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)

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