Online shopping is easy, right? Well, that might be true for consumers who simply 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 from which impeccable ecommerce performance is built — and in which customer satisfaction is rooted. 

In this article, we’ll explain what a purchase order is, how businesses raise POs and how purchase order automation can transform your awkward “dad dance” into a graceful ballet. 

What is a purchase order?

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, it will involve someone manually checking stock levels, making a decision about reordering and placing an order. 

This system works well for a small business who have complete oversight of their stock and its movements. However, as a business scales and becomes more complex — selling across multiple channels, operating from larger warehouses and even across multiple locations and geographies — this approach 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. Let’s dive into what this means. 

What is an automated purchase order?

Purchase order automation reduces the time spent manually managing the various processes to raise, approve and send purchase orders. This automation also manages relationships with your suppliers to ensure the timely delivery of the right levels of stock into 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, which means you never run out of stock.

Stock forecasting becomes even more essential when online sellers manage multiple warehouse locations or 3PL relationships and operate across international borders, which all add to the complexity of the 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 helps online sellers, from ambitious start-ups to sophisticated multi-channel retailers, better manage their purchase orders with intuitive workflows and scalable solutions. So, what would the process look like at various stages of an online seller’s ecommerce journey?

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 order 100 units, arrange to make a payment and discuss 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 open to errors. 

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. It dramatically reduces multiple touchpoints and opportunities for human error. This is particularly useful when dealing with suppliers across international time zones. You just press a button and it’s done.

Processes like automated stock forecasting take this advanced functionality to the next level. Linnworks actually tells you when and how much of a specific item you need to order.

Who benefits from raising purchase orders in Linnworks?

When an online seller raises purchase orders in Linnworks, multiple people across your business benefit by being able to 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 to manage purchase orders 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

Money makes the world go round and 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. Better financial tracking can also help you streamline accounting procedures and your company’s financial obligations. 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.

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. Not only will you potentially lose out on a sale, but you may also push your customers 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.

Final thoughts — let’s dance

A mosh pit might be fun, but it’s no way to run a successful ecommerce business. Automating various aspects of your business will ensure you don’t stand on anyone’s toes and waltz towards profitability.

To learn more about how Linnworks can help your ecommerce business dance its way to profitability, request a demo today.