How Do Purchase Orders Help Track Supplier Performance?

Oct 6, 2021 | Supplier management

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Oct 6, 20213 min read

Purchase orders are essential for monitoring supplier performance and ensuring timely delivery of products and services. Automated purchase orders provide efficient and accurate tracking, reducing the risk of errors and saving time and money. With accurate purchase orders, companies can measure supplier performance and make informed decisions for future transactions.

A purchase order is an agreement between a buyer and a supplier, outlining the products or services to be exchanged for a set price. For many businesses, efficient and accurate tracking of supplier performance is essential and purchase orders help ensure this is done accurately. 

Understanding How Purchase Orders Help Monitor Supplier Performance 

The importance of monitoring supplier performance cannot be overstated. A company’s success and profitability depend upon the performance of its suppliers. Purchase orders help to ensure that suppliers are delivering the products or services promised, on time and as agreed. This helps to ensure that customer demands are met and that any disputes between the buyer and supplier can be quickly resolved. 

Purchase orders have become increasingly automated over the years, allowing for faster processing, accurate tracking, and more reliable information. Automated purchase orders can be used to ensure that all data is tracked and stored in one convenient location. This makes it easier to identify any potential problems or discrepancies quickly and easily. 

In addition, automated purchase orders can help to streamline the entire purchasing process. By automating the process, companies can save time and money, as well as reduce the risk of errors. Automated purchase orders also provide a more secure way to store and track data, as well as provide a more efficient way to manage supplier relationships. 

The Benefits of Automated Purchase Orders for Supplier Performance Monitoring 

The use of automated purchase orders helps to streamline the process of tracking supplier performance. Automated purchase order systems are designed to provide accurate, up-to-date information on supplier performance, allowing companies to identify areas of risk or improvement more quickly. 

FactWise Source-to-Pay uses RfX data, PO data, and historical data to offer robust, accurate supplier performance analytics (price, on-time delivery, quality) so that procurement teams can make data-driven decisions and do not have to rely on tedious, repetitive data entry and Excel-based analyses to obtain supplier analytics.  

For example, according to a study conducted by Forrester Research companies using e-procurement systems saw a 10-15% improvement in supplier performance due to better tracking and visibility provided by electronic POs. In this study, companies such as Procter & Gamble, Coca-Cola, GE, were found to have implemented e-procurement systems and reported positive results. 

Another example comes from a case study by SAP Ariba, in which Johnson Controls, a global provider of building technology, was able to achieve significant improvements in supplier performance through the use of an electronic PO system. The implementation of this system allowed Johnson Controls to standardize their purchasing processes, automate manual tasks and track supplier performance more effectively. This resulted in a 25% reduction in purchase order processing time and an increase in supplier on-time delivery performance by 15%. 

Automated purchase orders also provide an audit trail of all transactions, making it easier to review past performance and make adjustments as needed. This ensures that companies are able to accurately monitor supplier performance over time, helping them to maintain better relationships with their suppliers. 

Measuring Supplier Performance with Accurate Purchase Orders 

Accurate purchase orders are essential for measuring supplier performance. By tracking each purchase against its terms and conditions, companies can more accurately measure a supplier’s delivery speed and on-time payment. This helps companies better understand the performance of their suppliers, allowing them to adjust their contracts or seek alternate solutions when necessary. 

In conclusion, the use of purchase orders is a valuable tool for tracking supplier performance. Companies can use POs to monitor their suppliers and make informed decisions for future transactions. The implementation of e-procurement systems has also been shown to improve supplier performance, as they provide increased visibility, standardization, and automation. Companies such as Procter & Gamble, Coca-Cola, GE, and Johnson Controls have reported significant improvements in supplier performance through the use of POs and e-procurement systems. 

Generating best-in-class, accurate POs is automated and streamlined on FactWise source-to-pay and can be done in <1min. FactWise empowers procurement organizations to prioritize preferred vendors via RfX events and direct POs, discover new, pre-vetted, well-rated vendors that meet their quality requirements, and to define item specifications and logistics/delivery requirements in detail on POs to ensure compliance. FactWise is committed to transforming the procurement journey for buyers and suppliers globally. 

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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