Customers splitting Purchase Orders, who are they fooling?

RJT · Apr 29, 2013

We have been getting a lot of orders where for example we quote 15 parts and get 5 purchase orders of 3 each or 3 orders for 5 each ( you get the idea). Several customers are doing this. We deliver all the parts at the same time with multiple invoices. It just causes more paper work and more chances for something to get fouled up. I understand having budgetary limits, but what is the use of multiple PO's that are numerically sequenced (PO 11345, PO11346, PO 11347) all the same amount for the same part?? I can't see how even the worst accounting or purchasing department wouldn't see what's going on. What good does having a limit for how much you can spend on each order, but not limiting the number of orders? What am I missing?

Modelman · Apr 29, 2013

They've already selected their payment terms... 30 days on the bill for the first PO

60 days for the second

and 120 days for the third. :bawling:

Dennis

Gordon B. Clarke · Apr 29, 2013

Some people seem to regard it as a crime but if I were you I'd phone the customer and (politely) ask for an explanation.

I'd add on a "handling" charge for dealing with 3 separate orders if it's just a smart ass in purchasing that's making waves and see if that changed anything. Surely delivery alone must cost extra each time?

JB @ C and L Machine · Apr 29, 2013

Gordon B. Clarke said:
Some people seem to regard it as a crime but if I were you I'd phone the customer and (politely) ask for an explanation.

I'd add on a "handling" charge for dealing with 3 separate orders if it's just a smart ass in purchasing that's making waves and see if that changed anything. Surely delivery alone must cost extra each time?

Your cute little handling charge will get you paid later. Why you ask? ...accounts payable pays what the exact PO states. No more / no less

Bobw · Apr 29, 2013

Probably for separate orders on their end, and it makes the cost accounting in purchasing easier. I'd talk to their book keeper/accountant, he'd
probably like to wring their necks too.

Tonytn36 · Apr 29, 2013

Yup, my bet is they are ordering them for different cost centers within the facility. Each of the 3 CC's needs 5 of them (15 total) but they need costed to each CC, thus 3 PO's, one charged internally to each CC. It's accounting stuff on their end. My bet is the accounting software they are using can't split the costs between cost centers AND issue just one PO.

Fortunately, ours can split costs. I have about 22 different cost centers to deal with.

Jorgo · Apr 29, 2013

I have a customer who does this. They always have three projects going at once and the d different PO's make it easier to apply costs to the different projects. It's a real pain printing multiple invoices though.
Jordy Wallace

jh35 · Apr 29, 2013

We only supply parts to ourselves but...
We make this certain clamp in qtys of 5-10 on a very regular basis. I asked why we can't make 2000 of them at once and save the setup time. The answer was they didn't have one account for all of it and it would be a paper work headache as several different groups use this part and each has their own account. There HAS to be a way around it. Common sense does not prevail sometimes.

Pete Deal · Apr 29, 2013

Been there and done it. They are trying to get around an internal organizational constraint. Maybe it is an approval level. Maybe the orders above a certain limit need to be approved by someone much higher up. Or, as others have said maybe it is being spread accross several projects to not go over budget in a particular area. Not fun but it gets things done sometimes.

bryan_machine · Apr 29, 2013

It may also be a customer's customer constraint - as in for YOUR project I have to show POs/Invoices for all of the things I bought for YOU, and you don't want to see/will refuse to pay, for POs/invoices associated with somebody else's project, even for the exact same part.

So very likely it's not "fooling" anybody in accounting or management, it could very well be *imposed* by accounting or management.

SND · Apr 29, 2013

It usually is indeed to attach each job order on their end with each PO's, qty's and what not. Makes for more paper work indeed, on their end anyway as I throw it all on one invoice and 1 packing slip on my end when they're all the same parts.

It gets more fun when you have a po for 1 or 2 that pop up just as you're done running the other 5-6 and have to start the process/set ups all over again.

RJT · Apr 29, 2013

Gordon,
I delver them all at one time, just have to have a separate packing slip for each PO. Hard to imagine separate cost centers other than some are used immediately , some for spare parts. This is tooling they use to manufacture their product. The odd thing is several different customers have started doing this recently. Just a PITA as far as paperwork.Seems like it would be just as much a pain for them too.

Tonytn36 · Apr 29, 2013

bryan_machine said:
It may also be a customer's customer constraint - as in for YOUR project I have to show POs/Invoices for all of the things I bought for YOU, and you don't want to see/will refuse to pay, for POs/invoices associated with somebody else's project, even for the exact same part.

So very likely it's not "fooling" anybody in accounting or management, it could very well be *imposed* by accounting or management.

