If you're a business owner, you know that a blanket PO can help streamline your supply chain. But what exactly is a blanket purchase order, and how does it work?
What is a Blanket Purchase Order?
A blanket purchase order (BPO) is a supply chain sales order authorizing the vendor to regularly supply specific goods or services to the buyer. Also known as a standing purchase order, the BPO is a contract that outlines the terms of the agreement, including the purchasing quantity, price, delivery schedule, and payment terms.
Unlike a regular purchase order, which is only suitable for one transaction, companies can use a blanket PO for multiple purchasing requisitions over time. The BPO can be helpful for both buyers and vendors by helping streamline the ordering process and avoid disruptions in the supply chain.
How To Use a Blanket PO
If you need to make multiple purchases of the same item or service, or the purchasing quantity is difficult to estimate in advance, then a BPO might be the way to go.
You could set it up to cover a specific period, such as one year, or it can be open-ended. Once the blanket PO is in place, the company can place orders for the goods or services as needed, up to the specified quantity and dollar amount.
However, a regular PO will probably suffice if you only need to make a one-time purchase.
How BPOs can benefit your supply chain
When used correctly, blanket POs can help to improve efficiency and reduce costs in the supply chain by providing the following benefits:
- It saves time and money by eliminating the need to renegotiate prices or terms for each purchase.
- Buyers get better prices by securing volume discounts from vendors, allowing them to buy in bulk.
- The buyer can avoid having to issue a new purchase order each time an order is placed.