Introduction to Purchase Orders
Course Overview
Purchase Orders
Requisition
A requisition is a way of communicating demand for purchased materials. It says you need this many of this item at this site on this date. It also says which site negotiates the purchase. Requisitions are usually generated by MRP, but can be entered manually.
Purchase Order (PO)
• Authorization to purchase specified items at a set price by an agreed upon date
• Contract to pay for the items under the terms and prices of the PO
Blanket Purchase Order
• A blanket order says you have agreed to purchase a certain quantity of an item over a certain period of time (the exact delivery dates to be determined later), and that you have agreed to pay according to the terms and prices specified
• Blanket orders are usually negotiated in advance of the demand and cover a longer time period, perhaps the annual requirement for a key component, with a price based on a volume commitment
Blanket orders monitor the quantity purchased and offer an opportunity to negotiate for a good price
Terminology
Requisition
A statement that someone needs a certain amount of an item by a certain time. The requisition lists what items are needed, how many, where, and when.
Purchase Order (PO)
A contract with a supplier to purchase a specific quantity of items to be delivered at an agreed upon date for a set price. A purchase order should include order quantity, description, price, discounts, payment terms, transportation terms, and all other terms pertinent to the purchase and its execution.
Blanket Purchase Order
A long-term commitment to a supplier for products against which short-term releases will be generated to satisfy requirements. When a need arises, a release is made against the blanket order to generate a purchase order.
Supplier
Provider of goods or services; individual seller with whom the buyer does business, as opposed to vendors, which is a generic term referring to all sellers in the marketplace.
Supplier Item
The item number the supplier uses to identify their item.
Document Structure
Header
The header includes generic information that applies to the entire order, including:
• PO site
• Contract terms
• Supplier data
• Delivery date
Completing the header causes the PO to be stored on the system even if no other information is entered for the order
Line Items
The line item’s frames include all items on the order and contain information about the ordered items, such as:
• Quantity
• Price
• Any exceptions to the header data (a different due date or a different site, for example)
The PO site on the line items can be changed if that item is being purchased for a site other than the one on the header
Trailer
The trailer frame contains tax, shipping and status information and presents the total for the entire order and any applicable
• Taxes
• Discounts
• Special charges
