threshold.
If different groups come from different suppliers, aligning the calendars reduces the time spent managing orders.
How is safety stock calculated?
Safety stock is the buffer that comes into play when a delivery is late or demand runs higher than expected.
A simple approach: average daily usage multiplied by lead time, plus one day.
For a business taking weekly delivery and using ten kilograms a day that is eighty kilograms: seventy for the week and ten as buffer.
The buffer is adjusted to how critical the item is. Two days for something at the centre of the menu, half a day for a peripheral item.
Where demand fluctuates the buffer grows. A sales volume that doubles at weekends makes a buffer calculated on the weekday average inadequate.
Excessive safety stock brings all the disadvantages of infrequent ordering. A buffer is insurance, not a storage strategy.
What if the minimum is not reached?
There are four options and all of them work.
The first is combining product groups. Putting frozen, dry and packaging items in one order gets you over the threshold.
The second is reducing frequency. Ordering fortnightly instead of weekly doubles the value.
The third is pulling forward long-life items. Whatever is added to reach the threshold should not be a short-life product.
The fourth is placing a joint order with a nearby business. That is a common and effective practice among small operators.
Buying short-life product to reach the threshold is the worst option; the delivery cost saved comes back as waste.
What should be discussed with a supplier?
The minimum may not be negotiable, but other items are.
The delivery window can be discussed. A business receiving deliveries in the morning can get them into service the same day.
The order cut-off time matters. How late you can order the day before directly affects planning.
Is partial delivery possible? For an item out of stock, is the preference to wait or to send what is available?
The handling of missing items should be in writing: how it appears on the invoice and when it will be replaced.
Price validity deserves discussion too. A business ordering frequently does not want a different price on every order.
How is an ordering system organised?
Set a fixed order day. Ordering at random produces both missing items and emergency delivery costs.
Keep the count sheet in the same order as the order form. Writing into the form while counting in the store avoids doing the work twice.
Write down minimum and maximum stock levels. Anything below the minimum at the count goes into the order automatically.
Keep the order history. Three months is enough to see seasonal swings.
Name the person responsible. "The kitchen" does not place orders; a person does, and that person owns the shortfalls.
