Every supply chain starts with a purchase order. EDI 850 purchase orders are used worldwide to guarantee trading partners’ best standards and practices. Thanks to this EDI buyer guide, you will understand the basics behind EDI documentation and the benefits of implementing EDI software.
What is EDI 850?
Also known as an electronic purchase order, an EDI 850 is a type of electronic data interchange (EDI) transaction set. EDI documents are electronic documents that contain essential supply chain information Usually, an EDI 850 document is received during the early stages of the ordering process.
What are the essential components of EDI 850?
An EDI 850 purchase order contains the same information one can expect to find on a paper purchase order document.
The following information may be found on an EDI 850 order transaction set:
- PO Number
- Order date
- Requested shipping details, including shipping method and preferred carrier
- Desired delivery date
- Vendor details, including name, address, and contact details
- Buyer details, including name and delivery address
- Billing information
- Item identifiers such as stock keeping units (SKUs) and universal product codes (UPCs)
- Quantity and unit of measure of items ordered
- Price per unit and total price of the order
- Proposed payment terms
- Allowances and other charges
What are the benefits of an EDI 850 purchase order?
Implementing an EDI 850 solution brings the functionality and convenience of electronic documents to the context of order processing. In contrast to paper-based documents, EDI 850 data can be streamlined and optimized via automation. Likewise, transferring EDI documents is effortless and instantaneous.
An EDI document can safely travel through the Internet thanks to encryption. This allows trading partners to share sensitive information through secure communication channels, such as pricing and contact details.
Order processing is substantially streamlined by EDI 850 implementation to benefit both sellers and buyers. For the former, it means that business operations are easier to conduct, monitor, and manage; for the latter, they have access to better services and improved delivery times.
AN EDI 850 purchase order is able to replace most of the needed interactions between a seller and buyer before a purchase is made. When a buyer sends an EDI 850, it appears automatically in the seller’s system, which simply has to confirm the details and answer with a purcharse order acknowledgment or EDI 855.
Improved validation and verification
With the right tools in place, automated processes begin validation and information verification procedures when a company’s business system receives an EDI 850 document. Through these, any incorrect or missing data is identified and flagged appropriately. These automatic processes allow sellers to quickly find issues within purchase orders and resolve them with buyers.
Reduced operational costs
EDI documentation is more efficient than phone, fax, and email orders. This translates into better communication and a reduction in mistakes, delays, and late shipments. All these factors together help a business run smoothly and cut operational costs.
Another huge benefit of implementing digital documents is that automation minimizes the number of manual tasks required from employees. Crucial information in EDI documents is fulfilled automatically, helping employees avoid mundane, repetitive tasks and focus on more value-added ones.
Enhanced bookkeeping and auditability
EDI software can translate the contents of EDI 850 documentation into a format readable by a company’s ERP, WMS and/or TMS systems. Thanks to standardization, both the seller and the buyer can rely on having the same EDI data in their systems. This means that accounting duties can be considerably simplified with EDI adoption.
How to use EDI 850
When a purchase order is initiated, the seller receives an EDI 850 document from the buyer. Vendors must confirm the receipt of the purchase order with EDI transaction sets. Many buyers have specific EDI requirements outlining which documents will be exchanged.
Relevant EDI documentation includes:
- EDI 997 Functional Acknowledgement: This document is used by the seller to acknowledge to the buyer that they have received an EDI 850 from them. This document tends to be fully automated. AN EDI 997 document can include information about issues, such as syntax errors, found in the purchase order.
- EDI 855 Purchase Order Acknowledgement: Similarly to an EDI 997, an EDI 855 is a formal response from the seller to the buyer upon the receipt of an EDI 850. This document confirms the receipt of a new order and outlines whether it was accepted, rejected or if any changes are required. Changes may be needed due to price discrepancies, out-of-stock inventory, or delivery date changes.
- EDI 856 Advance Shipping Notice: This type of document advises the receiving party of a shipment and is commonly used by suppliers, distributors, manufacturers, and retailers. Many major retailers use AN EDI 856 to specify the timeframe before a product arrives at a retailer’s desired location.
- EDI 810 Invoice Transactions: An EDI 810 is an electronic version of a paper-based invoice document. It is commonly sent as a response to an EDI 850 as a request for payment for delivered goods and services.
- EDI 820 Payment Order or Remittance Advice: Trading partners can use this document to transmit payment data. An EDI 820 document is commonly sent in response to an EDI 850 or EDI 810 in order to confirm payment details or notify any adjustments made to the payment amount. This document is often sent alongside the payment through an electronic funds transfer.
- EDI 860 Order Change Request: When changes need to be made to an EDI 850, the buyer can communicate this to the seller via an EDI 860. Implementing an EDI 860 helps track and streamline the creation of a new EDI 850 purchase order transaction.
- EDI 940 Warehouse Shipping Order: An EDI 940 document is used to request the shipment from a remote warehouse to a buyer’s location.
- EDI 945 Warehouse Shipping Advice: AN EDI 945 is used as confirmation that a shipment has been completed. These documents are issued by warehouses or third-party logistics providers (3pl) to clients. EDI 945 documents contain item identifiers, quantities shipped, and shipping details.
EDI 850 format
Common segments found on the EDI 850 format are:
- BEG – The purchase order number
- DTM – Delivery date. This segment relays the date the retailer wishes to receive the goods.
- N1*ST and N1*BT – Ship-to and bill-to DUNS. A 9-digit code used to identify different physical locations of a company
- PO1 – Items details. These include UPCs, quantity, and retailer item number.
- AMT – total amount. The calculated total price of all units.
EDI 850 specification
The data content of EDI 850 documents is established by the X12 Transaction Set. This transaction set contains the format of the data contents of the Purchase Order Transaction Set (850) for its use in an Electronic Data Interchange (EDI) environment.
Example of an EDI 850 purchase order
An EDI 850 transaction exchange can be summarized in the following steps:
- The transaction process begins when a business receives an EDI 850 purchase order from a trading partner.
- EDI software generates and sends an acknowledgment document, such as an EDI 855, to confirm the order has been received.
- En EDI 856 is generated and sent to the trading partner to provide essential information about the shipment.
- An EDI 810 is automatically generated and sent.
- Through an EDI 820, the terms of the impending payments are settled.
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