What is a purchase order?
A purchase order, usually shortened to PO, is the buyer’s official order to a supplier. It lists what is being bought, how many, at what price, when and where it should be delivered, and on which terms. When the supplier accepts it, the PO becomes the agreement both sides work from.
The PO number then follows the goods all the way through the supply chain: on the supplier’s invoice and packing list, on the advance shipping notice to the warehouse, and in the receiving check when the goods arrive.
Core principle: One PO number links the order, the delivery and the invoice, so every unit can be checked and paid correctly.
What a purchase order contains
| Field | Example |
|---|---|
| PO number and date | PO-2026-0418, 15 October 2026 |
| Buyer and supplier details | Company names, addresses, VAT and EORI numbers |
| Items | SKU, description, quantity, unit price |
| Delivery terms | Incoterm and named place, for example FCA Shenzhen |
| Delivery date and address | Ready date at the factory or arrival date at the warehouse |
| Payment terms | 30% deposit, 70% before shipment |
| Labelling and packing instructions | Barcodes on every unit, carton labels, maximum carton weight |
The purchase order process
- The buyer creates the PO, often triggered when stock falls to the reorder point.
- The supplier confirms quantities, prices and the ready date.
- Goods are produced and shipped; the supplier invoices against the PO number.
- The warehouse receives the goods against the PO and reports differences.
- Finance pays after a three-way match: PO, receipt and invoice agree.
Purchase orders in the warehouse
Receiving against the PO
The warehouse counts what arrived and compares it with the PO: missing units, extra units (overage) and damage are recorded.
Why it matters: You only pay for what was delivered and spot supplier problems early.
Faster put-away
When the PO is sent to the warehouse before arrival, with SKUs and quantities per carton, receiving is faster and cheaper.
Watch out for: Goods without a PO number or with unlabelled cartons often take longer to receive and can cost extra.
Example: A supplement brand sends PO-1187 for 12,000 units of three SKUs to its manufacturer in Poland and shares it with its 3PL. When the pallets arrive at the warehouse, staff scan them against PO-1187, find 240 units short on one SKU and report it the same day. The brand pays the invoice minus the missing units.
Purchase order vs invoice vs sales order
- Purchase order: sent by the buyer to order goods.
- Sales order: the supplier’s internal confirmation of that order.
- Invoice: sent by the supplier to request payment, quoting the PO number. See commercial invoice for the customs version.
Frequently asked questions
What is a purchase order used for?
To order goods from a supplier in writing and to check later that the delivery and the invoice match what was ordered.
Is a purchase order legally binding?
Once the supplier accepts it, a purchase order usually forms a binding contract, subject to the terms both sides agreed.
Who creates a purchase order?
The buyer, typically the purchasing or operations team, often from an ERP or inventory system.
Why does a warehouse need the PO number?
To check incoming goods against what was ordered and report shortages, extra units or damage before stock goes live.
