LPO stands for local purchase order . it is a contractual
document where both supplier and customer agreed about the quantity ,quality
,time of delivery , mode of payment, name of goods, conditions for issuance
of Bank guarantee, security cheque etc..
Both the parties of the contract agreed and signed on the LPO
and based on these condition , they do the delivery of goods and
it’s payment.
Before preparing LPO, the supplier and customers will make a
discussion regarding the price ,quality , payment term , delivery term
ect .. In short both the parties will make a detailed discussion regarding all
aspects of that transaction. Once they agreed after negotiation, then the
customer prepare a LPO and after their signature they handed over
this LPO to the supplier for their approval and signature. LPO is valid only
when both parties of the contract agreed and signed .
When a company having any requirement of any goods , then such
company accepting quotations from various suppliers and after analyzing each
quotations, the company will select some companies for negotiation and after
the negotiation the company will fix the supplier of that goods.
Accepting Quotation from suppliers, Negotiations with suppliers,
selection of suppliers, fixing prices, fixing payment term, preparation of
LPO, get approval of LPO etc.. are some of the common duties of
purchase and procurement Department. Out of these duties , negotiation with
suppliers is the most important duty of procurement department because all the
terms are discussed.
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