EDI ANSI X12 Transaction Set 850 Purchase Order Explained
Last Updated on September 30, 2024 by Tatyana Vandich
In this blog, we will navigate through the ANSI X12 EDI standard, with a focus on the 850 (Purchase Order) transaction set. This transaction set is a major business document exchanged between most business partners, whether they are a manufacturer, retailer, or businesses part of the same supply chain. The 850-transaction set is the backbone of the electronic data interchange in today’s heavily digitized world. This post is based on over 24 years of EDI experience with hundreds of EDI integration projects implementations.
What is Electronic Data Interchange (EDI)?
Let’s start with a little refresher; Electronic Data Interchange (EDI) is the protocol designed to exchange business documents, electronically, between business entities wanting to collaborate at the business level, as vendor and client.
In simple terms, EDI is an electronic exchange of digital business documents, between a sender and a receiver company, in a very structured and standard format. This protocol is used by businesses around the world as their main method to exchange business documents. Obviously, since it is standardized, there are currently lots of organizations and standards to manage i.e. ANSI, UN/EDIFACT, Tradacomms and many others depending on the industry and business needs.
EDI Purchase Order (850) Definition
The ANSI X12 EDI Purchase Order coded as 850, is a “Transaction Set” nick named as EDI 850 or EDI X12 850 or just PO, is a fundamental document in EDI. EDI 850 is a formal business and commercial request sent by the buyer (purchasing company) to the supplier (seller) for demand of delivery of goods and/or services at an agreed price.
What business information is contained in an EDI Purchase Order?
A typical EDI 850 Purchase Order includes typical commercial data included in any business purchase order, such as:
- Purchase order date
- Purchase order number
- Item description
- Item price and quantities
- Payment terms
- Discounts
- Shipping details
- Requested delivery date
- Location(s) where the goods should be delivered to
How is the EDI 850 handled by the EDI service provider?
A little summary description about the EDI 850 flow:
Typically, the buyer creates a Purchase Order in his internal ERP system (i.e. SAP, Microsoft Dynamics, JD Edwards, etc.); it can be created in the ERP system automatically or manually, depending on the business process of the company.
Then, the generated Purchase Order is converted to an appropriate format acceptable by the EDI service provider to translate to the appropriate standard and format. Once the purchase order is transferred to the EDI provider, he will then convert the PO document to ANSI X12 EDI 850 transaction set. After conversion, the EDI 850 is sent to the destination (or the recipient).
Useful information:
If you are looking for an EDI Service provider or you are not satisfied with your current provider and want to get the best EDI services, find out here how to choose the right EDI Service Provider.
Difference Between EDI 850 and 875?
EDI 875 and EDI 850 are two different transaction sets that are used in electronic data interchange (EDI) to exchange business documents between trading partners.
Unlike the 850, EDI 875 transaction set is used to place orders for grocery products specifically. It sent by chain stores to their suppliers and vendors, to replenish inventory at the store level. However, the EDI 850 transaction set is used for purchase orders. The main difference between the two is the specific industry or vertical.
The EDI 850 Purchase Order transaction set is more generic in terms of its usage; it is used across various industries to communicate purchase ordering for goods and services from a buyer to a supplier. The 850 typically includes the minimum information needed on a purchase order, such as item description, quantity, price, delivery date, and payment terms.
On the other hand, the EDI 875 Grocery Products Purchase Order transaction set is used specifically in the grocery industry for the purchase of perishable and non-perishable goods, and includes additional information such as weight, temperature requirements, expiry date and other special handling instructions.
In summary, both EDI 850 and EDI 875 are used as a legal purchase order to buy goods and services. They are designed for different industries and have different data requirements.
EDI 850 Exchange and Communication Protocols
For the exchange of EDI documents, including EDI 850, there exist different methods and communication protocols used in this industry:
For the exchange of EDI documents, including EDI 850, there are various communication Protocols:
VAN (Value-Added-Network)
A value-added network (VAN) is a private network that ensures the secure transfer of EDI data between the source and the destinations (or partners). VANs normally interconnect between each other’in order to keep the transmission secure.
AS2 (Applicability Statement 2)
AS2 (Applicability Statement 2) is secure messaging over the Internet using digital certificates and encryption.
