Creating Purchase Orders and Dealing with Minimum Order Quantities
Placing an order from a supplier is no simple task. You have to deal with figuring out what you want from each supplier, filling out purchase order forms for that supplier, and you also need to deal with minimum order quantities. With all these tasks, placing orders can be tedious and easy to hurry through without thinking about what you’re doing. It’s a great idea to make sure you know what you can do with a purchase order, and what you should think about when creating one.
A purchase order is a document given from the buyer to the seller, which notes the products or services the seller will provide. It is basically a contract, that requires the buyer to pay the agreed upon price, and the seller to provide the agreed upon goods.
When a buyer provides the seller with a purchase order, it is up to them to accept or reject the order. They can reject if they can’t handle the order or don’t like the price, or they can accept and form a contract to provide the goods in the purchase order. Dealing with purchase orders can be a nuisance, but it’s definitely a necessary nuisance.
When creating purchase orders, there are a few things to think about. First of all, you need to know what products you want from each individual supplier. Different suppliers will have different prices for their products, and it can be a great move to order each individual product from the supplier with the best price. You also need to think about the other terms of the purchase order besides pricing. The purchase order should specify shipping terms and delivery dates, item quantities and identities, and payment terms. It is important to consider these items, and how they can work for your business.
A problem can arise with your purchase order in the form of a minimum order quantity. A minimum order quantity is the minimum required size of an order, set by a supplier. Suppliers set these in order to only field orders that are “worth it”. If a supplier creates a specific custom good, they often will set a minimum order quantity on it. It is not worth their time to set up the equipment and only produce a small number of this custom good, so they will set a minimum order quantity of some number that is worth the time of producing.
Dealing with minimum order quantities can complicate your orders, especially when you are buying parts for a product that you create and sell. If you have five parts you need to purchase, and you want to purchase 50 of each, it can be problematic if a supplier has a minimum order quantity of 100 on one of the parts. You need to consider your options and make a decision. If you can afford the extra 50 parts, then you might want to just go with that supplier and store the extra parts for when you need them. If you can’t or don’t want to pay for the extra parts, it may be a good idea to look for another supplier. You could find another supplier with a smaller minimum order quantity, and order your 50 parts from that supplier. While dealing with minimum order quantities can require a little extra work and thought, there are ways around them.
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