eCommerce glossary

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Purchase Order

A purchase order, aka PO, is an official document that buyers create for sellers to outline the items they want to purchase and the quantity details. It allows both the buyer and seller to document whatever they have agreed upon. This maintains transparency and keeps the relationship between both parties healthy.

There are four types of purchase orders:

  1. Standard Purchase Order (SPO): In an SPO, the buyer has complete clarity on what they want to purchase, desired quantity, delivery time, and payment terms. For example, if a company needs 10 computers within a month, it will generate an SPO for the seller with a breakdown of the necessary information.
  1. Planned Purchase Order (PPO): In a PPO, the buyer shares the estimate of the future needs with the seller. The planned purchase order contains a few fixed details such as items, pricing, and payment terms. However, details related to the quantity and ​​delivery date stay tentative.
  1. Blanket Purchase Order (BPO): In BPO, a buyer tries to negotiate discounted pricing by placing multiple orders at once.
  1. Contract Purchase Order (CPO): CPO is the most complex purchase order type because both the buyer and seller sign a binding contract after agreeing to the terms.

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