What are types of Purchase Order (PO)?

Construction industry is all about promoting the in and out of construction materials like cement, bricks, paint, and so on. There’s always the material activity taking place at a construction site. There are many suppliers that supply different kinds of materials. During these activities, taking care of Purchase Order (PO) is necessary. You need to know if material arrived, if the PO was approved, and it was quality checked. A better purchase order management saves you from many things. Let’s get to know what is purchase order and the importance of it.

The Role of Purchase Orders

PO is an important part of the procurement process. PO is basically a document that contains the information of material like types, quantity, received, etc. It helps in providing right information and giving clarification about the purchase of material. It is important to know the specification of material and helps in minimising the misunderstanding regarding order.

Advantages of Purchase Order Management

1. Reduction in Error

There are many bills, invoices, and POs are made during a construction project and it is obvious to have errors in documents. Making POs through construction management apps helps in reducing errors. There are many construction management apps but one of the best out there is ONSITE.

2. Cost Management 

When material arrives at a site there is a possibility that their quantity varies but you make payment of the quantity you have ordered. With an organised PO management, you can avoid that error. You can make a PO of the exact amount that you have received which helps in clear cost. It helps in avoiding overpayment.

3. Reduces Delays

Now with construction management apps like Onsite you can avoid any kind of delay in PO. You get to select material received and choose their quantity and the whole process of making PO as well as approving it occurs within the app. It helps in avoiding the confusing process of supply chain and helps in avoiding miscommunication. 

4. Improvement in PO process 

This organised process helps in improvement in the cost and material received processes. It helps with visibility and accessibility. It helps in having a formal process of PO that is most of the time accurate.

Key Elements of a PO in construction

There are many key elements that help in accuracy and organisation. Following are the key elements of a Purchase Order in Construction: 

1. Header: Header is a section where important elements include the name of the company, address, contact info, and a purchase order number. This is necessary information that every POT contains. 

2. Vendor Information: Every PO contains the information about the suppliers where the supplier’s name, address, and contact is mentioned. 

3. Description of Item: In this description, there is clear information and specification of the items that are required. 

4. Quantity: This section has the information of the quantity of the materials that a company is willing to receive. 

5. Unit Price: The unit price section specifies the price of per unit. It helps in the calculation of the total amount. 

6. Total Amount: When the items are specified and the price of per unit is decided, the taxes and additional charges are added to make a total amount, 

7. Deliver date: There is a section where it is mentioned when the company wants to receive their order. This helps the supplier to ready the material on time. 

8. Payment terms: In this section, it is specified what is the method of payment with which company will make the payment of the order. 

9. Terms and Conditions: In this section, there are terms and conditions mentioned. The terms and conditions could be anything like warranties, instructions, etc so that there is a clear communication between both the parties

This format helps in clear communication and makes the purchase order organised.

What are some types of Purchase Order?

There are different kinds of Purchase Order used in construction and each are used for different purposes. Let’s   get to know about different types of POs:

1. Standard Purchase Order (PO)

It is the most common type of Purchase Order used to order material at a construction site. It is the basic type of PO where delivery details, address, contact, and price are mentioned. It is typically used for one-time transactions and contains detailed specifications.

Content of a standard PO:

1. Delivery date
2. Delivery location
3. Terms and Condition
4. Quantity of material 
5. Price of material 
6. List of material

2. Planned Purchase Order

A construction site is always in the need of materials so in this PO it is pre-planned how much material a site needs at what time phrase. It is a whole contract where materials are needed from time to time. It is a long-term planned PO that contains general framework, price agreement, and offers flexibility. 

Content of a planned PO:

1. List of material
2. Quantity of material
3. Price of material 
4. Delivery Dates
5. Delivery Locations 

3. Blanket Purchase Order (BPO)

A Blanket Purchase Order is similar to a planned purchase order but the difference between them is that Blanket purchase orders do not specify the material quantity, delivery information, and price. The terms are pre-negotiated between both of the parties. In these terms they decide a maximum limit of the price of material and agree to the flexibility of timing and prices.

Content of Blanket Purchase Order (BPO):

1. Buyer and supplier information 
2. Agreed maximum limit prices 
3. Terms and Conditions 
4. Validity Period
5. Material name 

Common Challenges and Solutions of PO

1. Inaccurate Scope and Specifications

• Challenge: There is often miscommunication and delay in receiving material. There could be wrong amounts of material ordered and error in calculation can be made. 
• Solution: With the help of an organised PO, you can avoid delays and remove miscommunication. You can make accurate PO of materials.  

2. Cost Overruns

• Challenges: Like mentioned above, often you receive the wrong amount of material, but the PO is made of a decided amount. It can cause a problem of overpayment.
• Solutions: By PO you can specify the amount and make payments accordingly. Many have digitised their PO processes with the construction management apps like ONSITE. So, you can make accurate PO with the help of these apps. 

3. Inventory Management Challenges

• Challenge: Often there are chances of overstocking, shortage and wasted material. 
• Solution: You can use POs to track incoming materials and manage inventory levels efficiently. 

4. Delays in Delivery 

• Challenge: There are often delays in receiving the material that has been requested. This delay can cause the delay in progress of the construction project as well. 
• Solution: With PO, you can specify the dates of receiving so that suppliers keep check of time and deliver the material at site accordingly.

Conclusion

So, if you are someone who has problems related to material then switch to PO. Use construction management apps to make an error free PO and enhance the construction project management of your site. It helps with productivity and enhances efficiency of work. Get a smooth purchase order process with management apps.

FAQs

1. What is Purchase Order (PO) in construction?

PO is an important part of the procurement process. PO is basically a document that contains the information of material like types, quantity, received, etc. It helps in providing right information and giving clarification about the purchase of material. 

2. What are the Advantages of Purchase Order Management?

This organised process helps in improvement in the cost and material received processes. It helps with visibility and accessibility. It helps in having a formal process of PO that is most of the time accurate.

3. How does PO help with avoiding delays?

There are often delays in receiving the material that has been requested. This delay can cause the delay in progress of the construction project as well. With PO, you can specify the dates of receiving so that suppliers keep check of time and deliver the material at site accordingly.