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Purchase Order Management and Performance Management – Summary

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Purchase Order Management and Performance Measurement  defined the purchasing management process, also referred to as the purchase order (PO) flow process, and discussed its difference from the purchasing cycle.  The primary difference is that that purchase management doesn't typically include sourcing or price determination. We traced the purchase order flow from requirements identification to purchase order close-out.

Effective and accurate purchase order management requires the creation and on-going maintenance of a number of key databases. The two basic databases used in purchase management are static databases, which are intentionally created or changed, and dynamic databases, which are automatically updated whenever a PO is entered or altered. We discussed determining the timing of PO release and the use of material requirements planning (MRP), reorder point (ROP), and kanban system for order release, as well as establishing vendor managed inventory (VMI) process. The major goals of VMI are to cut time- and cost-adding functions from the buyer and allow the suppler to build flexibility into production and delivery to achieve the buyer's goals quickly and in a cost-effective manner. VMI relationships require a strong sense of mutual trust; solid contracts must exist between the two parties.

We concluded by exploring the effect of the Internet and computerized technologies on procurement and supplier relationship management (SRM). Internet functionality has enabled purchasing and supplier relationship management to take advantage of tremendous opportunities for digital transformation.  For example, there is an array of Internet-enabled functions available to today’s purchasing function such as e-Procurement, e-Sourcing and marketplace exchanges. B2B marketplaces are also available for supplier relationship management services such as product search, supplier search, e-sourcing or strategic sourcing, and many other value-added services.

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