Purchase Order Management - Challenges and Tips

This blog post provides useful tips on how to reduce inefficiencies and improve Purchase order operations.

Outbound logistics processes include activities such as the order processing, packing, and shipping of products. Before selling and shipping great products to customers, companies need to create said product, meaning that outbound orders usually trigger incoming shipments. Whether exporting goods to sell in a particular region, or manufacturing products to be exported globally, companies send purchase orders to suppliers in order to source raw materials or commodities. These purchase orders are essential for not only stock and inventory management but also production planning. Hence, companies must have visibility into the status and delivery timeline for each purchase order and incoming shipment because of the interconnectedness and complexity of both.

PURCHASE ORDER MANAGEMENT

Coordinating purchase orders with the timely arrival of incoming goods is called Purchase Order Management. Purchase orders do not necessarily require chronological alignment with sales orders. Moreover, depending on whether operations team follow make-to-order or make-to-stock principles, in- and purchase order management may be separate processes. However, the balance between demand and supply must be kept.

A common challenge is suppliers talking their “own” language, while transport partners also speak their “own" language. For example, a company orders and tracks the order internally as "Reference 123". The freight forwarder then might split the order and deliver it in three slots, each called "Ref XYZ". This creates difficulty in maintaining a clear logistics overview and effective communication. So, easing communication will facilitate workflows and improve the relationships with all the stakeholders. One way to do so is to centralize communication channels or use a centralized order management system.

Route selection presents an additional challenge because shippers have many options and factors to consider. Avoiding delays, minimizing extra costs, and reducing exposure to risks all impact what could be the optimal route. Furthermore, route selection affects the  fulfillment of sales orders. This has an impact on manufacturers' warehouse planning and the fullfillment of their customers' orders.

Below are some “Dos” and “Don’ts” of Purchase Order Management:

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Ultimately, customer satisfaction and reduced costs are the goals of purchase order management. Additionally, despite usually being analyzed separately, sales and purchase order processes need to take place in sync because both make up an efficient overall order management and improved supply chain. To avoid inefficiencies like delayed deliveries, shippers should follow the dos mentioned above by using tools like Logward's Order Processing, which empowers collaboration and centralizes incoming and outgoing purchase orders.

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