Running an online store is not just about selling. It is about ensuring you have what you need when needed.

If you have ever dealt with a supplier mix-up, unexpected stock shortages, or an order that mysteriously went missing, you know how frustrating things can get. 

That’s where purchase orders come to save you.

Discover what a purchase order is, how it works, the different types available, its key benefits, and the simple steps to create one.

Let’s dive in!

What is a purchase order (PO)?

A purchase order (PO) is a formal document issued by a buyer to a supplier detailing the items the buyer intends to purchase.

It is a contractual agreement that outlines specifics such as product descriptions, quantities, agreed-upon prices, payment terms, and delivery dates.

Once the supplier accepts the PO, it becomes legally binding, ensuring both parties have a clear understanding of the transaction.

POs help businesses manage inventory efficiently, track expenses, and establish accountability in procurement.

Types of purchase orders

Different types of POs exist based on how businesses handle their procurement needs.

Some of the most notable purchase order types are:

1️⃣ Standard purchase order (SPO): The most common type, used for one-time orders with defined quantities, prices, and delivery schedules.

2️⃣ Blanket purchase order (BPO): A long-term agreement where a buyer commits to purchasing goods over time at predetermined prices, without specifying exact delivery dates.

3️⃣ Contract purchase order (CPO): Establishes a legal contract between a buyer and supplier for future orders but does not include specific order details.

4️⃣ Planned purchase order (PPO): Similar to a standard PO but includes estimated order quantities and tentative delivery dates that can be modified as needed.

To learn more about purchase order types, see our article "4 Types of Purchase Orders You Should Know About."

Benefits of effective purchase orders

1️⃣ Ensures budget control: Businesses can track expenses in real-time and prevent overspending by aligning POs with budgeted amounts.

2️⃣ Strengthens supplier relationships: A transparent, professional approach fosters supplier trust and improves long-term collaboration.

3️⃣ Improves inventory management: POs help businesses maintain optimal stock levels, reducing the risk of overstocking or stockouts.

4️⃣ Simplifies audits & compliance: Detailed purchase records ensure better compliance with tax regulations and audit requirements.

5️⃣ Reduces procurement delays: A structured PO system streamlines approvals and processing, ensuring faster order fulfillment.

6️⃣ Provides legal protection: Since POs are legally binding, they safeguard businesses from unauthorized purchases and supplier disputes.

7️⃣ Increases operational efficiency: Automation tools can generate, track, and manage POs, reducing manual effort and administrative workload.

8️⃣ Supports data-driven decision-making: Analyzing PO data helps businesses optimize supplier selection, pricing negotiations, and demand forecasting.

Purchase order vs. invoice: Key differences

While a purchase order confirms an order, an invoice requests payment for that order. Both are essential for proper financial tracking and procurement.

Purchase order vs. sales order: Key differences

A purchase order (PO) and a sales order (SO) are closely related but serve different purposes.

Essentially, a PO represents a buyer’s intent to purchase, while an SO is the seller’s response confirming the sale.

When to use a purchase order?

A purchase order (PO) is essential for eCommerce businesses that must formalize purchases, track expenses, and ensure order accuracy.

eCommerce businesses should use POs when:

1️⃣ Restocking inventory: Ensures suppliers deliver the correct quantities on time, preventing stockouts or overordering.

2️⃣ Placing bulk orders: Helps meet supplier Minimum Order Quantities (MOQs) while securing volume discounts.

3️⃣ Managing pre-orders or backorders: Aligns stock arrivals with customer demand to avoid overselling.

4️⃣ Outsourcing fulfillment or packaging: Tracks costs and delivery schedules when working with third-party logistics providers or suppliers.

5️⃣ Setting up long-term supplier agreements: Locks in pricing and supply terms for recurring purchases, streamlining procurement.

How to create a purchase order in 6 steps 

If you’ve never created a PO before, the process might seem a bit overwhelming, but don’t worry, as we’ll walk you through it step by step, explaining everything in detail below.

1️⃣ Identify what you need to order

Before you even think about creating a purchase order, you must determine exactly what your business needs.

Why? Because ordering too much stock can waste money and storage space, while ordering too little can lead to stockouts and lost sales.

📌 Why this matters: Every purchase should have a purpose. Buying too much ties up cash, while running out hurts sales. Purchase orders help you stay in control and keep business running smoothly.

📋 How to identify needs:

• Check current inventory levels: You can use inventory management software or conduct a manual check to determine how much stock is available.
• Analyze past sales trends: Look at historical data to understand seasonal demand and sales cycles.
• Consider upcoming promotions or events: If you’re running a sale or expecting a high-demand season, factor that into your purchasing decision.
• Assess supplier lead times: If a supplier takes weeks to deliver, order ahead to avoid stock shortages.

Pro tip: Forecast demand to optimize orders

Fabrikatör’s advanced forecasting feature leverages AI-driven algorithms and growth rates to predict future demand, ensuring purchase orders align with your inventory needs.

By accurately forecasting trends, you can create POs that prevent stockouts and overstocks, adjust orders to match sales cycles, and stay prepared for peak demand during seasonal events or promotions.

2️⃣ Choose the right supplier

Once you know what to order, the next step is choosing a supplier.

If you’re already working with vendors, you’ll likely place an order with an existing supplier, but if it’s a new purchase, you need to research and compare suppliers to find the best fit.

📌 Why supplier selection is important: Choosing the wrong supplier can lead to delayed shipments, poor-quality products, or pricing disputes, which can cause unnecessary headaches for your business.

