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A blanket order authorizes a supplier to provide goods and services to a customer on an ongoing basis, with specified terms. It is used to ensure approved suppliers are used and expenses are within budget. It is not the same as a volume purchase agreement and does not commit the customer to a fixed quantity of goods.
Also known as a blanket purchase order, a blanket order is a business document that authorizes a supplier to supply goods and services to a customer on an ongoing basis. The terms of the agreement usually specify elements of the agreement such as the type of goods and services that will be supplied and the unit price that the customer will pay for each item delivered. General orders also usually provide details of the duration of the agreement and any other terms and conditions that might be relevant to the nature of the business relationship between the supplier and the customer.
General Purchase Orders are used by many businesses of all sizes. In many cases, the document serves as a means of ensuring that the customer’s employees do not attempt to purchase goods or services from unauthorized suppliers. At the same time, sellers often extend special rates to customers who are willing to purchase up to a certain dollar amount of products within a certain time frame.
However, it is important to note that a blanket order does not serve the same purpose as a volume purchase agreement. Volume purchase agreements commit a customer to purchase a certain amount of goods or services within a certain period of time. In case of non-compliance by the customer, the seller may request penalties for non-compliance with the terms.
While the blanket order often places a limit on how much money the customer can spend with the seller within a given time period, it in no way commits the customer to spending the full amount. In fact, the customer must absolutely not order any product from the seller, regardless of the existence of a blanket order. Since the typical blanket order agreement does not commit the customer to receive a fixed quantity of goods at regular intervals, it is necessary for the customer to contact the supplier to place orders related to a blanket purchase order and schedule shipment when and as needed .
Many companies use a general order process as a means to not only ensure that only approved suppliers are used, but also to keep expenses within budgeted amounts for each department or division of the company. For example, a company may choose to set up a blanket order that will be in effect for an entire calendar year. During that year, the company can order up to a certain currency amount of products, but no more. Once the predetermined amount is reached, the blanket order is considered fulfilled and it is not possible to order additional products until a new blanket order is created and approved by the customer.
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