What is a Purchase Order in Maintenance?

To keep equipment running, maintenance teams frequently purchase spare parts or specialized services on the fly. While skipping formal documentation saves time up front, it can lead to costly issues related to missed deliveries, incorrect charges, or disputes with vendors.

Purchase orders (POs) formalize purchasing activity and provide a clear paper trail of what was ordered, from whom, at what cost, and when it’s expected. In this article, we provide an overview of purchase orders, including how they fit in to the maintenance process, and how a computerized maintenance management system (CMMS) helps you better manage POs.

What is a Purchase Order?

A purchase order is a document your organization sends to a vendor that indicates the your intention to purchase goods. It is a legally binding document that specifies what items are to be purchased, and provides details such as item quantities, pricing, delivery timeframe, and payment terms. Purchase orders, at times, are used to purchase services, though the variability of project deliverables and timelines may prompt the need for additional service contracts and agreements.

Types of Purchase Orders

There are multiple types of purchase orders, suitable for different scenarios:

• One-time (or standard) purchase orders are used to make sporadic, infrequent, one-off purchases from a vendor. An organization may use a standard purchase order to purchase equipment or critical spares.
• Planned purchase orders (PPO) are used when the demand for goods in known in advance, but exact delivery dates are uncertain. PPOs specify what will be ordered and under what terms, and require organizations to issue a separate release for each delivery. In maintenance, PPOs are useful for recurring purchases of commonly used spare parts where consumption rates vary, such as filters or lubricants.
• Blanket purchase orders (BPO) are long-term agreements used to streamline recurring purchases. They allow organizations to order various items as needed, up to a specific limit, without creating a new PO each time. BPOs often do not include specific quantities or delivery dates, offering flexibility in ordering. Maintenance teams use BPOs to quickly acquire frequently used parts or consumables without redundant paperwork.

Purchase Order vs. Work Order

Though they may be part of the same workflow, purchase orders and work orders serve entirely different purposes. They’re often confused by people outside of maintenance or procurement because both can be triggered by maintenance needs, such as when a replacement part is ordered to complete a repair.

A work order authorizes the maintenance team to complete specific tasks or services, as well as documents exactly what was done, when, and by whom. It’s a flexible document that is expected to evolve during the job, allowing technicians to add parts, materials, or additional labor as needed. While work orders involve costs, they don’t represent formal purchasing activity.

A purchase order, on the other hand, is a formal request for goods or services from an external vendor. It’s a fixed agreement that must match vendor’s invoices exactly, or be adjusted through a new PO or amendment. Purchase order support maintenance by securing the resources needed to complete the job, but they don’t document the work itself.

Why Use Purchase Orders?

For busy maintenance professionals, paperwork simply slows them down. Often times, goods and services are purchased without formal documentation other than a vendor invoice. While convenient, vendor invoices only tell one side of the story. For example, what happens when there’s a dispute about payment, delivery, or accuracy?

Purchase orders provide many benefits to maintenance organizations:

• Clearly communicates expectations: Purchase orders are highly detailed and ensure that both you and the vendor agree on what’s expected.
• Reduces mistakes: Using a formal purchase order reduces mistakes that occur from misinterpreting handwritten orders or orders taken over the phone.
• Improves recordkeeping: Maintaining a purchase order history makes it easy for finance teams to see what was purchased and why it was needed.
• Makes orders easier to track: Purchase orders make it easier to track what was ordered and when it will arrive, as well as verify that you received what was ordered.
• Provides legal protection: Purchase orders are legally binding contracts that offer protection to your organization and the vendor. They are a record of exactly what was ordered and can be used as a point of reference if problems arise.

How Maintenance Purchasing is Different from Standard Procurement

While all purchasing generally follows a set process, maintenance purchasing often requires a faster, more flexible approach. The following sections compare a typical procurement workflow with the more reactive process followed by industrial maintenance teams.

The Standard Purchasing Workflow

The purchasing process at a given organization consists of multiple steps, and varies based on their organizational structure, workflows, and internal policies. However, a typical purchasing process follows these general steps:

1. The buyer identifies a need for a good or service.
2. The buyer creates a purchase requisition to request the goods and/or services, and sends it for approval.
3. The requisition is reviewed for budget, compliance, and authorization.
4. Once approved, the buyer issues a purchase order to the seller.
5. The seller reviews the PO and confirms their ability to fulfill it.
6. The seller accepts the PO and fulfills the order.
7. The seller ships the goods (or provides the service) and sends an invoice to the buyer.
8. The buyer verifies the delivery and invoice, and then pays the seller.

The process above works well from planned purchases like office equipment or bulk materials. Maintenance purchasing, however, is typically reactive and time-sensitive. When a critical asset fails, a lengthy purchasing process means increased downtime, lost production, and heightened safety risks.

The Maintenance Purchasing Workflow

Because of the unplanned, reactive nature of maintenance work, maintenance teams require a simplified, flexible purchasing process that prioritizes speed over cost savings. Compared to traditional procurement, maintenance purchasing follows these general steps:

1. The buyer directly orders a good or service from the seller. The buyer pays upfront or the seller issues an invoice to be paid shortly after shipment.
2. The buyer creates a purchase order to document the purchase for recordkeeping purposes.
3. The seller ships the order to the buyer.
4. The buyer verifies the order and immediately uses the part to make the repair.

To give the maintenance team purchasing flexibility and reduce administrative obstacles, some organizations bypass purchase orders and allow direct purchases using a company-issued credit card. While purchase orders can be created after the fact for recordkeeping, this practice complicates traceability during financial audits.

Purchase Order Management Software for Maintenance Teams

Maintenance teams have unique purchasing requirements unlike that of other departments. Therefore, traditional purchasing software, such as enterprise resource planning (ERP) or accounting software, often don’t accommodate the immediate purchasing needs of maintenance teams. That’s where the simplified purchasing functionality of a computerized maintenance management system (CMMS) comes in.

A CMMS with purchasing capability provides an easy way to document purchases or integrate with other systems. CMMS software stores all asset, MRO inventory, and vendor information in one place, making it easy to create purchase orders in seconds. Some systems even automate purchase order generation based on inventory activity and support approval workflows to ensure POs meet internal policies before they are sent to vendors. Purchasing history and reports also track past purchases for review or maintenance audits.

Streamline Maintenance Purchases with FTMaintenance Select

FTMaintenance Select helps maintenance teams effectively manage their purchasing process from requisition to receipt. Combined with robust asset and inventory management features, FTMaintenance Select allows you to easily create and manage purchase orders throughout their lifecycles. Request a demo today to see how FTMaintenance Select can help you simplify your maintenance procurement process.