E1: 43: Blanket Orders in Procurement (P4310, P43060)
(Doc ID 2284834.1)
Last updated on JANUARY 30, 2019
A blanket order is an agreement with a supplier to purchase a specific quantity of a specific item at a specific price within a specific period of time. The supplier agrees to the discounted price because of the volume that is promised to be purchased within a fixed time frame. For example the supplier’s regular price for an item might be 49.50, but they offer a price of 42.50 if your company agrees to purchase 1,000 items within a period of one year.
After the blanket order is created with the supplier, the blanket price is granted whenever a regular purchase order is made for the item. The quantity of items that remain open on the blanket is reduced by the order quantity each time a purchase order is released against the blanket order. In the example above the blanket is for 1,000 items at 42.50. If a regular purchase order for 50 units is released against the blanket, the item will be purchased at the discounted price of 42.50 and the quantity remaining open on the blanket is 950 units. Over the year when all 1,000 units have been released, the blanket will be closed and the price for subsequent purchases will return to 49.50 unless another blanket order is negotiated.
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