When it comes to procurement, two terms that often come up are “blanket PO” and “scheduling agreement.” While they may sound similar, they actually refer to different procurement methods. Understanding these differences can help businesses make informed decisions when it comes to managing their procurement process.

Blanket PO

A blanket PO is a purchase order that sets a predetermined amount of money for a specific period of time. The supplier agrees to provide goods or services up to that amount without the need for additional purchase orders. Essentially, it`s an umbrella agreement with a predetermined ceiling value.

Blanket POs are particularly useful for businesses that have ongoing needs for goods or services from a particular supplier. For example, a manufacturer that regularly sources raw materials from a specific supplier may enter into a blanket PO with them. This allows the manufacturer to avoid the administrative burden of creating and issuing multiple purchase orders for each order of raw materials. Instead, they issue a single blanket PO for a set amount and the supplier fills the order as needed until the limit is reached.

Scheduling Agreement

A scheduling agreement, on the other hand, is a longer-term procurement agreement that defines the terms and conditions of a business`s purchases from a supplier over a specific period of time. It provides the details of the delivery schedule, pricing, and quantities for a certain period, typically several months to a year.

Scheduling agreements are useful when a business has a long-term production plan or has a steady stream of orders for a particular product or service. For example, a manufacturer might enter into a scheduling agreement with a supplier for a specific component that they use in their product. The scheduling agreement specifies how much of the component the supplier will provide, when it will be delivered, and at what price. This allows the manufacturer to plan their production schedule with greater accuracy and avoid potential supply chain disruptions.

Which option is right for your business?

The decision between a blanket PO and a scheduling agreement ultimately depends on the specific needs of your business. If you have a repetitive purchase need from a specific supplier, a blanket PO may be more appropriate. If you need a predictable and steady supply of goods or services over a longer period of time, a scheduling agreement may be the better choice.

Regardless of which option you choose, it`s important to ensure that the terms and conditions of the agreement are clearly defined and mutually beneficial to both your business and the supplier. This can help avoid potential disputes and ensure a smooth procurement process. Additionally, businesses should consult with a procurement professional or legal expert to ensure compliance with industry regulations and laws.