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2.3 Purchase Order (PO) Management

2.3

A Purchase Order (PO)is Managementa legally binding contract, not a casual request for goods. Ambiguity in PO generation leads to price variances, delivery delays, and legal disputes regarding liability. This chapter defines the syntax of a valid PO and the non-negotiable requirement for Supplier Acknowledgement.

A valid PO must contain:

  • The LegalPart Contract:Number: Dannie Internal P/N mapped to Manufacturer P/N.
  • The Price: Standard Cost vs. Spot Price.
  • The Date: The "Dock Date" (arrival at facility), not the "Ship Date."
  • Incoterms: Defining the transfer of liability (e.g., DAP Dannie Dock).

2.3.2 The Acknowledgement Mandate 

A PO is notconsidered just a request; it is a binding contract.

  • The Acknowledgement:"Unconfirmed" The strict rule that a PO is not "placed" until the supplier provides a written acknowledgement (ACK) confirming:

    1. AcknowledgementPrice Acceptance: withMatches athe confirmed delivery date andPO price.
    2. PPVDate (Confirmation: Verifies the delivery schedule.
    • Rule: If an ACK is not received within 48 hours, the buyer must escalate. Unacknowledged orders are invisible to the planning engine.

    2.3.3 Purchase Price Variance):Variance (PPV) Managing

    Any deviation between the delta between "Standard Cost" (quoted)ERP baseline) and "Actual Cost" (paid).PO WhoPrice) authorizesrequires authorization.

    • Negative PPV (Savings): Recorded for margin analysis.
    • Positive PPV (Cost Increase): Requires Customer or Management approval before PO issuance if it exceeds the variance?defined threshold (e.g., >5% or >$500 total).

    Final Checklist

    PO Stage

    Requirement

    Failure Impact

    Issuance

    Must cite Incoterms & Dock Date

    Ambiguous liability during transit

    Confirmation

    Written ACK required within 48 hrs

    Material shortage risk (Ghost Order)

    Variance

    PPV >5% requires approval

    Margin erosion / Unauthorized spend

    Closure

    3-way match (PO/Receipt/Invoice)

    Payment blocking

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