Blanket Purchase Order

Introduction:

A blanket purchase order (BPO) is a long-term agreement (usually 1 year) between your company and a supplier to deliver goods or services with a set price on a frequent basis over a specified time period.

If your business makes multiple payments for the same goods or services, issuing a blanket purchase order with the details, such as price and delivery schedule, already specified is an efficient way to reduce time spent and processing delays.

Practical Scenario:

There are many services or products which your organization uses on a frequent basis and where procurement process cost is much higher, which can be minimized with the help of blanket PO. Some practical examples include office stationary, sound systems for meetings, etc

Ideal scenarios:

Blanket orders are only wise to use under some situations stated below:

1.   When quantities of the same goods or services are needed throughout a time period, typically one year.

2.   When unit cost can be identified and details can be accertained.

3.   When a single vendor is capable of delivering throughout the length of the contract.

4.   When ordering in bulk quantity facilitates more discounted contract terms, such as bulk discounts.

5.   When spread out deliveries minimize stocking risk and costs.

NOTE: Blanket purchase orders should never be written for orders where the price is not guaranteed, the quality of the product is untrustworthy, or the vendor cannot be trusted.

Details:

   

Key Points to remember:

·         Concept with one real life example

·        There is no GR required for blanket purchase orders

·        Order type is framework order and you may use Item category B