What is an automated purchase order system?

Purchase orders, also known as POs, can take up lots of your time and be prone to human error. If you want to make things easier and more efficient, an automated purchase order system can help. In this article, we'll outline what one is and how you can use it to create different types of automatic purchase orders.

3 ways to use an automated purchase order system

An automated purchase order system is a key component of Profit4's order management software, which takes care of purchase orders automatically. That includes different types of purchase orders:

• Purchasing stock for your warehouse -  purchasing stock to store in your own warehouse and sell directly to customers
• Back-to-back purchase orders -when suppliers send goods for you to forward directly onto your customers
• Direct deliveries - you may also have an agreement where the supplier sends goods directly to your customers after you have sold them through your website, trade counter or over the phone

How to create automated POs

With Profit4, there are a few ways to create automated POs. You can raise a purchase order when a shortage is detected, raise a shortage to add to your shopping list' or set up automated POs based on a few different requirements.

Below, we'll take a look at these methods in more detail:

Raise a purchase order

An order management system, like Profit4, can automatically detect shortages when you create a sales order. When you add an item to a sales order, Profit4 will detect if the right amount of stock isn't available.

You'll have the option to raise a purchase order immediately using your chosen method, such as back-to-back or direct delivery. Of course, this depends on the agreements you have in place with your suppliers. The system will create a supplier purchase order for you with the right product, quantity and price, which can be sent directly to the supplier.

Whether you're adding more to your sales order or moving onto something else, the purchase order is taken care of. That eliminates the chance of a team member writing a note (or making a mental note) to order that stock, then forgetting to do so when the phone rings.

Raise a shortage

Alternatively, you can raise shortages. This is also an option when there's insufficient stock for your sales order. In this case, Profit4 will automatically add the items to a shortage list (or shopping list, if you like).

When someone comes to create a purchase order, they'll see what you've added without any need to tell them. That means there's no specific communication required between the sales and purchasing team. Or there's no need for someone to remember if they take care of both sales and purchasing - in a smaller, multi-role team, for instance.

With this approach, you can save up purchase orders to make larger orders without losing track of exactly what's needed. That's useful when suppliers have a minimum order value or offer discounts for larger order volumes.

Set up automated POs for bestselling products

The final option involves a little more automation magic. Profit4 can generate shortages based on minimum, maximum and optimum levels of stock. The latter will be calculated based on your historical sales. For example, if you sell an average of 10 units of a product each week, it will know you need 10 in stock at all times.

To do this, you simply need to create shortage generation criteria with the following restocking options:

• Minimum - ideal if you want to minimise stock being held due to a lack of storage space
• Maximum - maybe you want to stock up in time for a busy period
• Optimum - let the system crunch the numbers to keep stock at the right levels
• Sales requirements only - this will automatically generate a shortage, only when sales are made for out-of-stock items

Once the criteria are set, Profit4 will automatically generate a purchasing list of sales order requirements and stock needed to attain minimum, maximum or optimum levels. All you need to do is raise a purchase order from that list, which Profit4 can create and email to the supplier.