What’s a blanket PO? Understanding its role in procurement

In procurement, efficiency is important. However, creating a new purchase order (PO) every time you need to reorder supplies can slow things down. 

That’s where blanket purchase orders (blanket POs) can make a real difference. Whether you’re stocking up on office supplies, scheduling routine maintenance, or securing raw materials on a rolling basis, blanket POs simplify your workflow and help you spend smarter. They also cut out repetitive admin tasks, speed up the approval process, and can even help you negotiate better rates with suppliers.

Let’s break down how blanket POs work, when to use them, and how they boost procurement flexibility and control.

What is a blanket PO?

A blanket PO is a type of purchase order used for a blanket purchase agreement or blanket orders. More specifically, blanket POs are ideal for when a long-term agreement between a buyer and supplier allows for multiple deliveries of goods or services over a specified period under a single contract. Unlike standard POs that cover one-time transactions, blanket POs establish terms for recurring purchases without having to issue new POs each time. It’s like setting up a procurement framework that you can draw from as you need throughout the contract period. 

A typical blanket PO includes:

• Contract timeframe

• Total contract value

• Item descriptions and prices

• Specific PO number

• Delivery schedule

• Payment and renewal terms

• Cancellation policy

Once you’ve established a blanket PO, it allows authorized personnel within your organization to “release” it whenever they need the contracted item. This streamlines the procurement process for repeat purchases.

The blanket PO workflow process

Blanket POs can allow for a workflow with increased optimization opportunities. Here's how a typical blanket PO process unfolds:

1. Needs assessment: Identify recurring procurement needs that are suitable for a blanket PO arrangement.

2. Supplier selection: Choose the right vendor based on price, quality, reliability, and delivery capabilities.

3. Negotiation: Work with the selected supplier on pricing, exact quantities, timeframes, and other terms.

4. Blanket PO creation: Develop and issue the blanket PO document with all required elements.

5. Internal communication: Inform relevant departments about the new blanket PO and access procedures.

6. Release management: Generate releases against the blanket PO as necessary.

7. Delivery and receipt: Accept and verify deliveries according to the terms you’ve established.

8. Invoice processing: Match invoices to releases and the master blanket PO.

9. Payment: Process payments according to the agreed upon payment terms.

10. Monitoring and reporting: Track spend versus the PO maximum and evaluate performance.

11. Review and renewal: Assess the blanket PO’s effectiveness and determine whether or not to renew.

Blanket POs vs. SPOs

To fully grasp the value of blanket purchase orders, it's helpful to understand how they differ from standard purchase orders (SPOs). The key differences include the following:

• Purpose: Blanket POs are for recurring needs, while SPOs are for one-time purchases.

• Duration: Blanket POs cover extended periods, but suppliers typically fulfill SPOs in a single transaction.

• Flexibility: Blanket POs allow for multiple deliveries and releases, while SPOs have fixed delivery dates and delivery times.

• Administration: Blanket POs require more up-front work but less ongoing processing. SPOs are simpler, but you must recreate them for each purchase.

• Relationship focus: While blanket POs foster deeper supplier relationships, SPOs can be more transactional.

• Cost structure: Blanket POs often include bulk discounts, but SPOs reflect current market pricing.

Blanket POs can reduce administrative tasks for procurement departments while delivering value across the organization. Here are some key benefits:

Operational efficiency

Instead of generating individual POs every time a team needs something, you can create one master agreement that covers multiple purchases. That means fewer approvals to chase, less paperwork to manage, and faster procurement cycles. It also simplifies budgeting since you can allocate funds up front rather than tracking each order one by one.

Additionally, when you need to pay invoices, they’re easier to process because they’re tied to a single, binding contract.

Cost savings

When you commit to larger order volumes, you position yourself to negotiate better discounts or secure price breaks. As a result, blanket POs can help you lock in a fixed price over a longer term, which means less exposure to market fluctuations.

They also reduce the number of transactions you need to process, which can add up quickly when you consider the cost per order. According to the American Productivity & Quality Center, processing a single PO can cost anywhere from $50 to $150. However, consolidating recurring purchases into one PO significantly cuts lead time and administrative costs. Plus, with predictable pricing in place, it’s easier to manage your cash flow.

Strategic advantages

Cultivating long-term supplier relationships goes beyond just striking agreements; it strengthens partnerships by fostering trust and mutual commitment. In times of supply chain disruption, vendors may be more likely to prioritize dependable, contract-based customers whose partnership histories demonstrate loyalty and alignment.

By incorporating blanket purchase orders (POs) into recurring procurement processes, organizations can standardize and align their purchasing behavior with broader business goals. This approach not only enforces compliance with approved vendors but also reinforces strategic priorities, optimizing procurement's impact.

For example, an organization using blanket POs for recurring purchases could experience these benefits:

• Operational efficiency: Teams can quickly request essential items or services without repeated approval cycles.

• Cost savings: The company can negotiate better pricing through bulk or long-term agreements.

• Strategic advantage: Vendors are more likely to prioritize fulfillment during periods of high demand or limited supply.

