By Jim O’Brien
Supply chain and procurement professionals know exactly what document to use when issuing an order for products of services. The Purchase Order (“PO”) is the “simplest” document used in supply chain relationships yet it is a document that can cause the most problems. Often this document does not seem to receive the care and attention it deserves until it is unfortunately too late and the realization of its importance arrives at the same time as supply chain scar tissue.
Commonly purchasers use a PO is to identify the product or services to be acquired, the quantity, and the price to be paid (and maybe shipping location) and ignore the risks such an approach can permit. The process is easy, quick and the height of simplicity. Alas, such simplicity comes with significant risk.
Specifically, using a PO in the absence of a properly drafted master purchase agreement is typically not sufficient to protect the interests of a purchaser of technology products and services on a whole host of issues for a variety of reasons and exposes the purchaser to supplier imposed terms and conditions and unwanted surprises related to the product or services the purchaser thought it was acquiring.
To simply avoid such supply chain scar tissue, invest time in the supplier relationship by reaching agreement on a master purchase agreement. Additionally, use the required form of PO because once that agreement is in place, ordering becomes simpler and the risk reduces dramatically.