The biggest difference between a regular PO and a blanket purchase order is the time frame. While a regular PO is used for a short period of time, a blanket purchase order lasts for an extended period, with a definitive start and end date.
The key difference between the two include:
Details
For a single PO, a business should specify as much as possible about the order. On the other hand, a blanket purchase order with multiple deliveries can afford to be broad. Purchase orders will describe specifics like part numbers while a BPO is more likely to describe a high-level need.
Length
A BPO is a long-term agreement with a supplier, with a start and end date, rather than a single contract for a one-time purchase. Blanket orders are typically created annually or quarterly.
Volume
The volume of orders changes with a BPO because a business is buying more than they would from a single PO.
Deliverable
Blanket purchase orders are more often used for services, rather than products. That’s because there’s more of a recurring demand for services.
Amount
Every purchase order has a set amount, whereas a BPO might not. It can remain open.
When Should a Blanket Purchase Order be Used?
Every type of purchase order starts with a genuine need for products and/or services and a good supplier you can trust. A blanket purchase order is created when those same products/services are needed for an extended period of time.
When the unit cost can be well defined, details specified, and a single vendor capable of delivering, it’s a good time to consider a blanket purchase order.
There are certain circumstances in which using a BPO is ideal, including (but not limited to):
- Parties can decide on a set unit cost
- You can trust a single vendor to handle the entire need
- Bulk discounts can be applied to large orders
- Building long-term supplier relationships is important
- You need to make separate purchases with multiple payments
- When a projected need will stay consistent throughout a period of time