Purchase Orders Considered Harmful

["Moore, Robert" <rmoore@aerostructures.bfg.com>]

Bob  wrote:
...
Purchase orders are a carryover from paper systems.
They are usually composed of a collection of line items,
often aggregating quantities over time periods.  They
have no knowledge of how the purchases items 
will be used, nor what processes and components
are required to fulfill the order.

Dependent demands, by contrast, are totally dependent
on whatever independent demand stimulated them in the
first place.  

All dependent demands should be linked to their
relative independent demand so if there are changes
anywhere in the network of activities, they can be
rippled out to the affected relatives.

For example, if a customer order for a finished good 
changes in quantity or timing or is cancelled - the
dependent demands should be changed correspondingly.

The PO is too heavy a mechanism for managing
dependent demands - something more like an
electronic Kanban or manufacturing schedule
or point-of-sale event notification would be 
better.  The same goes for invoices, which are unnecessary
for dependent demands.

Without sounding like a complete idiot, a more concise meaning of the term
purchase order is needed.  For example, if you are referring to the type of
purchase order formerly known as a "one shot" you are correct. The cost
associated with this type of business transaction eliminated its usefulness
in the late 80's.  Today, Long Term Agreements (LTAs) are established which
provide the legal entity and relationship between two parties.  Usually the
LTA, consists of thousands of line items covering the duration of a decade
or more.  Not the type of transaction I would focus on.  The LTA purchase
order "release mechanism" however maybe exactly the entity you are looking
for.  These include some of the methods you have already stated,
(electronic Kanban, automatic reorder, schedule release, etc.)  

Invoices are obsolete and are only used to keep mentally challenged auditors
happy.  They provide absolutely no business value.




R.J. Moore
EC/EDI Administrator
BFG Aerospace Aerostructures Group
rmoore@aerostructures.bfg.com
619.691.3768