The purchase order offers quite a few advantages to all its users, especially for procurement related purposes. With the help of Purchase orders, materials can be quite easily procured externally for stock or direct consumption along with procuring services externally. In addition, the special procurement types “subcontracting”; “third party” (involving triangular business deals and direct-to-customer shipments) and “consignment” are all made possible all thanks to the purchase order.
Purchase orders can be utilized for covering the requirement of the enterprise by using the external sources (i.e. a vendor supplies a material or performs a service). Purchase order also helps in procuring material which is required in one of the enterprise’s physical plants from an internal source, i.e. from another plant. All such transactions involve longer-distance stock transfers. The activities following on from purchase orders (such as the receipt of goods and services) are all logged, thus enabling an extremely effective and efficient monitoring of the entire process of procurement.
Apart from the above, purchase orders can be utilized for once-only procurement transactions. For instance, a specific material from a specific vendor can be procured only once, that’s when a purchase order is made. However, in case the enterprise is planning to enter in a longer-term supply of relationships with this vendor, then it is suggested to set up a so-called outline agreement, and this also typically results in more promising conditions of purchase.
Usually, the purchase order quantity can be rounded during the purchase order processing for allowing the maximum advantage of the negotiated conditions or for the process of optimal utilization of the present transport capacities and all of this is done in the interests of optimized purchasing.
The user can create a purchase order which comes with an extended, a predefined validity period and a value limit, as not all materials or services to be procured justify the effort involved in individual monitoring. (Eg: all of this can be done when procuring office supplies). This kind of a purchase order is same in nature to the “contract”.
In this scenario, it is not imperative to specify the individual materials or expend any effort for the goods receiving activities. Additionally, putting an automatic process also reduces the amount of work which is involved in invoice verification to a minimum extent.