Establishing a strong relationship with your suppliers is key to increasing sales and simplifying your multichannel selling, especially if you are purchasing from more than one supplier. We recently gave you some tips on how improving that relationship directly affects your bottom line, but today we’re going to focus on one particular piece of the puzzle – mastering the purchase order. Although it may seem like a small piece, it plays a huge role in your day-to-day operations.
When you’re providing your supplier with information about the products you need, there are some standard items to always include. Standardizing your purchase orders will allow you to increase clarity, decrease errors, and reduce the amount of back-and-forth emails and calls between you and your suppliers. Setting clear expectations up front will also allow your internal operations team to make smarter decisions and be more efficient when purchasing products.
What to Include in an Inventory Purchase Order:
- Payment Terms:
Surprise! You have to pay for the goods you buy. When you are finalizing a purchase order agreement, make sure that you are capable of paying the way your supplier needs you to. Ask about automated options if you know there will be a potential stall on your end. However, only do this if you’re confident in the supplier’s delivery performance. These things will most likely be squared away upfront, but suppliers can change their policies and may forget to tell you. Some vendors will also provide an early or prompt payment discount, so be sure you are well versed on where you can save.
- Delivery Dates:
Deciding delivery dates may seem simple and straight-forward, but when you have several people to manage, you must make sure everyone has the same information. When finalizing the amount of inventory and the shipping timeline, you are in charge of making sure both your suppliers and internal team have the same information. If there are updates to the shipping dates, your warehouse team will need to be notified. And if something is expected, but not shipped, you must put systems in place that encourage your teams to communicate.
- Item Identification:
When purchasing from a supplier, they will have their own product IDs or SKUs that you need to use when you order. And if you are purchasing items from multiple suppliers, these custom IDs can become very difficult to track against your internal identification system. Create a system that makes it simple for your employees to know how to mark inventory when it comes in. If you fail to correctly label inventory once you receive it, you will run the risk of overselling items or getting stuck with excess inventory you cannot sell.
Clearly your suppliers need to know how much inventory you need. However, you should also inquire about any bulk discounts based on the number of items you purchase. Suppliers can change their rates, and if you are close enough to a bulk discount option, it is your responsibility to ask. Also, if you’ve been working with a supplier for a long time, don’t be afraid to ask if there are special discounts you can receive as a loyal customer.
- Shipping Terms:
If you work on a smaller rotation cycle of shipments, this is incredibly important. You’ll want to make sure that you’ve considered all of your options with the supplier and determine what the protocol is when you need an immediate shipment. If you need to make a last minute request, does your supplier have approval to send it at a higher rate? Does this approval have to come from you or have you given your operations manager the ability to sign-off in such a situation? Make sure you’ve thought of every possible scenario as this is a crucial piece of the operational process that several business forget.
- Other Obligations and Terms:
All of the nitty-gritty details exist here. If you’ve had a verbal agreement with your supplier regarding something very important to your process, make sure it is well documented! With the amount of buyers he or she has, it is very likely that a verbal agreement will be forgotten and possibly disputed, especially if the person you had the agreement with leaves the company or changes roles. Document everything and note special instructions or arrangements right on the purchase order.
Creating a transparent purchase agreement with your internal operations team and your suppliers will assure accuracy in your orders. Of course, things will come up, mistakes will be made and relationships may be bruised a bit. But there are ways you can lower the number of times these things happen by knowing what to expect and assuring that everyone is on the same page about those expectations.
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