A blanket purchase order is used when buyers need to purchase a fixed quantity of a specific product over a period of time. When the orders are in bulk and buyers definitely need the specific items then they issue blanket purchase orders to the suppliers. There are many situations when businesses can benefit by issuing blanket purchase orders.
To protect businesses from sudden price fluctuations
Blanket purchase orders are issued at a fixed price. This eliminates the risk of any future price fluctuations. Yes, it could also mean a loss if the prices of your ordered products go down. But this is a risk most businesses are willing to take in case other benefits make up for it. This can work out great for vendors as they can keep stock ready ahead of time and also have the certainty of payments from the buyers. However, blanket purchase orders are issued for only the current financial year.
To keep a steady supply of certain products ready
Blanket purchase orders are ideal in situations when you definitely need certain products from specific vendors and the ready supply of these products are more important to you than any price fluctuations. Issuing blanket purchase orders are also ideal in situations when you anticipate a shortage of certain crucial components for your manufacturing process or business.
To streamline the inventory process
Processing inventory and issuing blanket purchase orders for all essential items ahead of time can help businesses manage their inventories better. Doing so eliminates the need to go through the inventory for small, but essential items every week or month. With blanket purchase orders there is also no risk of buyers forgetting to place essential orders in time. When the orders are placed ahead of time the suppliers can deliver them as and when needed.
To save time
Businesses can save significant time when they issue blanket purchase orders. When there is a certainty of requirement of some products then instead of issuing multiple purchase orders one blanket purchase order does the job. This eliminates the need to make new purchase orders every time, getting the necessary approvals and then sending them across to the vendors. When the orders are taken care of ahead of time it can save businesses hassle later on, when the deadlines for deliveries are just around the corner.