Although orders are fundamentally
either discrete orders or blanket orders, there are really several more specific
"types" of purchase orders that are associated with more specific
business process scenarios:
of Standard Purchase Orders
Increasingly, the term Standard
PO is being used when referring to discrete purchase orders for Direct
Procurement, which is the the procurement of direct
material. The descriptions of "standard" purchase orders are based on
The exchange is
company-to-company; accounts are already established
The buyer and seller are
already doing business together
One time information is
already captured, such as addresses, product specifications, pricing
The seller's catalog may be
publicly available (on the web, etc.), or the seller may have previously
provided a public or customer-specific catalog to the buyer; the order
references the fact that the pricing comes from the catalog.
The PO is being sent to confirm
an order that has already been placed verbally
Pricing and terms pre-negotiated
The buyer and seller may have
previously negotiated a contract
(purchase agreement) which sets pricing a period of time.
There may be more than one contract between a buyer and seller, as
some commodities may have more or less volatility in pricing.
A short term contract would be used where pricing is volatile but
partners want to freeze pricing for a month or two.
A longer term contract would be used for commodities that have fairly
The contract may specify
conditions under which the contracted pricing does not apply.
The order references the fact
that the pricing comes from the contract
A contract for systems may
specify pricing for standard
configurations, or the contract may establish pricing for a customer-specific
configuration which is being purchased repetitively; the
customer-specific configuration in this case is assigned a part number.
The procurement of items that go
directly into the product being built
a/k/a Inventory Order, Stock
Goods are shipped to a third
party; only those where the drop-ship address has been established in
advance and is associated with a ship-to code are considered
Often confused with consignment
because the inventory shipped
to the third party is usually
consigned, i.e. physically in the possession of the 3rd party, but
not owned by that party
Inventory is consigned
from sellers perspective if seller retains ownership while 3rd
party possesses inventory.
Inventory is consigned
from buyers perspective if seller transfers ownership to buyer
when inventory is shipped to the 3rd party.
For a "standard
configuration" of a system; i.e. a personal computer may be sold
in a package that includes a default memory chip, default accessories, etc.
A standard configuration
is assigned a part number (such as a GTIN
- Global Trade Item Number
- a standard for part numbers) that represents the configured system.
The individual components have their own part numbers, but the part
number of the configured system is what goes on the purchase order.
The part number for standard
configuration may be part of the sellers catalog.
spot-buy PO is a discrete order for an unplanned purchase not
made under contract terms. The purchase usually made on a one-time basis, usually to
fulfill a short-term need, such as the need to acquire parts on an emergency basis to
replace damaged parts or to fulfill unexpected customer demand. A spot-buy PO may also be used to purchase
material being auctioned by a seller, or to award a seller that has won a reverse-auction bid.
Only those for established
partners/established parts are considered "standard" orders
Types of Purchase Orders ("not Standard")
There are many types of Blanket Purchase Orders.
BPOs types are described separately here.
Relationship between Purchase Order Number, Ship-To Location and Buying Party
EIDX recommends transactions with the PURCHASE ORDER NUMBER,
SHIP-TO LOCATION and BUYING PARTY at the header level only. That is, only one
purchase order number, one ship-to location, and one buying party per
Typically, the purchase order number and ship-to location may be the only two
components of a key for finding the data in both the purchase order system and the sales
orders systems. Purchase order number alone may not be an adequate key because purchase
order numbers may not be unique across all customers in the sales order system, especially
if the location number scheme is a simple sequential number like 09 or 10. The processing
is generally easier if all key components (purchase order number and ship-to location) are
found only in the header of the transaction.
The buying party (corporation) and the bill-to location may be cross-referenced in the
seller's system given the ship-to location in the transaction. That is, once the
buyers ship-to location code is cross-referenced to the sellers ship-to
location code, the corporation and the bill-to addresses may automatically be linked to
the buyer and the given purchase order. When this happens, it is not necessary to send the
buying party or bill-to location in the transaction/message. Check with your trading
partners; if some of this data is required by some trading partners, you are likely to
send it to all your trading partners.
It should suffice to cross-reference locations by using the codes for addresses. It should
not be necessary to send full addresses.
If there is only one ship-to location associated with the purchase order, it should be
sent in the header level.
Though EIDX recommends that a given purchase order have only one ship-to location, trading
partners can decide if they can implement the transactions if these data elements are at
the detail level, that is, multiple purchase order numbers, ship-to locations or buyer
parties within a single EDI purchasing transaction. These types of orders occur in cases
where a central purchasing department or purchasing agent is buying on behalf of
multiple company divisions or entities. Key data at the detail level is likely
to be more complex for a sales order system; hence, it is not the preferred transaction
Single Occurrence of Part in an
It is recommended that the purchase order have a
given part number only on one line item in the order.
If the part number must be repeated in a purchase order, the entire set of
schedules for the given part are split between the line items. This may
complicate the seller's processing of the orders and reviewing the schedules in
Likewise, when the seller splits line items in the sales order and they do not
maintain the integrity of the original line item number, the buyer's system may
have problems matching the acknowledgments to their data.
If there is a business reason for repeating the same part on multiple line items
within a given purchase order, then considerations should be given to splitting
them into separate purchase orders.