A blanket purchase order (BPO), also known as a standing purchase order, is a long-term contract between an organization and a supplier to supply products or services at a fixed price over a specified period of time. It is a type of purchase order that helps businesses efficiently order the same shipment of goods or services from a single vendor at regular intervals. A blanket purchase order is used when a business needs the same goods or services on a recurring basis over a specified period, such as an entire year. The delivery schedule may or may not be predetermined.
Advantages of using a blanket purchase order include:
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Reduced costs and increased purchasing power: A blanket purchase order allows an organization to group together purchases that would otherwise be spread out over a long period of time and gain volume savings. Furthermore, these POs enable an organization to pool purchases from many divisions and locations in order to increase negotiating power.
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Improved efficiency and shortened purchasing lead time: A blanket purchase order clearly lays out the terms and conditions of a purchase, including quantities required and delivery time. This eliminates the need for an organization to keep additional stock on hand because it is confident that the supplier will fulfill the order as previously negotiated.
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Streamlined ordering process: A blanket purchase order eliminates the need to secure sourcing and negotiate contracts for each order, which allows the procurement department staff to focus on important activities over repetitive tasks. It also streamlines the ordering process for expected repetitive purchases.
Blanket purchase orders should not be used for orders if the pricing is uncertain, the product quality is suspect, or the seller is untrustworthy. They are best used when dealing with recurring purchases from the same supplier over an extended period of time.
