Purchase Order

TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
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A purchase order, also known as a capital order, is where a buyer makes an investment in specific goods or services and then sends a request to a seller to purchase the products or services. Typically, a standard purchase order, which is used in the distribution of large-scale inventory, is used for infrequent, irregular or one-time purchases. However, with new inventory programs that track sales, manufacturing and shipping data, companies can more efficiently and effectively utilize their existing purchase orders to achieve greater control over their supply chain and inventory requirements. In fact, some companies are now taking advantage of their purchase orders to streamline their production processes and better manage their overall supply chain. For example, instead of receiving a single large order from a manufacturer, some companies are now electing to receive multiple smaller, more frequent orders from a single manufacturer to help them better monitor their supply chain.

When implementing a strategy that relies on purchasing orders to better control your supply chain, it's important to first establish the nature of each order. For instance, if you are implementing a method of inventory leveling based on the number of outstanding returns, the method by which you will physicallyacce from your current level of inventory to your maximum level of inventory should be defined in terms of quantity and not in terms of dollar amount. Similarly, if you have a very large order that requires your manufacturer to acquire new inventory from a supplier, the supply chain method by which your manufacturer will acquire this inventory should also be clearly defined in terms of dollar amount and not in terms of quantity. The objective behind purchasing an ACI certification from a third-party vendor is to ensure that your inventory levels are kept within the parameters of your ACI certification standards.

Once you've determined your ACI PO, the next step is to define your inventory. This involves first determining what your ACI PO defines as; then utilizing your PO definition to generate ACI deliveries. For example, if your ACI PO defines a shipment as an ACI truck delivery, you may utilize the value of the ACI truck delivery as the basis for your ACI PO definition. If you defined a shipment as merchandise that is received at a depot and returned to you after processing, your ACI PO would provide you with the value of the return shipping as your ACI PO. All of these ACI PO definition are provided just for the purpose of helping you maintain an accurate understanding of your supply chain so that you can proactively control it.

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