The best remedy for this problem is to use blanket purchase orders with suppliers that have frequent transactions with Nypro. A blanket purchase order is typically used for items or services that are used repeatedly, and is effective for a fixed period of time. Employing a blanket purchase order makes managing relationships with suppliers with a high quantity of purchase orders easier because it consolidates multiple purchase orders on one blanket purchase order. Clearly, the purpose of blanket purchase orders is to increase the efficiency and productivity of the purchasing process; but, how does an organization implement this policy smoothly?Low Volume VendorsNypro has too many low-volume vendorsthose vendors that have infrequent, unplanned purchases, making up a low purchasing value. It is beneficial to investigate these vendors because they represent a potential avenue for cost savings through vendor consolidation.The Pareto analysis or 80-20 analysis has been used to identify which suppliers represent the majority of spending. As shown in Table 3, there are 1023 suppliers for Nypro China, however only 144 of these suppliers make up 80 percent of the entire MRO buy. This means that 879 suppliers make up the remaining 20 percent of the MRO spend! This strongly suggests that there are many low volume vendors throughout Nypro-China. In order to identify the kinds of suppliers that may include these low-volume vendors, the term, hot commoditieswhich are defined as those level-three classifications having more

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How should the company implement the blanket purchasing agreement to consolidate large quantities of purchase orders? What are the potential benefits?