When it comes to pursuing blanket orders in B2B sales, coming up with a clear and concise blanket order agreement that outlines liabilities and responsibilities for both parties, is pivotal to success. Blanket orders allow customers to lower their inventory cost of ownership, and allow vendors to properly manage production and their own inventory requirements. The right blanket order agreement can not only reduce a company's inventory counts, but also reduce its inventory financing costs. However, both parties must have clear expectations as to how the agreement will work. With this in mind, I thought I would include a sample blanket order agreement for B2B sales professionals.
Blanket orders are ideally suited for cyclical and seasonal demand patterns. They allow the customer and the vendor to allocate material and inventory for the sole purpose of ensuring the blanket order is a success. The customer benefits from better pricing, and lower inventory ownership, while the supplier or vendor benefits from larger volumes in manufacturing and lower prices in their procurement of materials. However, in the case of blanket orders, most customers may have an idea of their quarterly volume, but as for which month they’ll need the parts, is anyone’s guess. Blanket orders are the perfect contractual agreement when it comes to dealing with infrequent and cyclical orders.
For the blanket order to be successful, a couple of essential criteria must be followed.
1. Signatures are Essential: When looking at any contractual agreement, signatures are a must. Signatures certify that the representatives of both companies have agreed to the stipulations outlined in the agreement. Verbal agreements mean nothing. If both parties aren’t willing to sign the agreement, then it’s not an agreement worth having.
2. Clearly Defined Liabilities: Make sure liabilities are defined for both parties. The sample blanket order below is merely a guideline of what a blanket order might look like. I’ve scaled it down to show the more important aspects of what the agreement should include. As a customer, make sure that lead times for delivery, and stock replenishment for the next release, are clear. For vendors, make sure the liability for the finished and semi-finished inventory is accepted by the customer.
3. Willingness to Negotiate: Negotiation is just part of the process. If you’re a customer, you want to negotiate price, lead time, payment terms and any volume discounts. If you’re a vendor, you want to negotiate the time you must hold inventory, your pricing and the quantity to be shipped/manufactured for each shipment. Never negotiate out of fear, but never fear to negotiate!
Here is the Blanket Order Agreement for B2B Sales
BLANKET PURCHASE ORDER APPENDIX
Customer Name: (Buyer) has placed Requirements Type Blanket Purchase Order (BPO) with the Supplier named above. Supplier hereby accepts the terms of this BPO and the additional terms and conditions of this appendix. This appendix has been prepared based on mutual negotiation for the purpose of defining in greater detail the Buyer’s Purchase Commitment and to set goals and objectives consistent with the developing supplier relationship.
Purchase Commitment:Consistent with the BPO, Buyer hereby agrees to purchase the parts described below:
BPO Number |
Part # |
Estimated Qty |
Ship Qty |
Material Authorization |
Piece Part Value/Unit |
Selling Price |
Q40286 |
102029801 |
120 PCS |
5 |
15 Units |
$410.00 |
$777.00 |
Estimated Quantity: An estimate based on historical usage, firm backlog and forecasted sales.
Ship Quantity: The number of parts the Supplier agrees to include in each shipment as well as the quantity of finished parts the Supplier agrees to maintain in inventory at all times during the term of the BPO.
Material Authorization: The maximum number of custom piece parts the Supplier will maintain in inventory at one time.
Releases: An authorized representative of the Buyer shall make releases against the BPO from time to time. The release frequency may vary, however, the release quantity is always anticipated to equal the Ship Quantity. Supplier will deliver the release quantity to reach Buyer’s facility within 5 business days of notification of release.
Purchase Commitment: In the event that the Buyer is required to Terminate the BPO the maximum actual inventory of parts that Buyer agrees to purchase shall not exceed the total of Ship Quantity & Material Authorization. Total liability for both Ship Quantity (5 x $777.00/Unit: 3885.00) and Piece Part Inventory/Material Authorization (15 x 410.00/Unit: $6150.00) = $10,035.00 U.S. Total Liability.
Term: The terms and conditions of this appendix shall be in effect until completion of the BPO.
SUPPLIER NAME: CUSTOMER NAME
(Supplier) (Buyer)
Signature: Signature:
______________________________ ______________________________
Name and Title: Name and Title:
______________________________ ______________________________
Date: Date:
___________________ _____________________
When it comes to pursuing blanket purchase order agreements, keep it simple. Don’t be afraid to negotiate what you feel your business is worth. Make sure to have clearly defined liabilities for both parties, and always ensure the agreement is signed and dated. While disagreements may still occur, having a signature on an agreement certifies that both parties were made aware of their respective roles.
If the individual who signed the agreement leaves their employer, you at least have set a precedent to how the blanket order and contractual negotiations should unfold. It's about protecting your interest, your inventory and your future business with customers. Here is the sample blanket order as outlined above Download BPO: Blanket-Order Agreement
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