What is Purchase order?
A purchase order is the formal order sent to a supplier with items, quantities, prices, and delivery dates. Open POs are future inventory and must feed into coverage, cash flow, and OOS forecasts. Changes and delays need a clear status.
Practical example
A confirmed PO for 3,000 units is due on October 15. A two-week delay immediately changes stockout risk.
Frequently asked questions
What is the difference between a purchase recommendation and a purchase order?
A purchase recommendation is an unapproved proposal based on the forecast, inventory, lead time, and purchasing rules. The purchase order is the binding order sent to the supplier. Commercial review, approval, and possible changes to quantity, price, or delivery date happen between the two.
Which statuses should a purchase order track?
At minimum: draft, approved, sent to supplier, confirmed, in production, shipped, partially received, and completed. Confirmed quantity, expected delivery date, payment status, and deviations should also be visible so inventory and cash flow reflect the real PO status.
Why is a large purchase order also a cash-flow decision?
Approval commits the company to a specific quantity and payment, often months before the goods are sold. Especially for six-figure orders, a good forecast is not enough: MOQ, payment terms, lead time, expected margin, and alternative uses of capital must be evaluated together.
What teams should remember
- A purchase order is the formal order sent to a supplier with items, quantities, prices, and delivery dates.
- Open POs are future inventory and must feed into coverage, cash flow, and OOS forecasts. Changes and delays need a clear status.