No matter how big or small your retail brand is, you’ll be submitting purchase orders regularly.
The question is: Will you draft those orders by hand, or will you digitize the process, making your life a whole lot easier? (Warning: There is a correct answer here.)
If you haven’t already, it’s high time to ditch these antiquated, hand-filled order forms. By switching to a digital purchase order system, your brand can save tons of time, money, and energy. Here’s how.
Digital purchase orders (DPO) are electronic documents that outline all the purchasing terms for buyers and sellers. This includes details about any inventory you’re requesting (SKU number, item descriptions, quantities, and so on).
However, unlike traditional POs, your purchase order software builds electronic purchase orders on your behalf – not someone on your operations team.
To do this, your PO software centralizes all that handy purchasing data. That way, you maintain accurate records of your inventory purchases, inform future purchasing decisions with past DPOs, and draft purchase orders much faster.
Electronic purchase orders boast many benefits proving paper-based POs don’t stack up. These advantages include cutting down on printed materials (save the trees!), minimizing human errors, and even reducing overhead costs.
To give you a sense of the key differences, we’ve put together a convenient table compiling a DPO’s many advantages – plus the many downsides of sticking with the old-fashioned paper route.
|Paper purchase orders||Digital purchase orders|
|Involves stacks of physical paperwork||Eliminates paper waste and reduces your company’s carbon footprint|
|Prone to all kinds of human errors, inaccuracies, and inconsistencies||Avoids errors (like incorrect prices or product quantities) and promotes greater accuracy|
|Requires additional storage costs and employee time to manage paper documents||Saves time and resources by giving you more control over the ordering process|
|Little-to-no process visibility||Increases transparency and helps prevent duplicate orders and discrepancies|
|Requires consistent, manual follow-up throughout the entire PO process||Automates entire workflows, like establishing reorder points and sending replenishment alerts|
|Takes a lot of time to complete, which can delay lead times and order fulfillment||Makes it easy to draft, submit, and adapt POs (which cuts down on lead times)|
Perhaps the most obvious win with electronic purchase orders is that you eliminate untold amounts of paper waste. It’s better for the environment and makes your carbon footprint that much smaller.
Yes, you save a small forest of trees, but you also cut down on additional expenses. After all, paper and ink costs add up over time.
Not to mention that electronic POs make managing your records a heck of a lot easier. When you safely store your digital purchase orders in your PO software, there’s much less chance you’ll duplicate or lose order forms – both of which disrupt the order fulfillment process.
Purchase order software ensures all your docs are accessible and well-organized, so you can reference past and present orders with just a few clicks.
No need to comb through stacks of paperwork to find the information you’re looking for (and no one needs to risk getting a paper cut).
Even better, digital workflows offer greater security than paper-based systems.
With paper documentation, there’s always a risk of your orders being misplaced or accidentally destroyed. But when your purchase orders are digitized, all your data is safely stored in the cloud and only accessible by authorized team members.
Manual PO processing (via spreadsheets and paper-based systems) requires a lot of manual data entry. (Yuck.)
The problem with these manual tasks (besides being tedious and time-consuming) is that they’re susceptible to all kinds of human errors, inaccuracies, and inconsistencies. Yes, even when you take the time to double-check your work.
Meanwhile, paperless purchase order systems help you avoid these common errors (think: incorrect prices or product quantities).
In other words, electronic POs improve the overall accuracy of your orders and minimize those small mistakes that could lead to big costs for your brand.
Just so you know how expensive this can be: Stockouts cost retailers an average of about $1 trillion annually. Yes, that’s trillion with a “T.”.
Ever since supply chain challenges hit in the wake of the COVID-19 pandemic, many brands have overordered to get ahead of any stockouts.
And now, they find themselves overrun with extra inventory. In an interesting turn of events, this excess inventory is expected to cost brands even more than stockouts have historically.
Relying on manual purchase orders is an expensive choice. Prepare yourself for some serious sticker shock.
According to a 2020 study from the American Productivity & Quality Center (APQC), manual PO processing costs businesses upwards of $506.52 per purchase order.
Now, imagine creating dozens of POs each year with that hefty price tag. Needless to say, that’s buckets of cash down the drain.
Paper POs also come with additional storage costs, are a time-suck for your employees, and have a much higher error rate (as we’ve already mentioned above).
In contrast, an electronic process helps you manage your costs more effectively. Electronic POs give you greater cash flow control since you can monitor your spending relative to previous POs. That way, you can safely stay within budget.
The best part? With this increased control, you only order the necessary inventory, so you’re not wasting money on products with little-to-no demand. But we’ll dig deeper into this kind of financial transparency below.
