A blanket PO is a long-term agreement between a buyer and a supplier for an ongoing purchase of repetitive goods and services set over a specific period of time or until it hits a specific monetary threshold. Rather than creating multiple purchase orders for every transaction, a blanket purchase order helps deliver multiple releases or call-offs.

The key characteristic of a blanket purchase order is that it is a long-term agreement that favors repetitive purchases over one-time transactions. The terms of a blanket PO are pre-negotiated, and so there is no need for repeated negotiation of price, delivery terms, and other conditions.

A blanket PO must have a definite expiry date and/or a maximum monetary value until it is valid. After this time elapses or the maximum threshold is reached, the blanket PO is either closed or renewed to streamline the ordering process and reduce the administrative overhead.

The improved process efficiency and supplier relationships scratch only the surface of blanket PO benefits. The commitment to ordering larger volumes over time gives buyers an opportunity to negotiate volume discounts and better pricing to extract larger cost savings.