Purchase order

Once a buyer and a seller have finalized their negotiations in the so called offer phase a legally binding contract is created between them. From such a contract one or multiple pairs of procurement orders and customer orders can be spawned. The procurement order is the business object on the customer side, the customer order is the business object on the vendor side. They are bound together through the b-op network, if both participants have their b-op digitals and they share enough trust.

If there is not an existing contract that governs the relationship between buyer and seller, the procurement order can be used in place of a contract. This offers legal protection for both buyer and seller. Each purchase order is assigned it’s own unique number, known as the procurement order number.

Structuring the procurement orders, there are various types of purchase contracts, the most common are standard purchase contract and blanket purchase contract.

Purchase Contract Basics

All purchase contracts share certain common requirements, and should ideally contain as much detail as possible. That’s because once a purchase contract is formally accepted by a vendor, it becomes a legally binding agreement between the vendor and the purchaser. In general, purchase contracts should contain:

• Detailed and complete vendor information
• A detailed description and quantity of goods or services to be purchased
• Quality specifications
• Full pricing information as agreed upon between buyer and seller side
• Delivery terms and conditions
• Payment terms and conditions

Purchase Contract Varieties

Different types of purchase orders fulfill specific purposes.

Standard Purchase Contract

When you are making a one-time purchase create a standard purchase order. It’s the most common type of purchase order, and the simplest. Basic purchases, like replenishing office supplies, are of this type.

Planned Purchase Contracts

When you are partnering with a single supplier as your sole source of specific goods or services, this type is right. You can create a single contract, and then schedule purchase orders released during the timespan of the contract. This contract type has the benefits, that you and the vendor can plan regarding liquidity demand (you) and stock demand (vendor).

Blanket Purchase Contract

When you are partnering with a defined supplier, but you’re not sure about your precise time frame or quantities required, use this type of contract. Blanket Purchase Contracts typically have a limited quantity ceiling and cover a specific period of time. They’re useful in locking down pricing terms with a given vendor before making purchases from them.

Long-Term Purchase Contracts

Rather than a binding legal agreement for a specific purchase, contract purchase orders create a high-level, long-term agreement. This legally binding contract spells out in detail the exact terms, pricing, and conditions of all purchases made from the supplier by your company, but not specific purchases themselves. They might not have an expiration date, and the framework itself lets you issue standard Purchase Orders that conform to the terms and conditions established within the contract purchase order.

	STANDARD	PLANNED	BLANKET	LONG-TERM
Established Terms & Conditions	YES	YES	YES	YES
Goods & Services Specified	YES	YES	YES	NO
Pricing Specified	YES	YES	POSSIBLE (Price-Steps)	NO
Quantities Specified	YES	YES	POSSIBLE (Price-Steps)	NO
Account	YES	YES	NO	NO
Established Delivery Schedule	YES	POSSIBLE	NO	NO

Related Articles

• Procure-To-Pay
• Purchasing contract
• Dev:Procurement Order - Developer information page