The risks of blanket POs

While they offer significant benefits, blanket POs , like all types of purchase orders, aren’t without risks. Here are some common ones to be aware of: 

Financial risks

Blanket POs can tie up funds for a longer period of time, which might reduce your team’s flexibility when unexpected expenses arise. Additionally, if market prices fall significantly during the contract period, a locked-in rate could suddenly look like a bad deal.

There’s also the risk of over-ordering. Without strong controls in place, employees may start ordering out of habit instead of need—and spend beyond the intended scope of the agreement.

Operational risks

Putting all your eggs in one basket with a single supplier can create the following challenges:

• Relying on a single supplier can result in shortages if they run into issues.

• Quality may slip over time without active deliverable review.

• Confusion or errors may occur if employees aren’t trained on the release process.

• Business needs may shift during the contract term, resulting in outdated PO terms.

Compliance risks

It’s easy for blanket POs to drift from their original terms, especially if informal changes pile up over the contract’s term. Regulatory updates can also introduce legal complications if your existing contract doesn’t align with new rules.

Additionally, poor documentation of releases can make audits more difficult—and without tracking expiration dates, a PO might outlive its term.

When should you use a blanket PO?

Blanket POs are a great fit when you're purchasing the same items or services from the same supplier regularly. If you can reasonably forecast your needs over time and want to secure consistent pricing and terms, a blanket PO can save you time, improve your spend management, and reduce admin work.

They’re especially useful when your organization values procurement efficiency and needs better visibility into your spending. Rather than creating multiple POs throughout the year, a blanket PO gives you one centralized agreement to work from, which makes it easier to manage budgets and supplier relationships.

Common use cases include:

• Office supplies, if teams reorder the same things regularly

• Maintenance, repair, and operations supplies you need year-round, like tools, filters, and lightbulbs

• Professional services with consistent hourly billing, like legal or accounting help

• Raw materials for manufacturing companies that experience predictable demand

• Facility services like weekly cleaning or monthly maintenance

• Software licenses that renew annually but expand throughout the year

• Marketing materials like repeat print jobs or branded swag

If any of these scenarios sound familiar, a blanket PO could streamline your procurement process and cut back on manual work.

When shouldn’t you use a blanket PO?

Blanket POs aren’t ideal for one-off purchases or when your needs change frequently. If the market price for a product fluctuates a lot—or if you're dealing with custom specifications that vary with each order—locking into a blanket PO can do more harm than good.

They also require internal oversight. If your team can’t manage releases properly, or if your policies require competitive bidding for each purchase, a blanket PO could complicate things rather than simplify them.

8 best practices for managing blanket POs

To fully leverage the advantages of blanket POs while mitigating potential risks, consider implementing these best practices:

1. Establish clear parameters: Define specific contract maximums, valid timeframes, and authorized users to prevent misuse and budget overruns.

2. Implement robust approval workflows: Create appropriate authorization levels for releases based on value and sensitivity.

3. Experiment with AI and ML tools: Use procurement software with AI and machine learning (ML) capabilities to analyze purchasing trends and recommend consolidations.

4. Leverage digital procurement data: Analyze spending patterns, supplier performance metrics, and compliance rates using digital tools to make data-driven decisions about future blanket POs and identify optimization opportunities.

5. Maintain accurate tracking systems: Employ procurement software to monitor spending against the blanket PO maximum and alert stakeholders when you’re approaching the contract’s limits.

6. Conduct regular reviews: Schedule quarterly blanket PO performance assessments that include spending patterns, supplier performance, and market price comparisons.

7. Document all releases carefully: Ensure that each release references the master blanket PO and includes all relevant details for proper matching and audit trails.

8. Develop a renewal strategy: Initiate the renewal evaluation process 60–90 days before the blanket PO’s expiration to prevent gaps in coverage or rushed negotiations.

By integrating these blanket PO best practices into your accounts payable process, you can set your organization up for optimal cost savings and minimal operations headaches.

Transform your procurement with blanket POs and Amazon Business

Blanket POs are a helpful tool for procurement teams that deal with recurring purchases. By consolidating multiple transactions under one agreement, you can reduce administrative work, secure better pricing, and build stronger supplier relationships.

Success with blanket POs comes down to careful needs assessments, thoughtful supplier selection, and robust management processes. When you implement blanket POs correctly, they elevate procurement from a transaction-focused function to a strategic business function. Get started with Amazon Business:

• Streamline your procurement with a free Amazon Business account for advanced purchasing controls and reporting.

• Create groups to organize people and purchase settings based on your organization's needs.

• Set up a blanket PO to allow account and group administrators to create a purchase order with a budget for requisitioners at the group and member-level.

• Discover actionable insights into purchasing activity with Amazon Business Analytics dashboards, and create customized dashboards with Spend Visibility (a Business Prime feature).

• Simplify your supplier management with integrations with more than 300 products in one place.

Ready to optimize your procurement strategy with blanket POs? Contact our sales team today to discover how we can automate your purchasing tasks and transform your procurement operations.