This is very real also.
If we get a tooling order from a customer, we have to track each individual tooling piece, from design time to material purchase to machining to finished product. Every invoice has to be in the tooling book, with pictures for each piece. This means you can't even order a stick of material, you have to order cut pieces for each individual part and each piece ordered has to be tied to the work order for that particular part. It is a paperwork logistics nightmare and it adds considerable cost. But they have an audit team that reviews everything and if even one i isn't dotted, they refuse to pay. This means if I have to order 8 pcs of something that is common to several operations, I have to create 8 separate internal orders, there are 8 individual pcs of material ordered in order to generate the 8 material invoices required, each piece is then treated as a single-piece order throughout the system of manufacture with time tracking, etc. If they have to go out for heat treat or coating, then you have to generate a po for each individual piece, same as if you were ordering 1. We don't do it because we want to, we do it because our customers require us to do it.

motion guru · Apr 29, 2013

We often order staged deliveries - but typically using a single PO -

If we are building a series of 10 machines and each machine uses 10 tooling plates - and we are building them in pairs with 5 deliveries scheduled over the next 10 months . . .

I'll order tooling plates all at one time with five deliveries of 20 staged over 10 months - and we will pay on that schedule.

When you get roughly $2.5 million in costs wrapped up in 10 machines - I don't want all the parts showing up at once. If a vendor chooses to deliver all at once, they still get paid as the parts are used according to the delivery schedule mapped out on the Purchase Order.

I can't float $2.5 million in parts and I don't expect my vendors to float it either - so only make the parts 20 at a time -or- give me a price that takes your cost of keeping them in your inventory into account along with shipping them according to the PO Schedule.

If you run your business to make life easy for you and not easy for your customer - you will find yourself losing customers like me.

Bruce Nelson · Apr 29, 2013

If you are getting paid on time as per specified, what do you care? It's all work resulting in paying jobs for your organization. You'd probably bitch if hung with a new rope.

Lord Byron

El Mustachio · Apr 29, 2013

I do this on a regular basis. We track the rigs we build by serial number. Much of our stuff is designed to order and it may be a long time before we build something similar again. Although we use many of the same parts and products, they get used in different quantities and configurations depending on the order. Our system allows for both a PO field and an Alternate PO field. We often use the Alternate PO field for the serial number of the rig. That way two years later I can run a report on every PO that had that serial number tied to it and get only the portion of the order that was required for that rig.

So, in short, reasons you may get split PO's for one job (at least from our shop);
-Purchaser is tracking quantities purchased for different jobs being built concurrently.
-Assigning "lot" data for product life cycle / warranty / quality purposes.
-Ease of look-up in the future (searching by other fields like serial number, vin, etc)
-Internal caps / limits on individual PO's
-Different destinations for components made during one parts run (shops that have more than one location or drop ship direct from shop to customer).

I do check with our vendors before I issue the PO's, so far they've never had a preference whether I send one blanket PO or divide it up.

toolsteel · Apr 29, 2013

Similar to what others here have said. I have done jobs on a time and material basis before where I needed to show the quantity, price etc. And even though I knew I was going out on a bit of a limb.....I occasionally ordered tools on seperate p.o.'s anticipating that I would be running the same job in the near future.....thus having a "new" p.o. to show my customer.

RJT · Apr 29, 2013

Fist of all, I'm thankful for the work, just trying to avoid paperwork and the mistakes and delays that can come from unnecessary extra paperwork. But yes, hanged by a new rope would probably be irritating to my neck. It would definitely piss me off (where's that little smiley face thing?). Motion guru, I understand staggered deliveries on big items, these are POs that total a few thousand dollars and they want delivery all at once. Thanks for the replys. Looks like i'm not alone in this.

Cole2534 · Apr 29, 2013

I've seen split PO's to keep things under the radar.

Stuart Caruk · Apr 29, 2013

Several companies have an unauthorized limit, and the purchasing gals are trying to keep things simple. I wouldn't complain too much. I can easily think of a half a dozen customers who routinely do this with us. Let's say they have an internal corporate limit that says they can't spend more than $10,000 without corporate approval of the capital budget, which might take 8 months to get. You make a component that sells for $5200. They need 3 of them. Either you wait 8 months + to get the work, or they write 3 separate PO's and you get the work now. Internally they may charge the separate invoices to a capital account, maintenance, or repair budget. I could care less. I simply want to produce the items and get paid for it. My goal is to make it as easy as possible for the customer to do business with me, and get me paid in a timely manner.

Customers splitting Purchase Orders, who are they fooling?

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