Blanket Purchase Order - An overview

Blanket Purchase Order (BPO) is essentially long-term contracts or agreements with a supplier, for the supply of certain materials typically low value but high volume consumables / expendables. This kind of long term contracts help the company in getting a consistent supply of materials with very little chances of delay by the supplier, since he is informed well in advance. For the same reason, it helps supplier as well, in planning his resources properly.

BPOs could be any of the three types:

•  Rate

•  Quantity

•  Value

Items such as Consumables or Expendables are typically considered as lived items and hence are essentially procured routinely to meet both needs of reduction in inventory carrying cost and lived items in stock. Procurement of these items may be undertaken through BPOs.

BPOs can be used to procure a variety of materials upto a certain predefined maximum value or price limit or quantity limit from a vendor. The nature of the materials for this kind of purchase scenario is generally such that, the cost of administrative effort involved in processing individual purchase Order is regarded as disproportionately high in relation to their value. Unlike in a conventional Purchase Order, where in we seek specific delivery date, we can specify a validity period for the order which is in line with the Agreement reached between the Supplier and the company (Price, Qty, Value or the combination) for uninterrupted supply to all receiving locations.

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