Outline Purchase Agreement

An outline purchase agreement is a longer-term arrangement with a vendor covering the supply of materials or the provision of services, subject to predetermined conditions. These apply for a predefined period and a predefined total purchase quantity or certain total purchase value.

An outline agreement does not contain data on specific delivery dates or quantities to be delivered. This data is transmitted to the vendor in one of two ways, depending on the type of outline agreement. A vendor is notified of quantities and delivery dates either in a specialized form of purchase order called a contract release order, or in a delivery schedule.

An outline agreement can be a contract or a scheduling agreement.

There are two key differences in the use of these two agreement types:

The volume of documents

In the case of the contract, as a rule, a new purchase order is created in the system each time goods or services are released against the contract. With the scheduling agreement, on the other hand, there is only one further document apart from the agreement document; this is the delivery schedule, which is continually extended as new requirement quantities and delivery dates are added.

Use in automatic materials planning

Requirements planning can be set up in such a way that the contract item is automatically assigned to a requisition item as the source of supply. However, this requisition must subsequently be converted into a purchase order (contract release order). In the case of the scheduling agreement, it is possible to directly generate scheduling agreement delivery schedule lines from the planning run, thus reducing purchasing department processing time.

Understand more about outline agreements in this PDF Guide on Outline Agreement.

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