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Also known as a blanket purchase order, the blanket order is a business document that authorizes a vendor to provide goods and services to a customer on an ongoing basis. The terms of the agreement usually specify elements of the arrangement such as the type of goods and services that will be provided and the unit price that the customer will pay for each delivered item. Blanket orders also usually provide detail on how long the agreement is to remain in place, and any other terms and conditions that may be relevant to the nature of the working relationship between the supplier and the client.
Blanket purchase orders are utilized by many businesses of all sizes. In many instances, the document serves as a means of ensuring that employees of the customer do not attempt to purchase goods or services from unauthorized vendors. At the same time, vendors often extend special rates to customers who are willing to agree to purchase up to a certain dollar amount of products within a given 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 client to purchasing a certain amount of goods or services within a given period of time. If the customer fails to do so, the vendor may invoke penalty charges for failing to comply with the terms.
While the blanket order does often place a limit on how much money the client can spend with the vendor within a specified period of time, it in no way commits the customer to spend that entire amount. In fact, the client does not have to order any products from the vendor at all, regardless of the existence of a blanket order. Since the typical blanket order agreement does not commit the customer to receive a fixed amount of goods at regular intervals, it is necessary for the client to contact the vendor to place orders related to a blanket purchase order and schedule the shipment when and as needed.
Many companies use a blanket order process as a means of not only making sure only approved vendors are used, but also to keep expenses within amounts budgeted to each department or division of the company. For example, a business may choose to set up a blanket order that will be in effect for an entire calendar year. During that year, the company may 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 no additional products can be ordered until a new blanket order is created and approved by the client.