When You Should and Shouldn’t Make PO Changes After It’s Been Issued
A purchase order (PO) is an official document created by a buyer with a request to order a product from a seller. When the seller accepts the document, it forms a legally binding contract between the buyer and the seller. That said, there are many instances in which PO changes are required even after the terms have been agreed to.
So when is it OK to issue revisions to your PO? We’ve put together some best practices to help guide you when issuing and editing your POs.
For Quantity Changes
If you’re hoping to make quantity changes, we recommend giving the supplier a heads up, especially if the PO was submitted more than 5 days ago.
Manufacturers are scheduling production orders and need to optimize for minimal downtime between the previous and the next job. Adding 1,000 units to an order may not seem like a substantial amount but the time impact is felt for the manufacturer. Equipment change-over, cleaning to cGMP standards, and paperwork can cause delays for the next customer in the production queue.
With quantity increasing or decreasing, the Gross Merchandise Value (GMV) of the PO will change.
- An increase in quantity can cause the unit cost to decrease or stay constant
- A decrease in quantity can cause the unit cost to increase or stay constant
However in both scenarios, there may be an additional payment required by the supplier. If you have payment terms that require a deposit the supplier may ask for you to true-up the balance before production can start. Generally, this can be avoided and worked out.
On the other hand, if you increase or decrease the quantity too late this could have a greater impact on the raw materials. For example, resin could fluctuate weekly as seen on the market, lead times for this “second” order may be increased, and depending on the quantity change, the price could be altered. If you decrease the quantity, the supplier may already have ordered the raw materials and they could pass that cost onto you.
Forecasted quantities can and will change but it’s important to communicate as soon as possible if it does happen to not incur any last mile delays.
For Pricing Changes
We recommend confirming the price before placing a PO. Why? Because time is wasted when the price is not confirmed in advance. The PO will always be rejected for a pricing mismatch causing the supplier to not schedule production. These inefficiencies don’t help your business or theirs.
For new items, pricing will be shared on a quotation sheet. For existing items that were ordered more than 3 months ago, we recommend confirming the cost with your supplier as a number of factors could have affected the price since your last order.
Factors include resin, currency, and any applicable artwork changes that could require a new quote if the colors increase or decrease.
For Supplier Information Changes
If you are noticing that you need to change your PO to reflect accurate supplier information, we recommend having your supplier provide this upfront. Create a supplier onboarding document that collects the business name, company address, contact information and banking details.
Adding New Parts to a PO
As long as production hasn’t started yet, you should be able to add new parts to your PO. We do not recommend adding new parts to a PO more than two weeks after it has already been accepted.
In some cases, we recommend creating a new PO instead of editing the existing one:
- When the added part does not align entirely with your existing order it causes more issues with reconciliation
- If the delivery date for the added part is different from the delivery date for the original parts it is easier to track on it’s PO
Changing the Mode of Transportation
Based on your forecasts and sell-through rates, we recommend aligning with your supplier on the desired mode of transportation 7 to 14 days prior to the PO’s estimated completion date.
New packing lists may need to be created. In addition, air market pricing updates weekly and books 7 days out, while an ocean route requires more time to plan. Establish your routes early to avoid annoyances later. (See our must-have checklist for coordinating freight here.)
To streamline delivery and inventory reconciliation, ensure continuity across manufacturers, warehouses, and fulfillment centers by establishing what will be printed on the box.
At a minimum, the exterior of the box should have the following:
- Brand Name
- Supplier Name
- PO #
- SKU or Part Name & Number
- # of Carton (1 of 30)
Additional items that are helpful include:
- Net Weight
- Gross Weight
- Lot #
- Manufacturing Date
One box should be deemed the master carton which includes the packing list for your receiving team to track against. Shipping arrangements can be orchestrated on the first order and be maintained throughout.
Have other questions about how to manage changes to your POs? Get in touch with a specialist today to see how Anvyl can help.