There are various methods for buyers to create purchase orders, and their decision is based on a few factors. These include the quantity and cost of the goods or services they intend to purchase, the presence of automated technology, whether they are making a one-time or ongoing purchase, and the buyer’s level of authority.
Discrete Purchase order
The buyer initiates this approach by creating a purchase order for purchasing goods or services. Typically, the process starts with a requisition. Following research, sourcing, and price bargaining, the buyer produces a one-time purchase order, which is forwarded to the chosen supplier.
Online Requisitioning System
With this approach, employees who are authorized by the company can access an online requisition screen through the business system. They can enter their requisition into the system, which will then be automatically presented to the buyer. The buyer will review the requisition, perform sourcing and pricing, and either reject or accept it before releasing the purchase order to the supplier.
Procurement Cards (P-cards)
This purchasing method involves giving authorized employees a card similar to a personal credit card, allowing them to make buying decisions without involving the purchasing department. This approach is suitable for low-cost and low-volume purchases.
Automated Ordering Systems
This approach involves an inventory planning system that creates purchase orders for items automatically, triggered by a flag in the item’s master file record. Typically, the buyer and seller establish direct electronic connections using methods like electronic data interchange (EDI), auto fax, or the Internet. This process is usually applied to low-value, high volume items, such as fasteners and lubricants, or when a blanket or contracted agreement is in place. With this ordering system, buyers can directly place orders into a supplier’s customer order system.
Direct-ship Purchase Order
Sometimes, customers want to buy certain products or large quantities that the seller doesn’t have in stock. However, instead of rejecting the order, the seller orders the products from an external supplier. The supplier then directly ships the products to the customer, without going through the seller’s normal in-house receiving, material handling, and shipping process.
Capacity Buying
This is a procurement strategy in which a company agrees to purchase a specific amount of a supplier’s production capacity over a set period. The supplier is then given schedules for specific items in quantities that align with the agreed-upon capacity level.