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Monday, February 23, 2009

Use of different Purchase order types

  • Standard Purchase order: This type of PO is used when you know the Item, Price, Delivery Schedule and payment terms. Most of the time Standard PO is used to fulfill sporadic demands or say demand coming once or twice a year. In this type of PO you are committing a purchase of item/s with particular quantity and particular price at particular shipment schedule.
For example
    • Purchasing for any specific event happening in Company
    • Where purchasing item/s is one time job.
  • Planned Purchase Order (PPO): This type of PO is used when you are not sure about the exact delivery schedules but other details are quite clear (like Item, Quantity, Price, approximate Delivery Schedule and Payment Term). For PPO Need-By-Date has to be entered, but this date will be treated as tentative date only. Once you are sure about the delivery schedule you create releases against this PPO with detailed delivery schedule. In this type of PO you are committing a purchase of item/s with particular quantity and particular price but with tentative shipment schedule. When you make a release, you are committing the delivery also.
For example
    • You need 1200 notebooks yearly, so you can raise PPO with quantity 1200 and in shipment details you can have shipment schedule as per your need (Say 12 shipments with 100 quantity each). This will be tentative schedule, you need to generate a release as and when you need the good and supplier will provide you material.
  • Blanket Purchase Order: This kind of PO is used when are not sure about quantity, price, delivery schedule. As soon as you select PO type as Blanket Purchase Agreement the fields for quantity  gets disabled. Blanket PO can be based on max agreed amount. Exact quantity Delivery Schedule and price will be informed to supplier by creating Blanket releases against blanket PO. You can have different ‘Price Breaks’ and specify the quantity / discount / effectively details. In this type of PO you are not committing your supplier at the time of creating PO, all the commitments are done when release is sent.
For Example:
    • A car manufacturer needs dashboard for each vehicle and it is purchased from selective suppliers only. But demand for dashboard is not clear. In this case Blanket PO is used and whenever demand comes, releases are sent to supplier.
  • Contract Purchase Order: This type of PO is used when you are not sure even about the item which need to be purchased J. The only information that you provide in a Contract PO is supplier, supplier site, payment terms and agreement control details (header part only). Standard PO are created by referring the Contract PO when some thing is to be purchased against the Contract PO from that supplier.
For example:
    • You need to import many items to run your business, but you don’t have Import/Export license. In this case you create Contract PO with supplier who has Import/Export license and whenever you need something to be imported, you generate standard PO referring the Contract PO for that Item/s.
Out of above 4 types you can add only Blanket and Contract POs in Approved Supplier List (ASL).
This is applicable for Oracle EBS only...



  1. If Requisitions are created outside Oracle (for e.g. MRP etc.), how system will create the release against Blanket PO?

  2. As long as requisition is coming to Oracle purchasing and ASL (Approved Suppler List) is setup for that item, it will pick the Blanket PO and generate a release.
    To make it happen one need to setup ASL properly...
    Hope this will help you.

    Devendra Gulve

  3. Very Nice Document.

    Ashish Wakale.

  4. Hi, I am exploring the possibility of this business functionality in Oracle EBS.. Please help me if you know any solution to implement "Currently, for all tenders awarded by Our Company, we will issue a letter of acceptance to the successful tenderer, upon obtaining approval from the approving authority and subsequently signed an agreement with the tenderer. As such, it is not necessary for company to issue a PO/WO to the tenderer.

    Such contracts are therefore not captured in FMS(oracle EBS) upon award.

    However, as most of these contracts involved progressive billing over the contract
    period (which could be between 1 to 3 years), there is a need for company to monitor the
    amount paid under each contract so as to avoid exceeding the approved contract sum.

    This is currently monitored manually outside FMS. As and when we received an invoice,
    besides entering the invoice details in FMS, we separately update the manual record for
    each contract. This is not ideal as double work is involved and there could potentially
    be human error in the manual updating and overbilling.

    We would like to explore automating such monitoring of contract sum in FMS."
    How to track this in EBS by creating what document type and as you know there is no need to send any purchase order to supplier as it a signed contract. only clearing the invoices whenever the supplier bills to us and keeping track that it is not over billed.


  5. Hi Sudha,
    For the scenario you explained, Oracle has introduced new feature in R12 EBS Oracle Services Procurement, called as Complex Service Procurement popularly known as "Complex PO", which enables you to track your tenders in a planned manner. Also it enables you to make payment on the basis of mile-stones of the contract/project. You need to explore this functionality as provides you complex payment term for the contract having high dollar values and running for multiple years. To be very honest even I did not worked on complex PO.
    If you are not using R12 then this functionality will not be available, in that case you can opt for a work-around by using Blanket PO. Raise a blanket PO with amount equal to the tender amount and then keep making releases of the amount you receive invoice from service provider. Also you can restrict use of this PO by putting validity date for the PO.


  6. Simply Excellent....The best i have read so far on PO Types.

  7. I would like to add some wording onto the Contract Purchase Ageement but there is no open fields to add any free hand. Correct?

  8. Your thought are most appreciated, you may add it as a comment.
    Or you send it to me on my email, I would add it in the article.

    Devendra Gulve

  9. Do you have a detailed manual for how to use Contract PO and release standard POS from it and Planned PO and how to create releases against it , one more thing , are scheduled Release are created against Planned PO only ?

  10. how can we cancel the purchase order from back end... if it was already created but.. in the inventory items was not there .in this situation what is the back-end program to cancel that purchase order...

  11. Hi Raj,
    From backend you need to terminate the workflow (DBA can help you on this).
    You can update below columns of PO_HEADERS_ALL

    Similarly you can find corresponding columns of PO line and cancel line as well.


  12. Functional Guy... you are my hero!

  13. Different approach on blanket order as published at

    Blanket Purchase Agreements

    You create blanket purchase agreements when you know the detail of the goods or services you plan to buy from a specific supplier in a period, but you do not yet know the detail of your delivery schedules. You can use blanket purchase agreements to specify negotiated prices for your items before actually purchasing them.

  14. Good clear notes
    -- Surendra

  15. This post is very nice, Because your post is giving very nice information. So we are very thankful to you.

  16. Nice Explanation Devendra.......Thankq So Much

  17. Hi All,

    Is there any way to match Prepayment invoice with Purchase order?

  18. Hi Madhu,
    Payments are linked with PO thru AP invoices. So Prepayment can be applied to the AP invoice created against the PO... on broader sense below wud the steps

    1. Prepayment (partial / full amount)
    2. Create PO, approve it
    3. Make receipt
    4. Generate AP invoice against the Receipt
    5. Apply Prepayment to AP invoice
    6. If Prepayment is partial then make payment of balance amount against the AP invoice.


    Hope this helps to you.



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