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Many companies I have worked with employ the infamous “blanket PO”. I’m not sure how it comes about but somehow it finds its way into the procurement process and then it enjoys quite some popularity… at least in the Purchasing department.

The blanket PO is a purchase order left open over a period of time so that multiple receipts in partial quantities can be booked. Of course, none of the receipted quantities have the correct timestamp. This causes confusion and error in many areas but especially exception monitoring in MRP gets out of whack. This is one of many things that causes the material planner to throw in the towel and curse this stupid SAP thing. Excel becomes the tool of choice!

A purchase order in SAP can have many line items to procure materials to a certain date in a certain quantity. Once the vendor delivers, you should post a goods receipt and close the PO. If the receipted quantity is less than what was ordered, you set the final delivery indicator which closes the purchase order and AP will pay the bill (for what you receved).

If you leave the PO open, as in a blanket PO, MRP doesn’t know that there are missing quantites and will further plan under the assumption that enough material is available yesterday… and then yesterweek… and so on. You will receive the exception message 07 ‘finish date in the past’ and another one to reschedule and expedite. Your availability checks will produce false results and if you perform vendor evaluation you will see ‘funny’ lead times which are very different from what you negotiated.

If a vendor delivers 50% and promises to deliver the rest in a few days, I wuold agree to post a partial delivery and leave the PO open until Tuesday. But this should be the exception. Also the delivery date should be adjusted and not just left falling into the past.

If your situation is that your vendor always delivers partial quantities, I would recommend a contract. In SAP there is a quantitiy contract – an agreement to deliver a total quantity over a defined period of time – and a value contract – an agreement to deliver a total value of purchased goods over a defined period of time. Both are an outline agreement to determine a price an to let the vendor know what you expect to be delivered; but not exactly when. As you require material you call off the contract. The ‘Call-Off’ is then a PO that is part of the overall total with all the agreed upon terms. The Call-Off, of course should be closed when the vendor delivers. If the quantity is short you set the final delivery indicator and ony the delivered quantity is allocated to the contracts total quantity.

A delivery schedule is a more automated contract which requires a close and good relationship with your vendor. In a delivery schedule process, the MRP planning run generates the call-off automatically and requests the required quantity automatically.

Try not to have outdated delivery dates on your purchase orders. Material planners and production schedulers can then actually plan with the system.

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