QualityInspection.org

Quality Assurance, Product Development, and Purchasing Strategies in China

  • Home
  • Articles
    • How To Manufacture A Product In China (without losing your shirt)? [Importer’s Guide]
  • Best Of
  • About Us
  • Contact us
X

Don't miss a post

It's easy to subscribe to our newsletter where you'll receive weekly updates for professional importers and manufacturers on better understanding, controlling, and improving manufacturing & supply chain in China, India, Vietnam, and beyond.

You are here: Home / Supplier Management / What should be in a purchase order (PO) to a Chinese supplier?

What should be in a purchase order (PO) to a Chinese supplier?

December 3, 2012 by Renaud Anjoran

Supplier ManagementI see a lot of small companies buying in China without a purchase order (PO). They simply accept the pro-forma invoice from the supplier. I think this is dangerous. It shouts “inexperienced buyer” to the supplier. But that’s not the main problem.

If you write the PO, you control what goes inside the PO. You can write all the information that is important to you, and refer to other documents that must be complied with by the supplier.

What is the minimum to write in a PO?

  • Buyer identification, with either the logo or the company name in large characters.
  • Full contact information of the person who follows the order in the buying organization
  • Full supplier company information
  • PO (unique) number, PO date, corresponding PO number of your customer if any.
  • List of the products with ordered quantity, unit price, and total price.
  • Most important specifications of each product (do not forget about labeling and packing). If you have written a product checklist, refer to it on the PO.
  • Terms of purchase: currency, incoterm, loading port and receiving port (for sea shipments), shipment date promised by supplier, payment terms, penalty for late shipment. If you have a quality control plan, refer to it on the PO.

You don’t have a PO form?

No problem. Feel free to download this PO template and adapt it to your needs.

Is the PO a contract?

No. If you want a contract that can be enforced in China, you need to work with a lawyer who specializes in China business.

I have no qualification to write about this, so here is an extract from an article on the China Law Blog:

Small and medium sized businesses often enter into OEM manufacturing transactions with a simple purchase order. This is a mistake. The purchase order will protect the Chinese manufacturer, not you. Your protection depends on your securing a written OEM manufacturing agreement with each Chinese manufacturer with which you deal.

What do you think?

Filed Under: Supplier Management

Comments

  1. Jacob Yount says

    December 8, 2012 at 10:09 AM

    You are very right that not issuing a PO screams small-time. I’m of the old-school way of thinking that if buyers don’t properly control things like this from the beginning, they are going to have bigger problems later on.

    One thing if I may add; be sure, once you send the PO, the vendor recognize specs that are in your PO but are not necessarily in their invoice. I’ve seen buyers add things in their PO and not have discussed them in advance with the vendor. Since the buyer didn’t spotlight, the vendor only adheres to their own invoice.

    At the end the buyer is screaming “it was in my PO!” and the vendor had no idea. They treated the PO like a formality.

    Have a great weekend Renaud and thanks for continuing to educate the importing masses.

    • Renaud Anjoran says

      December 8, 2012 at 3:23 PM

      Great point! The PO should be understood and accepted by the supplier.
      Getting the supplier to sign it and send it back is a good practice. But oftentimes they will sign a document without reading it…

  2. Felipe Borelli says

    August 21, 2013 at 2:06 PM

    Another points to highlight are:
    – the importance of adding the complete beneficiary Bank Account details in the PO;
    – and most important of all, to get the PO stamped with the Red Round Chop.

    Since this is the most recognized “official signature” for company related documents, it gives you greater assurance that more people in the sellers side have been involved in this PO and more important allows you to avoid frauds involving incorrect bank accounts.

    • Renaud Anjoran says

      August 21, 2013 at 8:49 PM

      I agree that these 2 points can only help.
      Regarding the red round chop: in theory it should be accompanied with the signature of the general manager, if my memory is correct. But I’d only require this if the amount of the PO is huge and if the supplier’s company is not very large. They sure won’t do that on every PO.

  3. Boris says

    June 13, 2014 at 4:26 PM

    Thanks for informative article. When does importer need PO form? Is it only relevant for importers having thousands in minimum order quanity?

    • Renaud Anjoran says

      June 14, 2014 at 3:38 AM

      I think it is always relevant, not just for orders above 10,000 USD.

  4. Rich says

    July 15, 2014 at 8:01 PM

    Thanks for the good info. What is the reasoning behind a company chop being used for only large purchases. While not legally bounding it basically states that they agree to your terms and PO and shouldnt depend on a dollar amount. Im not sure on the legalities but think that the accounting department should have a chop and possibly the right to sign if a large company.

    Your blog is a great resource with lots of specific information and practical tips. A good find..

    • Renaud Anjoran says

      July 15, 2014 at 9:06 PM

      The reasoning is, it makes sense to sue a Chinese supplier if the sum at stake is at least 50,000 USD. For small orders it makes little sense to spend a lot of time crossing all the Ts and dotting all the Is.
      There are several chops in a Chinese company. I was referring to the GM’s chop (which is seldom in the accountants’ hands).


Weekly updates for professional importers on better understanding, controlling, and improving manufacturing & supply chain in China.

This is the official blog of Sofeast.com.

This blog is written by Renaud Anjoran, an ASQ Certified Quality Engineer who has been involved in chinese manufacturing since 2005.

Hit the button below to get in touch:

Contact Us!

Subscribe to our email newsletter

Connect with us

  • Email
  • Facebook
  • LinkedIn
  • RSS
  • Twitter
  • YouTube
sofeast
sofeast
sofeast

Latest Articles

  • Benefits of Product Design Optimization (Taguchi Method)
  • 9 Key Quality Management Challenges in China
  • Why the AQL Inspection System Is Still So Widespread
  • The Design for Reliability Process for Launching Reliable Products
  • Breaking news! China opens its borders to all foreign travellers!

Categories

  • Quality Control Tips
  • Sourcing New Suppliers
  • Supplier Management
  • New Product Development
  • Process Improvement
  • Ethical Sourcing

Archives

© 2023 QualityInspection.org