A Purchase Order (PO) is a quick purchase contract: The organization’s representative issuer agrees with the supplier, if the PO is accepted, the purchasing organization will pay the agreed sum for the material contained within the PO. The agreement should be sealed with a supplier’s order acknowledgement.
A supplier I closely worked with once told me, because they did not issue acknowledgements, “If an order arrives wrong, let us know and we will get it corrected.” This is rather open-ended and verbally not an agreement, especially if the supplier’s representative moves out of the association, then verbal contract will be difficult to enforce. However, with the same organization, does come great benefits.
One project situation came up with an order for a host of small components. We ordered, yes, the lowest cost source, for antenna connectors (around 200), ground kits, weatherproofing kits, and a considerable length of coaxial cable, all on one PO for the project, and the order was delivered to the site. Then the project manager informed me that the owner decided not to do some sites and wanted more than 75% of everything returned. I said of course not. Then the project manager told me the specifications contained a clause that if the owner chooses not to do some sites, the owner has the right to return unused material. Our supplier representative was not pleased with the return request. Thus, I was introduced to a term I have never heard before…
Cherry Picking: I was introduced to this term on the above situation. My directives were to purchase the lowest cost from which-ever source offered the cost. In order to achieve the lowest project cost, I choose from various suppliers the least costly option. The not-pleased representative thus told me what I had done and that the supplier made no profit on the order.
From that time on, I corrected my purchasing procedures to avoid the Cherry-Picking label. Often a quote is presented with discounting with the assumption the whole quote will be ordered, or at least a profitable portion of the quote. From then on, the supplier modified their quoting process also. In order to not be accused from a customer that the quote was the source of them losing a project, the supplier would issue the same quote to all bidders. It was an All-or-None purchase order. If some material was changed later, the quote would need to be revised.
I was told when starting as the purchasing agent to be careful with issuing purchase orders and to ensure the instructions were clear. If a PO is issued with delivery requirements, staged deliveries for example, or for Just-In-Time deliveries, there must be an agreement with the suppling organization on the staged deliveries.
However, even if the purchasing organization clearly states within the PO a delivery schedule, the supplier may still ship the entire order without communicating the change or really be concerned with valid excuses. If product delivery control is strict, the best course of action is to issue a PO when the scheduled assembly is required. The post-pandemic COVID start, circa 2020, material shortages in all sectors were a focal issue with manufacturers and integrators.
On the flip side, most of the time the supplier is great with project supply acquisitions. Often, price changes, delivery issues, MOQ’s are quickly addressed and resolved. Issuing a PO revision is the best method to ensure the issue(s) are properly addressed.