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All You Need to Know About EDI ANSI X12 Transaction Set 850 Purchase Order

What Does EDI Stand For?

Electronic Data Interchange (EDI) is one of the fundamental protocols of business documents exchange, for companies collaborating in today’s business world.

Electronic Data Interchange (EDI) is an electronic exchange of business information between companies in a standardized format. This technology is used by businesses around the world as their main method to exchange business documents. Thus, EDI is a modern and effective document exchange standard and sometimes the only way to exchange documents between trading partners.

What is an EDI Purchase Order?

ANSI X12 EDI 850 Purchase Order Transaction Set simply named EDI 850 or EDI X12 850 or just PO is a fundamental document in EDI. EDI 850 is a formal request sent by the buyer (purchasing company) to the supplier (seller) for the demand of delivery of goods and/or services at an agreed price.

What Information an EDI Purchase Order Contains?

A typical EDI 850 Purchase Order includes the following information:

  • 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 Does an EDI Service Provider Manage the EDI 850?

Typically, the buyer creates a Purchase Order in his internal ERP system (i.e. SAP, Microsoft Dynamics, JD Edwards, etc.). The Purchase Order can be created in the ERP system automatically or manually, depending on the business process of the company. Then, the generated Purchase Order is transferred to the EDI provider, or the provider will pick it up directly from the ERP system of the company. The EDI service provider than converts the purchase order document to the ANSI X12 EDI 850 transaction set. After conversion, the EDI 850 is sent to the supplier (or the destination).

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.

What is the Difference Between EDI 875 and 850?

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.

The EDI 850 transaction set is used for purchase orders, while the EDI 875 transaction set is used for grocery products purchase orders. The main difference between the two is the specific industry or business sector they are designed for.

The EDI 850 Purchase Order transaction set is used across various industries to communicate the request for goods or services from a buyer to a supplier. The 850 typically includes information 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, and other special handling instructions.

In summary, while both EDI 850 and EDI 875 are used for purchase orders, they are designed for different industries and have different data requirements.

EDI Communication Protocols to Transfer EDI 850

For the exchange of EDI documents, including EDI 850, there are various communication Protocols:

VAN (Value-Added-Network)

VAN is a private, hosted service and a secure way to exchange EDI data between trading partners.

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 the HTTP and a secure way for communication over the Internet.

Moreover, one company may use different protocols to exchange EDI documents with its various trading partners. This usually happens because suppliers have to meet the requirements of their trading partners.

A Typical Set of EDI Documents Involved in EDI X12 850 Workflow

For a trading 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 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
  • 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

EDI X12 850 Transaction Set Structure

An EDI X12 850 (Purchase Order), as well as all other EDI X12 documents, consists of different segments where the initial segments are called Header, and the final segment is called Trailer:

Interchange Control Header (ISA) /Trailer (IEA)

Functional Group Header (GS) / Trailer (GE)

Transaction Set Header (ST) / Trailer (SE)

edi and EDIFACT structure

For more information about EDI structure, data elements and terminology learn our article:

EDI ANSI ASC X12 Standards – Technical Overview

EDI X12 850 Purchase Order Sample

The ISA, GS, and ST elements contain a 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.

EDI 850 Benefits and Opportunities

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 a 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

About EDI Provider EDI2XML

Our knowledge, expertise, and experience in EDI integration and automation allow us to provide our customers with solutions that take the business to a new level.

We cooperate with leading technology companies to develop cutting-edge solutions that can change your business. We use innovative solutions for various industries and help our customers solve the most complex EDI integration issues.

edi 850

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ORDERS and ORDRSP: The main EDIFACT messages in the supply chain management

This post was updated to reflect current trends and information.

Receiving and processing EDI purchase orders is the most common transaction faced by small businesses. This electronic business document is used to place a commercial order for goods or services by a buyer or business partner.
EDIFACT ORDERS

It’s still possible to use phone, email, or fax between two small businesses, but if you want to collaborate with a large retailer, distributor, or manufacturer, there is a high probability that you must be EDI compatible to receive orders from your B2B partners, in addition to other potential EDI documents or transactions.

What is EDIFACT ORDERS?

ORDERS (Purchase Order) is a type of EDIFACT message that contains requests for the supply of goods or services.

In EDI ANSI ASC X12 standard which is widely used in North America, the ORDERS is referred to as EDI 850 Purchase Order.

Large companies, working with small contractors demand mandatory use of EDI. Requirements for EDI compatibility is specified in contracts or in partners selection criteria.

High competition forces the business to comply, and start exchanging electronic data quickly and accurately, spending minimal time and resources on this business process. Thus, small enterprises must comply with the imposed conditions, in order not to lose a source of profitable purchases.

EDIFACT ORDERS message content

The most important main information contained in an EDIFACT ORDERS message:
  • Order number
  • Required date
  • Delivery date
  • Reference to supply contract number
  • Price and qualifier (including VAT and other taxes)
  • Identifiers of the consignee and sender, delivery location, customer, carrier, recipient
  • Information about the contents of the order (barcodes, quantity, item name, etc.).