📋 How to evaluate suppliers:

• Compare pricing and payment terms: Find the best balance between affordability and quality.
• Check supplier reliability: Look for vendors with a proven track record of on-time deliveries and consistent product quality.
• Evaluate order minimums: Some suppliers require Minimum Order Quantities (MOQs), which means you must buy a certain amount per order.
• Review supplier ratings and references: If possible, check reviews or ask other businesses about their experiences with the supplier.

Pro tip: Use supplier-specific POs to reduce errors

To simplify this process, Fabrikatör allows you to create supplier-specific purchase orders quickly and accurately, as you can filter products automatically by the supplier.

Additionally, you can include supplier-specific SKUs to reduce errors, improve communication, and save time when managing inventory and placing orders.

3️⃣ Obtain internal approvals (if required)

Depending on your company’s purchasing policies, you might need approval from management before placing an order.

📌 Why this step matters: Without proper approvals, businesses risk unauthorized spending, budget overruns, or duplicate purchases.

📋 How to secure approval:

• Submit a purchase requisition (PR): This is an internal request asking for permission to buy specific goods or services.
• Use digital approval workflows: Many businesses use procurement software to automate approvals, reducing paperwork and delays.
• Confirm with the finance or purchasing department: If you’re part of a larger organization, financial teams may need to approve budgets before orders are placed.

✅ Once approved, you can move on to creating the actual purchase order.

4️⃣ Create the purchase order

Now comes the most important part - creating the PO.

This document must be clear, detailed, and formatted correctly to prevent misunderstandings.

📌 Why accuracy is critical: A well-structured PO eliminates confusion, ensures suppliers fulfill orders correctly, and reduces the chances of receiving incorrect or incomplete products.

📋 Every purchase order should include:

Purchase order number (PO Number): A unique identifier for tracking and reference.

• Buyer details: Your company’s name, address, and contact information.
• Supplier details: The vendor’s name, address, and contact information.
• Order date: The date the PO was created.
• Expected delivery date: When you need the goods to arrive.
• An itemized list of products: Each product’s description, SKU, quantity, and price.
• Total cost: The full amount, including taxes, shipping fees, and discounts (if applicable).
• Payment terms: When and how the supplier should be paid (e.g., Net 30, Net 60).
• Shipping instructions: The delivery address, preferred shipping method, and special handling requests.
• Additional notes or special terms: Any extra conditions agreed upon between you and the supplier.

Here, you can find a free purchase order template.

🔹 Pro Tip: Automate PO creation for accuracy

Fabrikatör allows you to create purchase orders effortlessly, whether from supply planning pages or by selecting specific products for reorder.

Additionally, POs can be created through Replenish, Plan, or standalone options tailored to your needs.

It automatically adds supplier information if products are from the same supplier, lets you customize quantities, adds notes or references, and saves POs as drafts for further review.

5️⃣ Send the purchase order to the supplier

Once your PO is finalized, it must be sent to the supplier in a clear and professional format.

📌 Why this step is important: Sending a detailed and well-structured PO prevents fulfillment errors and speeds up processing.

📋 How to send your PO:

• Via email: Attach the PO as a PDF and include a short message summarizing the order.
• Through supplier portals: Some suppliers prefer orders to be placed through their online systems.
• Procurement software: Many businesses use software like Fabrikatör to send POs directly to suppliers and track order status in real-time.

Pro tip: Send POs faster and apply details automatically

Fabrikator allows you to send orders directly to suppliers or download them.

Minimum order quantities, batch sizes, landed costs, and supplier SKUs are applied automatically to save time and reduce manual effort.

6️⃣ Follow up and confirm the order

Your job isn’t done after sending the PO. Always follow up with the supplier to confirm that they received the order and are processing it.

📌 Why follow-ups matter: If not properly confirmed, orders can get lost in emails, misinterpreted, or delayed.

📋 Best practices for follow-ups:

• Ask for confirmation: Send a quick message asking the supplier to acknowledge receipt of the PO.
• Verify delivery timelines: Confirm when the supplier expects to ship the goods.
• Check for order changes: Ensure the supplier doesn’t need to adjust quantities, pricing, or delivery schedules.

✅ Once confirmed, you’re all set! The supplier will now fulfill the order and send an invoice upon shipment.

Pro tip: Track and manage shipments with precision

Fabrikatör allows you to add tracking codes to purchase orders, ensuring real-time shipment monitoring and accurate order fulfillment.

You can also effortlessly manage received inventory, update accepted and rejected quantities, sync stock with Shopify, and maintain clear documentation for better transparency.

Simplify your PO process with Fabrikatör!

Fabrikatör is an inventory management software designed for Shopify stores, helping you easily streamline purchase order creation and optimize your supply chain.

With its smart automation tools, you can:

✅ Create purchase orders effortlessly using Replenish, Plan, or standalone modes tailored to your business needs.

📦 Track incoming inventory in real-time and sync stock levels with Shopify for accurate updates.

🔗 Manage supplier-specific SKUs to eliminate errors and improve order accuracy.

📊 Analyze over 100 key metrics, including sales trends, inventory health, and procurement efficiency, to make data-driven decisions.

🛒 Simplify bulk ordering by automatically applying Minimum Order Quantities (MOQs) at the Product Group or Product Option level.

🚚 Enhance shipment tracking by adding tracking codes and selecting preset freight methods for better logistics management.

💡 Save time with centralized supplier communication and streamlined PO approvals.

📂 Download and share POs in PDF or CSV formats with customizable templates.

🔄 Prevent overselling with the backorder feature, linking incoming inventory to POs.

🔗 Integrate seamlessly with Shopify, QuickBooks, and Klaviyo to automate workflows and improve efficiency.

⚡ Automate restocking with AI-powered replenishment tools that analyze demand patterns to prevent stockouts and overstocking.

And much more.

Ready to take control of your purchase orders?Try Fabrikatör or request a demo today!