Transparency is such a big part of a successful PO system. And yet, paper purchase orders simply don’t offer anywhere near the level of transparency as electronic orders do.
|Having visibility within your PO system gives you clarity into past sales and helps you accurately forecast future demand. If you lack this transparency, you won’t know when your products are at risk of stocking out. And it’ll be almost impossible to forecast customer demand.|
It’s tough to keep up with transactions and PO records when you’re stuck with paper documents – especially since you could store all this paperwork in different places. This makes your records difficult to access, at best.
But with a digital PO system, you can easily oversee your PO process from start to finish and manage your inventory levels.
Purchase order software offers instant access to past and present POs. That way, you can quickly double-check any details or compare order changes month-over-month (or year-over-year).
The increased transparency from paperless POs also prevents discrepancies and duplicate orders altogether.
Meaning, the visibility from digital purchase orders puts you on the fast track to better inventory accuracy and efficiency, so every PO is fulfilled on time (and within budget).
Let the robots do the heavy lifting for you. With digital PO systems and software, you can automate nearly every step of the purchase order process.
For instance, an ops optimization software (like Cogsy) automatically calculates your reorder points (ROP) based on your current inventory levels and real-time demand trends. Then, it tracks how your real-time inventory levels stack up against that replenishment point.
When any of your SKUs hit their reorder point, Cogsy will send you a replenish alert, reminding you that it’s time to restock and what to reorder.
These notifications take all the guesswork out of stocking your shelves. And they help you place POs at the perfect time to prevent stockouts.
On top of that, replenish alerts and restock recommendations ensure you don’t order more inventory than you need. So, excess inventory and dead stock are a thing of the past for your brand.
Simply put, manual purchase orders take forever to process and are downright inconvenient. Manual POs can take several hours to fill out from start to finish, and you might have several days of back-and-forth with your vendor if you need to amend your order.
Think about it: With the manual process, someone has to fill every field out (from purchase order number to the specific SKUs to the quantities). Then, they have to double-check that all the details are correct. That takes a lot of time, no matter how you slice it.
What’s worse, it’s easy to make mistakes when filling out these order forms, which inevitably delays your shipments.
Manual POs also leave room for confusion and can put your vendor relationships at risk.
Let’s say you only want 1,000 units of a SKU, but some scribbled handwriting on an order form makes it look like you want 10,000 units. This sort of mix-up takes time and money to fix while putting a big strain on your supplier relationships.
On the flip side, digital POs decrease your lead times in a big way. Purchase order software makes it almost effortless to draft, submit, and adapt your POs (because it requires little to no data entry on your part).
By accelerating your PO process and eliminating errors, you can share orders with suppliers in less time (and with less back-and-forth). This way, they can reduce lead time by getting your products out the door faster.
|Cogsy automatically drafts POs based on your historical and real-time inventory data. All you need to do is check that everything looks right and hit submit. It’s as simple as that. Try for free.|
Want to build a paperless purchase order system for your own brand? Get started with just a few steps.
The first step in designing electronic purchase orders is to create the digital forms you’ll need. These will act as templates for you. That way, you’re not starting from scratch every time you make an order.
For instance, you might want to digitalize your purchase requisitions form along with the actual purchase order template.
You submit purchase requisitions (PR) to your finance team to get permission to replenish your inventory. POs formally order the stock on your approved PR from your suppliers.
That said, you can build one template that serves both purposes. For instance, you can create use your PO template as a PR by noting that it’s a “not approved” (similar to writing “void” on a check).
Taking the time to create digital forms means all your POs will follow the same format. This consistency not only helps you stay organized but reduces ordering errors, too.
Once you’ve built your templates, the next step is to design your purchase order process.
Using purchase order software makes planning this workflow a whole lot easier. The best software allows you to add rules that check that all your information is correct.
For example, you set rules that automatically match data formatting, adjust currency, and remove duplicate entries or line items.
You can also automate data export and storage tasks so that all your POs are archived properly. That way, they are easy to access whenever you need them.
What’s more, this is a perfect time to add rules that flag mistakes or inaccuracies – and even fraud. Procurement fraud is when a buyer or supplier tries to gain an unfair advantage during the purchase order process (like when suppliers send inflated invoices, for example).
But installing checkpoints in your PO workflow helps you avoid procurement fraud before it ever happens. This bypasses any profit loss and saves you lots of legal troubles.
After establishing your PO process, you’re ready to assign roles and grant permissions for the approval process.
Roles determine who can create drafts, approve requests, and order products from your suppliers. On the flip side, permission levels (based on each person’s assigned role) determine how much access and control a person has over confidential data.