EDIFACT ORDERS Processing

After signing the contract, the buyer uses ORDERS to send the seller a list and quantity of goods ordered.

Typically, a buyer creates the order in his ERP system (the most popular are SAP ERP, Microsoft Dynamics, Oracle JD Edwards EnterpriseOne). The created Purchase Order is instantly converted into an EDIFACT ORDERS message which is immediately sent to the seller. The seller must receive the EDIFACT message and quickly process it. He should transmit a Purchase Order Response (ORDRSP) in response to the Purchase Order received.

EDIFACT and ERP/CRM integration

To save time and money by processing the vast amount of information received from business partners, most companies (both retailers and suppliers) choose to integrate their EDI / EDIFACT messages into their ERP systems. Basically, with integration, they connect the received EDI messages and push it directly to their ERP software, through Integration Connectors designed specifically to synchronize and integrate into their ERP systems.

For example, using Magic xpi Integration Platform a company can connect a variety of heterogenous business systems such as ERP, CRM, finance, etc. by implementing out-of-the-box certified and optimized connectors.

You can find useful information on EDI integration with ERP Systems in the following articles:

How to make EDIFACT ordering even easier
EDIFACT ERP integration

As the number of outgoing or incoming orders increase, companies try to optimize the exchange of orders. In case the number of your orders exceeds a couple of hundreds per month, it’s worth thinking about integrating the flow of orders directly into your business software solution and save your company the time and money associated with human errors, delays to deliver, and increase efficiency.

The process of Order creation can be fully automated; it will not require human intervention. To do this first it is necessary to integrate your business system with EDI.

Related article:

Usually, after starting to use ORDERS message, the buyer will most likely request to receive replies to his orders, which means connecting another type of EDI message – ORDRSP. In addition, he can ask you for the dispatch advice (DESADV), and he can send you the delivery advice message. (RECADV).

What is ORDRSP and what are the benefits of using this EDIFACT message

ORDRSP (Order Response) is a type of EDIFACT message in which the supplier confirms or rejects the delivery of goods to the buyer. Using ORDRSP, the supplier can propose amendments, notify of a complete or partial delivery or confirm the entire delivery, before even processing the delivery.

Using UN/EDIFACT ORDRSP improves the logistics chain: the parties save on transportation, reduce returns due to incorrect deliveries of merchandise, increase the accuracy of delivery of the right products.

Through ORDRSP, the supplier can notify the buyer of the lack of certain products, thus avoiding disruption of supplies and maintaining a loyal business relationship. Customer, having this information, can order a similar product from the presented assortment or place an order from another supplier.

The buyer can always understand whether the supplier will deliver the goods on time, or not. He sees preliminary price confirmation and quantity of products, predicts the state of stock based on ORDRSP, and the supplier can automatically book goods for delivery in his warehouse when processing a Purchase Order Response.

What does ORDRSP contain?

ORDRSP has a direct relationship with ORDERS and are complimentary to each other. ORDRSP consists of:
  • Order number
  • GLN numbers of the buyer and seller
  • Order confirmation number
  • Date of planned delivery of goods
  • Scheduled time
  • Item No
  • Quantity approved (To Ship)
  • Price approved
  • Reason of rejection (when parameters are not matching between Order and supplier)

EDI/EDIFACT integration

In EDI/EDIFACT documents exchange, the EDI provider plays a key role. He is the one who ensures the conversion and integrity of message formats and tracking data transfers. For over 21 years now, our company EDI2XML has been successfully helping companies of all sizes switch to Electronic Data Interchange. We help speed up working with orders, shipments, acceptance, inventory of goods and reduce the risks of human errors. We have no hidden fees or confusing rates.

Contact us today for more information and a free EDI consultation.

4 Challenges of EDI and Drop-Ship in eCommerce


This post was updated to reflect current trends and information.

EDI integration projects


The term “drop-ship” has been used quite a lot in recent years by retailers and manufacturers alike. This supply chain management method looks to be gaining in popularity going into 2019 and will likely be in high demand for years to come as well.

Let me first explain the meaning of drop shipping and how it has become so popular…

What is Drop Shipping?

“Drop-ship” is a fulfillment method where a merchant does not carry any inventory on hand. Instead they sell products to consumers via an online store (eCommerce), send the customers’ orders to the manufacturer and have the manufacturer ship the goods directly to the customer. The customer will never know the difference since they pay the merchant and receive their goods in a box with the merchant’s labels. This method eliminates the need for the merchant to handle the goods.

The Rise of Drop-Ship Popularity

Due to the fast evolution of eCommerce, coupled with the continuous challenges that businesses face to reduce costs and increase profitability, the drop-ship method is in high in demand by major retailers. You’ll find that eCommerce giants like Amazon.com, Costco.com, Cabelas.com, Sears.com and others, are increasing the pressure on their supply chain to adopt the drop-ship concept. Of course, they also require their business partners to comply with their EDI requirements and specs for a full automation of the entire sales cycle.

