Purchase Order
Definition
A legally binding commercial document a buyer issues to a supplier specifying the items, quantities, prices, delivery dates, and terms of a purchase.
In Practice
Once a supplier accepts a purchase order (PO), it becomes a contract. The PO carries the item numbers, quantities, unit prices, required delivery dates, ship-to address, and reference to any master agreement terms. In most ERP systems it also drives downstream processes: goods receipt is matched to the PO, and the supplier invoice is matched to both in a three-way match before payment.
For planners, open POs are a core input to supply planning. The PO due date is the promise you plan against, so keeping PO dates accurate, by confirming with suppliers and updating reschedules, directly determines whether MRP output can be trusted.
Example: a planner releases a PO for 2,000 motors due in week 14. The supplier confirms week 15 instead. Updating the PO date immediately lets MRP flag the shortage and the planner can expedite or reschedule production before it becomes a line-down event.
Related Calculators
Related Terms
An internal request asking the procurement team to buy specific goods or services, which must typically be approved before it is converted into a purchase order.
Blanket Purchase OrderA long-term purchase order that commits to buying a total quantity or value from a supplier over a period, with individual releases scheduled against it as needed.
Supplier Lead TimeThe elapsed time from placing an order with a supplier until the goods are received and available for use, including production, transit, and receiving.
Payment TermsThe contractually agreed timing and conditions for paying supplier invoices, such as net 30 or net 60 days, often including any discounts for early payment.