A purchase commitment is a binding or planned obligation to buy a stated quantity or value under agreed conditions. It may appear in a contract, forecast, blanket order or capacity reservation.
Purchase Commitment: what the sourcing record should show
| Area | What to record |
|---|---|
| Decision | State whether the commitment is firm, cancellable, forecast-only or subject to releases. Define the period, products, price basis and remedy for a shortfall. |
| Evidence | Track committed, ordered, received and remaining quantities, along with amendments and supplier capacity reserved against the commitment. |
| Watch point | An informal forecast should not be treated as a firm order. Ambiguity can leave the buyer holding excess stock or the supplier with unrecovered capacity. |
When does Purchase Commitment matter?
State whether the commitment is firm, cancellable, forecast-only or subject to releases. Define the period, products, price basis and remedy for a shortfall.
What should buyers check before approving Purchase Commitment?
Track committed, ordered, received and remaining quantities, along with amendments and supplier capacity reserved against the commitment.
An informal forecast should not be treated as a firm order. Ambiguity can leave the buyer holding excess stock or the supplier with unrecovered capacity.
