How do I set up automated purchase orders?

Online shopping is easy, right? Well, that might be true for consumers who click on products and expect them to be delivered the next day. But behind the scenes there’s a complex choreography that needs to be executed flawlessly to make this happen.

If we compare ecommerce to an expertly-choreographed dance, then purchase orders are the position from which the first steps are taken. They are the foundation your supply chain is built on, and where customer satisfaction takes root.

As order volume grows, manual purchase order processes fall behind. Purchase order automation keeps purchasing in step with demand and turns that awkward “dad dance” into something closer to a graceful ballet.

What is a purchase order?

A purchase order (PO) is the document a buyer sends a supplier to confirm which products it’s buying, in what quantity, and at what price. Every ecommerce business raises purchase orders. Typically, a small business will raise a purchase order either when it runs out of stock, or is about to. In its simplest form, purchase order creation means someone manually checking stock levels, deciding whether to reorder, and placing the order with a supplier.

This system works well for a small business that has complete oversight of its stock and its movements. However, as a business scales and becomes more complex (selling across multiple channels, operating from larger warehouses, or spreading across locations and geographies), manual PO processing quickly becomes unsustainable.

You can only make money selling products if you have them available for sale. If your purchase order process falls behind your order volume or your customers’ expectations, you risk tripping up your entire ecommerce operation and falling flat on your face.

It’s time to embrace purchase order automation.

What is purchase order automation?

Purchase order automation (often shortened to PO automation) uses software to handle the steps you’d otherwise do by hand: raising purchase orders, routing them for approval, and sending them to suppliers. Automated workflows replace the spreadsheets, emails, and phone calls, which cuts the time spent on purchase order processing. For supplier relationships, the payoff is timing: purchase orders go out on schedule, so suppliers get the lead time they need to deliver the right levels of stock to your warehouse and fulfillment centers.

Stock forecasting: a more sophisticated approach

Automated stock forecasting takes the guesswork out of raising purchase orders. Warehouse Management Systems (WMS) like Linnworks help forecast stock movements and reorder products based on previous trends. In addition to your consumption rate, this software will also take into account elements such as the time it takes for your supplier or manufacturer to ship goods to your warehouse, so purchase orders go out before stock runs out.

Stock forecasting becomes even more essential when online sellers manage multiple warehouse locations or 3PL relationships and operate across international borders, which all add complexity to inventory management and the procurement process.

What about Just-In-Time (JIT) inventory management?

If ecommerce logistics is like a carefully choreographed dance, Just-In-Time (JIT) inventory management is a fast-paced jig.

Traditionally, online sellers would raise a purchase order, take items into stock and only sell what they have available in their warehouses or fulfillment centers. JIT allows you to sell what you don’t have.

This works on the premise that if you sell an item, you can quickly take that item into stock and fulfill it. Alternatively, have your supplier drop-ship it directly to your customer.

Just because an online seller using JIT isn’t buying, storing, and selling stock in the traditional way, doesn’t mean that purchase orders don’t have to be raised. You just need a more appropriate way of doing it, which often means automating the process.

Using Linnworks for automated purchase orders

Linnworks handles purchase order management for online sellers, from ambitious start-ups to sophisticated multichannel retailers.

Basic functionality: Recording purchase orders

At the most basic level, an online seller might just make a record in Linnworks that they have raised a purchase order.

Perhaps the seller’s relationship with a supplier isn’t very sophisticated and they are just placing orders over the phone. They might agree on a quantity, arrange payment, and settle on a delivery date. In that case, all of this information needs to be manually inputted into Linnworks.

The system then knows how many items are on order, how much they cost and when they will be available in your warehouse for fulfillment. This information can then be made available to the various departments in your business. It gives them good oversight of current and incoming stock levels.

While this approach works for many sellers, manually raising purchase orders and adjusting inventory levels can be time-consuming and prone to errors like duplicate orders.

Advanced functionality: raise a purchase order in Linnworks and email the supplier

Online sellers with a more sophisticated supply chain can raise the purchase order in Linnworks and have it automatically sent to their suppliers via email. That cuts out manual PO processing steps, along with the re-keying where human errors creep in. This is particularly useful when dealing with suppliers across international time zones.

Automated stock forecasting goes a step further. Linnworks can tell you when to reorder a specific item and how much to order.

Who benefits from raising purchase orders in Linnworks?

When you raise purchase orders in Linnworks, people across your business, from procurement teams to the warehouse floor, can access that information.

Inventory management personnel in office environments

In ecommerce businesses, raising purchase orders is mostly done by individuals in an office environment. These employees don’t see physical inventory on warehouse shelves, so they will always need a clear understanding of where stock is and what volumes are available in real time. The more information they have, the easier it becomes to procure and manage inventory in a timely and profitable manner.

