Should We Use a Blanket PO?

Choosing the right ordering style for your business is a critical part of your ordering process. In many cases, businesses may use more than one style of order to get the job done. Regular purchase orders are put in when you need a specific product at a specific time. They will include specific quantities of the goods you need, based on your current needs. Blanket purchase orders, on the other hand, may be ongoing, standing orders, which will arrive at a specific time. Is a blanket purchase order the right solution for your business and your needs? Make sure you’re taking the right factors into consideration as you determine whether a blanket purchase order will help streamline your ordering processes.

What is a Blanket Purchase Order?

A blanket purchase order helps streamline the ordering process. It sets out key details of a recurring order, including:

• The items that will come in each shipment
• The price of those items
• How often the shipment will be delivered

Using a blanket purchase order, or BPO, helps ensure that you will get the same shipment of the same essential goods on a regular basis. It relies on a stable demand for those specific items or materials but helps ensure that you have those items coming in at predictable intervals, which can, in many cases, help you manage your inventory. 

Is a Blanket Purchase Order Right for You?

Blanket purchase orders can have a number of benefits for your business. They can, however, also have a number of downsides that you may need to make sure that you’re taking into consideration. Is a blanket purchase order right for you? Consider these key elements. 

Pricing

 A blanket purchase order will lay out clear pricing guidelines that will help you predict exactly what your order will cost each time. You will typically not have to worry about seasonal shifts in demand, which means that you may be able to better predict your overall costs. Furthermore, blanket purchase orders may be less expensive, in general, than traditional purchase orders, since you may be able to negotiate a deal for your bulk orders. Many businesses find that this consistent pricing offers them a crucial benefit.

As you’re determining whether a blanket purchase order is the right solution for you, however, make sure you carefully consider whether you will receive pricing benefits from signing that contract or agreeing to set pricing terms early. In some cases, you may find that those essential items end up costing more, especially if there are normal seasonal price dips that are not taken into consideration as part of your pricing model. In addition, some goods may change prices over time–and that could mean price drops. 

Consistency

The primary benefit of blanket purchase orders is their overall consistency. When you place a blanket purchase order, you can count on those items showing up at predictable, consistent intervals. While supply chain issues may decrease the likelihood that every shipment will show up exactly on time, you can rely on those items coming within a relatively predictable window, which means that you’re more likely to have the inventory you need, when you need it.

That consistency can also prove incredibly beneficial when items do run out of stock does run short. Since you have a consistent order, you can more easily let customers know when those items are expected to arrive and what items they can expect to be in each shipment. In some cases, you may also have an easier time getting your hands on essential items than businesses that do not have standing purchase orders and that, therefore, may have to make do with leftover inventory.

Consistency, however, is generally a benefit only when you can reliably predict the inventory you will need for specific items. Seasonal changes can have a heavy impact on the inventory you need to have on hand, as can natural product lifecycles. If you cannot predict those needs, a blanket PO may not be the right solution for you.

Processing Time

When you need to place only a single blanket order for a regular shipment, you will have to spend a lot less time dealing with the ordering process. You can, instead, feel confident that those items will continue to arrive in a timely manner for the duration of the contract. While an effective supply chain management solution can help you decrease your overall processing time, using BPOs for the products you know you need to order most often can further streamline your efforts.

Accuracy

When your orders arrive, it’s critical to ensure that you have a system that will allow you to easily match your order with the inventory you have on hand. You don’t want to end up with excess inventory that you cannot sell, especially items that may quickly go out of date or expire. Make sure you carefully consider whether you can trust your vendor to send you accurate, reliable orders, and that you have the tools on hand to evaluate that accuracy over time.

Diversity

Supply chain diversity is a critical element for many businesses. Diversity can help you keep up with supply chain challenges and address issues more effectively, preventing you from ending up with vital inventory shortages during difficult periods. Blanket purchase orders, however, assume that your single supplier will provide the total inventory you need for that time period–or at least, the total inventory needed to fulfill that order. If you need to maintain a high degree of diversity, adaptability, and responsiveness in your supply chain, a blanket purchase order may not be the best solution for your needs. 

Let Stock IQ Help Manage Your Supply Chain

Whether you’re putting together blanket purchase orders to cover the majority of your inventory needs or you’re looking for a solution that will help you manage your other regular purchase orders, Stock IQ can help. Contact us today to learn more about how our supply chain management solutions can benefit your business.