Whether you’re a just-starting-out e-retailer making your
first investment in inventory or an experienced merchant
dealing with a routine resupply, Purchase Orders — dubbed
POs — will be involved.
Unless you’re manufacturing your own product, you must get
in touch with your supplier(s) to order product for sale.
POs make this happen by streamlining the process for both
retailer and vendor — they’re documents sent by a retailer
to the supplier that place an order for some quantity of
product that the supplier carries.
POs can contain the following information:
- Your name, date, and company address
- Your supplier’s name and address
- Ship-to information
The specific products you’re ordering, including product
size, color, etc.
- The price per unit of each product
The quantity of each product requested
- Each product’s SKU or UPC code
- Timeframe of delivery and payment
Specific instructions like which shipping carriers, methods,
or shipping accounts to use for delivery
As you can probably tell, specificity is important when issuing
a purchase order. The more detail provided, the less room for
any miscommunication with your supplier!
As you craft a PO, be sure to take more than just the products
and quantity you need into account. Here are some questions to
ask yourself when you’re ready to create and send a PO to your
Is any of my inventory on-hand at risk of a stock out?
How much does each unit I’m ordering cost?
- How much will this PO cost in total?
Am I waiting on any backordered inventory (product that
hasn’t yet been delivered from a previous PO)?
There are two aims in asking yourself these questions:
understanding whether or not the PO you’re issuing meets your
demand and whether or not your bottom line can take the
As for the actual creation of purchase orders, it’s certainly
possible to manually write them up or email them yourself, but
e-retailers typically use some sort of inventory management
software to create, fill out, and send their purchase orders.
When dealing with software, products and their respective
suppliers are imported, and when the user receives an alert that
quantity is low, they create and enter specifics into a PO
that’s emailed directly to the product’s supplier at the press
of a button.
Once you’ve figured out the contents of a purchase order, the
timeframe of delivery and payment are of utmost importance.
Before sending the PO their way, be sure to figure out when you
need the product and whether it needs to be sent to you all at
once or in batches.
That said, a PO is a two-way street. It’s important to
understand that a PO sent to the supplier is only
legally-binding once they accept it. Much of the control over
timeframe and payment belongs to the supplier — they have the
leverage since they have the product you need. They’ll do their
best to satisfy your needs as a client, but they may have their
interests to look after as well.
Some vendors might require that you pay for part of the
inventory requested before they ship it your way. Some vendors
might be selling the same product to various merchants, choosing
to deliver product to you in batches instead of all at once as a
result. Some might request that a PO be paid for in full once
it’s accepted, even if product must be backordered.
Regardless, list out a timeframe for delivery and payment.
Before it’s accepted by the supplier, a PO is an offer. If the
vendor has an issue with any of your requests, they’ll let you
POs aren’t just requests for product — they’re a major part of
managing your supplier relations and protecting yourself
operationally and legally.
Documents are important because, well, they document things.
They can be referred to in the event that something is unclear
or if something goes wrong. A PO is direct documentation of a
transaction between you and your supplier, and it acts as a
legally-binding contract once both parties accept it.
For instance, if your supplier shorts you on some inventory and
fails to live up to the delivery timeframe that you’ve both
agreed upon, the PO now has your back. Or, if you mistakenly
ordered a certain quantity or suspect that the supplier messed
up, the PO can be referred to to see who erred.
Until the supplier sends over every unit you’ve agreed on in the
purchase order, the PO will remain open and active. If product
is to be delivered over time, be sure to make note of the units
you receive, whether it’s adding the total to a spreadsheet or
inputting quantities in your inventory management software.
Only after a supplier delivers the PO in total is it fulfilled.
Payment depends on the rules agreed upon, but it often takes
place once the PO is completed. And, for all the reasons we’ve
already mentioned, be sure to keep record of your POs, even if