Role of the Purchase Order in B2B E-Commerce

In B2B, one company sell products to another company, rather than selling the products to the individual customer such as Alibaba, ThomasNet, IndiaMart, TradeIndia, EC21 etc.. Then Buyer company sell the products to customers.

A company/buyer/B2B store owner purchases the products from the suppliers/wholesalers. But the management of this part is a very crucial point in B2B e-commerce.

You need to manage the purchase order (PO) to make a smooth supply chain management.

What is the Purchase Order? 

A purchase order (PO) is an official document issued by a buyer/company authorizing to pay the supplier for products or services to be delivered in the future. It is a legally binding contract between both parties.

The buyer can create a purchase order without immediate payment. But the buyer is also obligated to pay after the products have been delivered within a defined time duration because PO also has the validity.

Note – A purchase order is always not generated for a bulk number of products, sometimes a purchase order also can be generated for a single product such as big machinery, heavy Furniture etc.

We are having purchase order management modules for various platforms – Magento 1, Magento 2, Opencart, PrestaShop and Shopify.

In Purchase Order Management, you can easily create suppliers and generate purchase orders for them manually as well as automatically.

After receiving the products, you can check the quality and correct shipment of the products.

Further, update the correct stock on the store and make the payout to suppliers for their products.

There are lots of factors which sales representatives / B2B store Owner have to manage for the smooth workflow of the B2B Webstore –

Streamline Inventory Matching/Reconciliation :

If customer’s desired product is out of stock then it may be caused to leave your website.

Maintaining the accurate stock will help you the replacement of products in time so that customer will not disappoint.

In Inventory reconciliation, check the quality of products and update the accurate inventory on the store after delivering the products from the supplier.

But what If you found damaged products?

If you update the inventory but you found that some products are damaged which are not saleable.

Then you need to create back order/pre-order for those damaged products before updating the inventory otherwise accurate stock management will not possible.

Example- If you have created PO for 1000 product but you got the 100 products are damaged. Then you need to update 900 products in the main inventory and create back order or separate PO for those 100 damaged products.

Hold the Inventory :

In hold the inventory, you can take the orders more than available stock in the warehouse for a product without losing the sales.

Because you can also take the orders for those products for which you have already generated the PO and approved by the supplier.

Example – Currently, you have 100 TVs in the warehouse and you have generated PO for 500 TVs and approved by the supplier then you can take the 600 orders for the TVs.

Purchase Order Merging :

You can merge multiple purchase orders in a single purchase order and reduce the shipping cost as well. You can merge purchase orders only when you have multiple purchase orders for the same supplier.

Multiple POs merging is possible when –

Example – If you created a purchase order for 200 TVs and later create another purchase order for 100 TVs more from the same supplier.

Then you can merge both purchase orders in a single a Purchase order (300 TVs ) by spending only single shipping cost.

Purchase Order Splitting :

Sometimes we need to change the purchase order according to situations, so you can split the single purchase order in multiple purchase orders when –

1. Product quantity is so large and single supplier can not full fill the requirement.

Example – If you need 1000 products within a week but your supplier can deliver only 500 product within a given time duration.

2. You get a better price for one of the purchase products from a different supplier.

Example – If you want to purchase Speakers and TVs. And, you can create a purchase order for supplier S1(Pirce of a bag – 10 USD and Price of a TV – 100 USD).

Further, you get another supplier S2 which provides the price of a speaker is the same but the price of a TV is 90 USD. Then you can split the purchase order for TVs to purchase on a better price from supplier S2.

3. A single supplier cannot deliver all product in time but another supplier can.

Example – If you create a purchase for mobiles and TVs to be delivered within a week, but existing supplier S1 can deliver mobiles only within a given time duration.

Then you can split the purchase order for TVs to purchase from another supplier S2 which can deliver the TVs within a week.

4. If you have multiple warehouses then split the purchase order for nearest suppliers.

Example – You create a purchase order to purchase 100 TVs for warehouse W1 and 200 TVs for warehouse W2.

After that, you get the another TV’s supplier S2 which is far way from warehouse W1 but very nearest to Warehouse W2.

Then you can split the existing purchase order for 200 TVs to purchase from another supplier which is nearest to warehouse W2.

Easy Payout Management :

After delivering products, you can check the products and then make the payment to suppliers.

You need to make the payout only those products which are updated in inventory. You do not need to pay for damaged and incorrect shipment products (incorrect quantity of products).

If you have any sort of requirement or query regarding the following, please share us at [email protected].

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