Supply Chain Glossary

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Order, Purchase


Source: Procurement Glossary
Author: Paul Rogers
Institute: CIPS - UK

Courtesy of


 

A purchase order [PO] is a document issued by a buyer to their supplier that defines what is needed, in what quantity, when performance is required, and on what terms, including price and payment terms.  The issue of a purchase order is increasingly a prerequisite in many payment systems for the payment of invoices, so as the practice of paying invoices without a matching PO declines, the proportion of transactions made by raising a PO is increasing, except for low value transactions.  Procurement cards, as the lowest cost acquisition method, are often used for low value acquisitions.

Legally, purchase orders can become part of the ‘battle of the forms’ between buyer and supplier, when each party exchanges documents with slightly different terms, making it hard to define when offer and acceptance were made on unambiguous and agreed terms.  To avoid this, many recurring purchases are made subject to an overarching agreement with the supplier, so that each PO ‘calls off’ against a formal agreement which defines the terms and conditions of the arrangement.  See also Battle of the Forms.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




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