It is a document which authorizes the vendor to supply products or services to the purchaser on ongoing basis. The company makes use of blanket purchase order for making order requests for frequently purchased items. Basically this order is designed for speeding up the procurement process efficiently.
The order which creates a long term agreement between the purchaser and the vendor is called blanket order. Usually a single order is created once which is capable of purchasing products at different periods spread out in particular term. The agreement will indicate the type of products or services that will be purchased by the customer and the unit price (fixed) the customer will pay for each delivery of the blanket order. The order also indicates how long the agreement will remain intact in detail.
A blanket purchase order is utilized by companies and organizations of all sizes. Most of the time, vendors give special rates to the companies who make request of blanket orders making more sales possible. It is different from volume purchase agreement where the customer is committed to purchase particular quantity of goods within the given time frame. In case he could not make purchases the vendor can initiate penalty proceedings against the customer. The blanket order also places a limit on the amount of money the customer can spend for the vendor within particular time, it is not mandatory that the customer has to spend the entire amount during that period.
Many organizations use blanket purchase order system for limiting their budget and to keep expenses within the limit. It can be created for any reasonable time frame such as one month, three months or even for one year. In case the company uses the entire products during that period, it cannot purchase additional products using the previous order. It has to make separate order or go for creating fresh blanket order for further purchases.