FTP (File Transfer Protocol)
FTP (File Transfer Protocol) is a standard network protocol built on a client-server architecture.
sFTP (Secure File Transfer Protocol)
sFTP (Secure File Transfer Protocol) secure version of FTP for data transfer over the Internet.
HTTPS (Hypertext Transfer Protocol Secure)
HTTPS (Hypertext Transfer Protocol Secure) is an extension of HTTP and a secure way for communication over the Internet.
It is to note thar one company may decide to use several protocols to exchange EDI documents with its various trading partners. This usually happens because suppliers must meet the requirements of their trading partners.
What EDI documents are involved in EDI X12 850 workflow?
For a business relationship between business partners, a single EDI 850 transaction is not enough. Although a purchase order is a basic document, business partners generally would exchange the complimentary additional following documents:
- EDI 997 Functional Acknowledgement – sent by the receiver of the transaction as a response to confirm receipt of EDI 850 or any other EDI document. This is a signature to indicate that the digital file was received physically, its content is valid in terms of Syntax, but without looking at the data values.
- EDI 855 Purchase Order Acknowledgment– used by sellers to accept, reject, or modify a Purchase Order.
- EDI 860 Purchase Order Change Request – used by buyer if necessary to make changes to a previously submitted Purchase Order; or to accept change initiated by the seller.
- EDI 856 Advance Ship Notice –send by a seller to a buyer to describe the shipped items and type of packaging. ASN is sent immediately after the goods left the seller’s location.
- EDI 810 Invoice –request for payment of goods or services
Structure of EDI X12 850 Transaction Set
Any EDI X12 document, including the 850 (Purchase Order) transaction, consists of different segments where the initial segments are called Header, and the final segment is called Trailer:
a. Interchange Control Header (ISA) /Trailer (IEA)
b. Functional Group Header (GS) / Trailer (GE)
c. Transaction Set Header (ST) / Trailer (SE)
For more information about EDI structure, data elements, and terminology learn our article:
EDI ANSI ASC X12 Standards – Technical Overview
Purchase Order 850 Sample File
The ISA, GS, ST elements contain Functional ID code, the sender’s and receiver’s ID code, date, time etc.
The transaction set envelope contains transaction detail, with information about a product, weight, size, color, volume etc.
ISA*00* *00* *ZZ*A1STORES *12*5142645505 *190510*0728*|*00403*100000013*0*P*}
GS*PO*A1STORES*5142645505*20200510*0728*1013*X*004030
ST*850*1013
BEG*00*SA*2332233**20200510
REF*IA*66910
PER*BD*Contact Name*TE*123-455-7880
FOB*DF
DTM*010*20200517
DTM*001*20200525
TD5*****Carrier Routing*******CG
N1*ST*Towner Square Schooms*92*006
N3*Williston Towner Square*2100 11th St SW
N4*Williston*ND*58701
PO1*1*4*EA*4.15**UP*066810348563*IT*WACT750SP16-BLK
CTP**RTL*7.99
PID*F*08***Nike Boy Short Black sz M
PO1*2*6*EA*5.00**UP*066810349983*IT*WACT170SP16-AMP
CTP**RTL*7.99
PID*F*08*** Reebok Boy Short Abstract Print sz M
PO1*3*4*EA*5.25**UP*066810349747*IT*WACT790SP16-BLK
CTP**RTL*9.99
PID*F*08*** Puma Boy Short Red sz M
CTT*3
SE*22*1013
GE*1*1013
IEA*1*100000013
Although EDI 850 must comply with ANSI ASC X12 standard, a Purchase Order can vary greatly depending on industry and trading partners. Even in the same industry, EDI 850 may vary, as it is customized to the specific needs of the company.
Benefits and Opportunities of the 850 Purchase Order
Profitability
- speeds up the supply chain
- saves on printing and document delivery
- increases the speed of payment
- saves resources for duplication, sorting and storage of documents
Efficiency
- instantly notifies partners of new orders
- eliminates manual input errors
- reduces the number of adjustments
- allows rational use of human resources
Integration
- Integrates with any business system (ERP, CRM, Warehouse Management, accounting, etc.)
- allows companies to build analytical reports
- connects business partners from anywhere in the world
Security
- electronic documents in encrypted and unchanged form
- eliminates the risk of losing orders
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