Types of PO
Purchase order (PO) is a formal document, issued by purchaser to seller summarizing the details of products or services to be procured.
I. Standard PO
a) Features of Standard PO?
Standard PO is comprehensive, containing complete information of the order.
Item details, quantity, price, delivery schedule, payment terms, location and accounting distribution all these are clearly mentioned in a standard PO.
Validity is usually for shorter period of time.
b) When is standard PO used?
Standard PO is the most commonly used PO type. Usually created for
-Infrequent or one-off purchase of items and when
-it is important to have precise & detailed specifications of the item/goods in question.
eg Govt orders with defined specs
II. Planned Purchase Orders
a) Features of Planned PO?
Like a standard PO, planned PO also contains all relevant information about the order except delivery dates and location, which are not listed. If at all its mentioned, then they are tentative details.
By issuing release against the PPO, buyer can place individual orders as and when required. The terms specified in the PPO are applied to the release as well.
b) When is PPO used?
PPOs are used in case of inventory items that are in requirement but are expected to be used intermittently over a period of time, consequently re-stocking is required only at irregular intervals, hence the delivery dates cannot and are not clearly defined.
eg printer cartridge
What is release in PO context?
A release PO is a purchase order released for a portion of the total amount or lines specified on parent PPO(existing purchase agreement).
III. Contract purchase orders
a) Features of contract PO?
As far as contract POs are concerned, it only specifies the negotiated & agreed terms & conditions of purchase between the company (buyer) and the vendor (seller), based on which any subsequent purchase orders can be created.
Doesn't any contain any information regarding the quantity, date or list of items to be purchased from the arrangement, but might contain information on time frames/ validity of the CPO
Contents of a CPO goes to say that
- there will be purchase order issued under the contract AND
- terms mentioned in that CPO are the framework/guidelines under which they will be issued.
b) When is CPO used?
CPO is resorted in cases where the business (ie the buyer) finds a contractor with whom it would like to have business deals in the future, but not immediately. please note that Contract PO in general have a validity of 1 year.
Eg: when a supplier is one among the sponsors for an event.
IV. Blanket purchase orders
a) Features of blanket PO?
Blanket purchase will capture the overall validity period of the PO, pricing, frequency of orders under the PO but exact quantity and delivery details are generally not mentioned upfront in the order.
similar to PPO, a release with clear details on quantity, delivery location, time and place must be created against the BPO, for deliveries under the PO.
b) When is BPO used?
Blanket POs can be resorted to when buyer has requirement wrt to an item over a period of time but the exact quantity as well as the specific timing of requirement is not known. In such case, blanket PO can be created to cover all those recurring delivery transactions under one PO for that specified period of time.
eg: paper for printing