Warehouse personnel for JIT needs

Warehouse personnel will sometimes need to raise purchase orders so they can fulfill individual or JIT orders. They would typically raise a purchase order for a single or limited number of items when a customer has ordered an item not currently available in stock. These smaller orders usually have a much shorter lead time than a bulk purchase, enabling businesses to meet their customers’ expectations with a Just-In-Time delivery.

4 benefits of using Linnworks for automated purchase orders

The benefits of using Linnworks as your purchase order system extend beyond the buying and warehouse teams. Here are four areas where online sellers also see a significant upside:

1. Enhanced visibility across the organization

When everyone across your organization, from accounting to marketing and all the way up to your leadership team, has a clear view of your purchase order process and associated stock movements, they can make better-informed decisions about your ongoing business strategy based on real-time data. For example, have you considered how real-time stock visibility can transform your marketing efforts?

2. Financial tracking: real-time stock value adjustments

Nothing will slow down an ecommerce business’s trajectory faster than cash tied up in slow-moving stock and distressed inventory. Managing your purchase order process in Linnworks will help you avoid expensive mistakes like over-ordering or running out of high-demand stock. Accurate purchase order records also make invoice processing easier, because each supplier invoice can be checked against the purchase order it relates to. If the tax man, a potential investor, or a finance organization needs to look at the value of your stock, the information is already there.

3. Historical data: understand supplier lead times

Timing is essential in running a profitable ecommerce business. Understanding your supplier’s lead times and raising purchase orders accordingly can mean the difference between taking stock of items just prior to peak sales periods and (literally) missing the boat entirely. Past purchase orders show how long each supplier has taken to deliver, and that supplier performance record gives your vendor management conversations something concrete to work from.

4. Stock forecasting

While every online seller would like to sell all their inventory, selling out when there is still consumer demand is a costly mistake. You lose the sale, and you may push that customer into the arms of a competitor. By automating your purchase order process, you can reduce the risk of running out of stock when you most need it.

Let’s dance

A mosh pit might be fun, but it’s no way to run a successful ecommerce business. Automating your purchase order process keeps you off your suppliers’ toes and lets your business waltz towards profitability.

If peak season or a new sales channel is about to add volume to your purchase order process, request a demo before the rush lands.

Purchase order automation FAQs

What’s the difference between a purchase requisition and a purchase order?

The requisition comes first. A purchase requisition (sometimes called a purchase request) is an internal request for purchase approval, usually raised by whoever needs the stock. Once it’s approved, it becomes a purchase order: the external document that commits your business to buying from a supplier at an agreed quantity and price. The requisition controls spend before anything is committed. The purchase order is the commitment.

How does approval routing work in purchase order software?

Through rules you set. An automated purchase order system can run the approval workflow for you, routing each PO to an approver based on conditions like order value, supplier, or department. Whoever needs to approve purchase orders does it inside the system, and the PO goes to the vendor without anyone chasing a sign-off by email. Because sign-off happens in the system, this kind of workflow automation also leaves a record of who approved each purchase.

Can purchase order automation prevent duplicate orders?

It reduces the risk. When every PO is raised in one purchase order system, anyone about to reorder can see what’s already on order, how many units, and when they’re due. Manual PO processing across spreadsheets, inboxes, and phone calls is where duplicate orders tend to slip through, because the full picture is split across all three. If you automate PO creation from stock levels, check that the system counts stock already on order, so it won’t suggest the same reorder twice.

How is purchase order automation different from AP automation?

They cover opposite ends of the process. Purchase order automation handles the front end of the procurement process: purchase order creation, approval, and sending orders to suppliers. AP automation (accounts payable automation) handles the back end, including invoice processing, matching each invoice to its PO, and paying the vendor. When the two systems connect, each invoice can be matched to its PO without anyone re-keying the order details.

What’s the difference between purchase order software and procurement software?

Scope. Purchase order software focuses on creating, sending, and tracking POs through to delivery. Procurement software covers the wider procurement process, with supplier sourcing, contract management, and spend analysis on top, and that level of procurement automation tends to suit larger procurement teams buying across many categories. If you sell online, you can also run purchase orders inside your inventory or order automation software, so reorders draw on the same stock figures your sales channels use.

How does purchase order automation work across multiple warehouses?

Each PO is tied to a location. In a multi-warehouse setup, every purchase order is raised against the warehouse or fulfillment center that will receive it, so inventory management shows incoming stock by site and reorder suggestions can account for stock already heading there. Without that link, a buyer can reorder for one warehouse while another sits on surplus a stock transfer could have covered. Before you set up automated PO workflows across sites, decide which locations reorder from suppliers and which get replenished by transfer from a central warehouse.

What is AI purchase order automation?

Forecast-driven reordering. AI purchase order automation software applies forecasting models to your sales history, seasonality, and supplier lead times, then suggests what to reorder, how much, and when. A buyer can review and approve each suggested PO before it’s sent, so someone stays accountable for the spend.