The Complexity behind Drop Shipping

If we take a behind-the-scenes look at drop shipping from 2 perspectives, from the eCommerce retailer, like Amazon or Cabela’s, and from the manufacturer of goods, we’ll find the simplicities and complexities behind each process.

From the perspective of the eCommerce retailer, the drop-ship method allows them to eliminate the need to carry any inventory and to ship their goods. Their process is rather simple, profitable and quick. All they need to do is sell products online and ensure that their partnered manufacturers are EDI and drop-ship ready. Once they sell products from their eCommerce site, they will send the orders via EDI to their manufacturer and the manufacturer takes it from there.

From the perspective of the manufacturer, we’ll find some of the complexities. However, if they are setup correctly from the get-go, then it becomes rather simple and quick. In this case, the drop-shipper (manufacturer or distributer) is entirely in charge of the fulfillment of all incoming eCommerce orders (from the retailer). They need to process the sale all the while complying with the retailer’s business specifications such as EDI. Let’s go over the top 4 challenges a manufacturer must overcome during a drop-ship EDI implementation;

Top 4 Challenges the Drop-Shipper Might Face

If you are a manufacturer and have recently partnered with an eCommerce retailer to sell your products, then you might already know that they will require you to drop ship and automate your sales process through EDI integration. I have listed below the top 4 challenges you might face as a drop shipper;

1.    Ability to submit accurate inventory feed (846) to the eCommerce retailer

When starting a new business relationship with an eCommerce retailer based on the drop-ship method, the first step will be to feed inventory & per-item stock statuses to the retailer in a timely manner. This inventory inquiry/advice document is called EDI 846. Major retailers such as Amazon.com, Cabelas.com, Costco.com and Wal-Mart.com require their Trading Partners to send them an 846 document at least twice a day so that their online store can properly show only available products, based on inventory available to ship. Most of the time, companies either don’t have an accurate inventory system or their stock status is not properly maintained, which can be a great challenge to overcome. Even if companies have accurate inventory statuses, many of their management software systems, even reputable and expensive systems such as JDE, do not have built-in capabilities to send the 846-inventory status in X12 format, as per the requirements of the retailers.

2.    Ability to receive and process EDI orders (850)

Another challenge comes in the form of receiving EDI purchase orders (document 850). Many companies struggle with the capability to receive EDI orders, process them and integrate them quickly into their management system before it is sent to the pick/pack/ship process down the line in the supply chain. Most software systems are still missing this integration capability and require end users to manually key-in orders received in EDI x12 format, to then be able to process and ship. This is a great challenge for many manufacturing and distribution businesses. Dealing with eCommerce Stores, orders are continuously coming in, at all hours, in high volumes. The client (retailer) typically expects the manufacturers to ship within 24 to 48 hours (at the latest!). Moreover, eCommerce retailers are expecting to receive a P/O acknowledgment (document 855) via EDI. Therefore, it’s extremely critical that the drop shipper is equipped with a fully integrated software solution where EDI orders can automatically come through in real-time, so that they are quickly processed.

3.    Ability to fulfill orders within a very short period of time

As previously mentioned, eCommerce retailers expect their partners to ship goods to the end-consumer within a very short time frame (24 to 48 hours). They expect them to package the products, print customized picking/packing slips to send with the goods and complete the shipping process in a very quick manner. In case of failure to comply, there is a risk the vendor will be eliminated from the program. At the logistics level, an important challenge is to have a management system and required resources to process orders, pick, pack and ship in the required time frame. Efficiency in this case is imperative since time is money.

4.    Ability to electronically submit Ship Notices (856) & Invoices (810)

Two other EDI x12 documents are sent out to the eCommerce retailer by the drop shipper; the Advance Ship Notice or ASN (document 856) and of course an invoice (document 810). Most companies don’t currently have the capability to turn those business documents into an x12 EDI format and submit to the Trading Partner, straight from their management system.

Overcoming Drop-Ship Challenges

Our team’s experience with EDI drop-ship has allowed us to overcome the above challenges in an efficient and timely manner. Since every project varies, it’s important to do the following;

  • Surround yourself with experts in EDI who have the experience in dealing with drop-ship projects. It’s important to have enough knowledge and expertise in these methods prior to beginning any EDI drop-ship project. It’s important to get organized internally before any major project.
  • Ask an EDI Provider, who offers flexible and affordable EDI & IT services, to help you streamline your processes and advise you on best practices.
  • Opt for a full EDI integration with your current management software solution, if possible. Of course, such an option is not always possible or provided by your Software provider but if it is, it’s our recommendation to go ahead with this since it will eliminate chargebacks and increase efficiency in your EDI projects so you are best capable of complying with your Trading Partners’ demands. Don’t forget, partner demands and specs can change at any moment. It’s best to ensure you can handle changes at a moment’s notice. (Flexibility is the way to go!)

If you’re looking to complete an EDI Drop-Ship project, contact us today. We’ve got the experts and the EDI2XML service to get you drop-ship ready. Contact us today for your FREE consultation to evaluate your EDI project.

Free EDI consultation