It can be important to have a clear understanding how purchase orders are managed within the contract manufacturer.
While not all contract manufacturers manage purchase orders the same way, the information that follows provides you with a reasonable understanding for what might take place inside most contract manufacturers with regards to issuing; managing, canceling, and filing purchase orders.
Issuing purchase orders
Purchase orders are typically prepared from some variation of materials resources planning (MRP) information output in the form of system-generated MRP purchase requisitions or a company-mandated purchase requisition for non-MRP requests. Most importantly, only authorized purchasing personnel should place purchase orders.
Meanwhile, the role of the purchase requisition is designed to collect all of the necessary information and authorization, relevant to processing the procurement within the contract manufacturer including applicable cost, history of purchases, approved vendors lists (AVL), approved manufacturers list (AML), special marking or certification requirements, deliver and quantity.
In most instances, purchase orders are distributed with a copy of the original copy sent to the supplier or vendor and a second copy which is filed and attached to the original purchase requisition.
Purchase orders as written change orders
Purchase orders are used as written orders to suppliers and may also be in the form of a confirmation for verbal orders.
Purchase order form / format is generated from information supplied by properly-completed purchase requisitions and should include at least the following information:
- Purchase order number
- Vendor name and address
- Order date (date order is placed, not date order is typed)
- FOB point
- Ship via information
- Terms noted on requisition
- Delivery/performance date (date products are to be delivered or the services are to be performed
- Ship to information (company location where product is to received)
- Indication whether or not the order being placed in a confirmation order or a change order
- Taxable and / or non-taxable status identified (resale identifiers may be required for non-taxable products)
- Items (separate line items are used for each item and should be numbered consecutively)
- Part number, part description, revision, delivery date, quantity, unit of measure, unit price, and total price
- Terms and conditions
- Authorized by (signature / name of buyer), appropriate vendor signature
Controlling purchase orders
Purchase order numbers should be assigned systematically by an enterprise resource planning (ERP) system. There are plenty of well-known industry platforms such as SAP or Oracle. Purchase order confirmation is typically performed within such ERP systems, which is then filed with the purchase order.
Anytime changes to a purchase order are made, the same purchase order number must be cited on change orders. Confirmation to these types of change orders must be required and should be filed with the hard copy purchase order.
Cancelling purchase orders
Cancelling a purchase order should only be accepted in writing. E-mail is considered acceptable written notification. A hard copy of the cancellation request should be filed with the original purchase order. Additionally, a hard copy of the confirmation of the purchase order cancellation should also be filed with the original purchase order.
Filing purchase orders
An assigned party within the contract manufacturing purchasing department should be responsible for maintaining purchase orders and related files. All original copies of purchase orders, corresponding requisitions, confirmations, change orders, change order confirmations, cancellation requests, cancellation confirmations, and other relevant information related to a purchase order should be filed and managed by the contract manufacturing buyer.