Definition§
A standing order is a contract where goods are delivered repeatedly according to a pre-specified schedule, eliminating the need for reordering each time. Such orders must comply with terms regarding shipment quantity and timing, as outlined in the initial agreement.
Examples§
- Retail Inventory: A grocery store might set a standing order for weekly deliveries of milk and bread from a supplier.
- Office Supplies: A company may create a standing order for monthly deliveries of office supplies to ensure continuous availability.
- Manufacturing: A car manufacturer can have a standing order for steel and other materials needed for daily production.
Frequently Asked Questions§
What businesses can benefit from standing orders?§
Virtually all businesses that require regular supplies can benefit from standing orders, including retail stores, offices, and manufacturing units.
How does a standing order differ from a regular purchase order?§
A regular purchase order is a one-time transaction, whereas a standing order sets recurring deliveries of products per agreed-upon terms.
Can standing orders be modified?§
Yes, standing orders can generally be modified with the supplier’s consent, often requiring updates to quantities, delivery schedules, or other specifics.
Are there penalties for not complying with a standing order?§
Non-compliance with the terms of a standing order can result in penalties, including potential contract termination or legal repercussions based on the agreement.
How is payment usually managed for standing orders?§
Payment terms are usually outlined in the initial agreement and can involve periodic invoicing based on the delivery schedule.
Related Terms§
- Purchase Order (PO): A formal document submitted by a buyer to a supplier outlining the specifics of goods or services needed.
- Blanket Order: Similar to a standing order but allows for more flexibility in terms of the quantities and timing of deliveries.
- Just-In-Time (JIT) Inventory: A strategy where materials are only ordered and received as they are needed in the production process.
Online Resources§
Suggested Books for Further Studies§
- Supply Chain Management: Strategy, Planning, and Operation by Sunil Chopra and Peter Meindl
- Operations and Supply Chain Management by F. Robert Jacobs and Richard B. Chase
- Fundamentals of Supply Chain Theory by Lawrence V. Snyder and Zuo-Jun Max Shen
Fundamentals of Standing Orders: Business Operations Basics Quiz§
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