Your approval chain, for instance, are the stakeholders who need to have eyes your inventory purchasing.
For instance, a business manager, procurement manager, or appointed budget holder will typically draft the DPO. Then, your Chief Financial Officer (CFO) may have final sign-off in the PO process.
Alternatively, this will be whoever oversees your brand’s spending and keeps your brand’s expenses in check. Regardless of who is appointed, these roles validate your POs and pass them on to your suppliers.
That said, smaller brands typically only have a few stakeholders involved in their PO process. So, you might not need to assign roles, as long as you’re tracking edits.
For instance, Cogsy’s purchase order feature automatically tracks who made what edits, so you can hold stakeholders accountable.
After you’ve created purchase forms, automated your tasks (with online workflows), and established specific roles and responsibilities, it’s finally time to put your system to the test.
Before your digital PO system goes live, share the workflow with your purchasing team to check for any errors (within the workflow itself).
From there, you can make any necessary changes or adjustments to your ordering system.
After making any updates, test your system once more (just in case). Once everything is running smoothly, you can fully launch your electronic PO system.
No electronic purchase order system is ever perfect. Luckily, you can (and should) continue improving it over the long run.
Once you introduce your system to a wider audience, it’s easier to collect valuable feedback, including insights on process gaps, pesky errors, or any lags in functionality.
If you or your colleagues discover major issues (like a batch of duplicate orders), hit the brakes on your digital POs while you make improvements.
On the other hand, if your PO system lacks a few minor features (like data formatting, for example), you can likely work on those changes as you go.
Iterating on your process regularly helps reduce inefficiencies so you can create and approve POs in as little time as possible.
Cogsy is an end-to-end purchasing tool for Shopify brands. And it offers hands-down the best purchase order workflow. Here’s our proof:
Say goodbye to guessing what inventory needs to be on your next purchase order.
Cogsy’s marketing events and growth planning features help you build smart inventory plans that address best-case, worst-case, and most-probable scenarios. That way, you can plan for future inventory purchases and set aside the cash you’ll need.
When it’s time to place a purchase order, you’ll get automatic replenish alerts, nudging you to draft your next PO.
You’ll also get handy restock recommendations based on your above plans. These data-backed suggestions safeguard against potential human errors (like overestimating your inventory needs).
How exactly? By outlining what to order, how much, and where to send that inventory so you only invest in stock that will turn a profit.
Cogsy’s digital purchase order template is trusted by some of the biggest Shopify brands (including Caraway).
And with the bulk-add function, you can fill it out with everything you need in mere minutes.
You can do this by clicking “add all” at the top of your restock recommendations list or hand-select SKUs from your product catalog.
Cogsy automatically pulls the recommended restock amounts when using the bulk-add function. This automatically reduces silly entry mistakes.
But you, of course, reserve the right to override these recommendations (in case you know something your data doesn’t show).
Plus, thanks to Cogsy’s multi-location support function, you can add multiple warehouse’s inventory needs onto one PO. You can then split this PO into multiple shipments, making the PO process easier to manage.
Cogsy’s purchase order workflow is the simplest, streamlined-ist purchase order workflow available.
Built off feedback from Shopify brands (like yours), the workflow fits seamlessly into your DTC operations. (All while saving merchants an average of 20 hours a week.)
“[Cogsy has] made our purchasing procedures faster, more efficient, and more accurate.Chris Kresser, founder at Adapt Naturals
Not only does it build accurate POs faster, but it also provides merchants the visibility they need to make smarter, more informed decisions.
With Cogsy, get a bird’s eye view of where all your purchase orders stand – from draft to delivery. You can even dive down and get a granular view of who made what edit for added accountability.
Ready to say goodbye to guesswork and hello to efficient purchase order management? Try Cogsy free for 14 days.
Purchase orders are created by a buyer, then submitted to a supplier. This legally binding contract contains details about the types and quantities of products the buyer needs (as well as information on payment terms and delivery timelines).
Once the supplier approves the purchase order request, they’re responsible for fulfilling the order by the designated delivery date.
Digital purchase orders are vital to your overall purchase order system, as they offer several benefits that paper-based POs can’t claim. The advantages of using digital POs include eliminating paper waste, minimizing human errors, and reducing overhead costs.
When it comes to digital purchase order software, Cogsy is head and shoulders above the rest. Cogsy automatically drafts purchase orders based on your historical and real-time inventory data. All you need to do is check that everything looks right and hit submit. Cogsy even automatically calculates your reorder points, so you never miss the perfect time to restock.