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EDI 850 Purchase Order

ANSI X12 EDI 850 Purchase Order Transaction Specifications

1. What is an EDI 850 Purchase Order?

Also known as an electronic purchase order, the EDI 850 is often the first step in ordering. The EDI 850 generally provides the same information you would find in a paper PO document, including:

  • Item, prices and quantities ordered
  • Shipping details
  • Payment terms
  • Discounts

It can be used for single or recurring purchases. Using the EDI 850 provides several benefits. It streamlines the purchasing process, enabling sellers to optimize their operations and buyers to receive their goods more quickly. In addition, because EDI transactions are encrypted en route, trading partners can securely share sensitive data like pricing.

2. EDI 850 Documentation

Simply accepting an EDI 850 from your trading partner is usually not sufficient for full EDI compliance. Most trading partners will expect other EDI transactions from you in response to the purchase order such as:

  • EDI 997 Functional Acknowledgement – to confirm receipt of the EDI 850
  • EDI 810 Invoice – to replace the traditional paper-based invoice
  • EDI 856 Advance Ship Notice – to describe the contents of each shipment and how items were packed.

You might also be asked to trade additional EDI 850 documentation for full compliance. These may include:

  • EDI 855 Order Acknowledgement – sent in response to the EDI 850 to confirm you can meet the requirements set in the purchase order
  • EDI 860 Order Change Request – sent to request an update to the details on the original purchase order

For assistance meeting the requirements of your trading partners in the most effective and efficient manner, look to EDI Here. We have extensive expertise with clients in manufacturing, retail and logistics and distribution. Our Professional Services team can help you develop an approach to address your needs for security, communications protocols and transaction formats and assist with integration issues and more. Contact EDI Here to discuss your situation.

3. What are the Essential Components of EDI 850?

The EDI 850 transaction set provides the same information as a paper purchase order document. These include: 

  • PO Number
  • Order date 
  • Requested shipping and/or delivery date 
  • Vendor details such as name, address and/or contact details 
  • Buyer details such as name and delivery address  
  • Buyer billing information 
  • Item identifiers, such as product SKUs or UPC’s 
  • Quantity and unit of measure of items ordered 
  • Price per unit, as well as the total price for the order 
  • Shipping terms, such as the shipping method, preferred carrier, and desired delivery date 
  • Proposed payment terms 
  • Allowances and charges 

4. How does a typical EDI 850 structure look like?

Common information in the EDI 850 transaction includes:

  • Item, prices, and quantities ordered
  • Shipping details
  • Payment terms
  • Discounts

How does a typical ANSI X12 EDI 850 Structure look like?

The information of a purchase order is grouped into so called segments and elements as specified in the ANSI X12 EDI 850 transaction set. An EDI purchase order message document like ANSI X12 EDI 850 is sent, received, and processed by an EDI solution (either using EDI software on-premises or using an EDI Cloud Service). To ensure a smooth, automated process, it is mandatory to follow the accepted ANSI X12 EDI 850 standards. Otherwise this may create errors or even prevent the document from ever reaching the supplier.

A typical ANSI X12 EDI 850 Message includes:

  • The items ordered and their respective costs
  • The respective quantities ordered
  • Invoicing information such as purchase order number and date
  • Ship to address (single or multiple ship-to locations as for cross-docking orders)
  • Additional shipping instructions
  • Logistics provider details
ANSI X12 EDI 850 Example – Purchase Order in the Retail Industry

The various data elements and segments found in an 850 purchase order include:

  • ISA is the interchange control header. It marks the beginning of one or more functional groups and control segments.
  • ISA01 – Authorization Information Qualifier. Code 00 indicates that no authorization information present in I02.
  • ISA02 – Authorization Information
  • ISA03 – Security Information Qualifier. Code 00 indicates that no security information present in I01.
  • ISA04 – Security Information
  • ISA05 – Interchange ID Qualifier
  • ISA06 – Interchange Sender ID.
  • ISA07 – Interchange ID Qualifier
  • ISA08 – Interchange Receiver ID
  • ISA09 – Interchange Date
  • ISA10 – Interchange Time
  • ISA11 – Interchange Control Standards Identifier. ‘U’ indicates that U.S. EDI Community of ASC X12, TDCC, and UCS is responsible for the control standard used by the message.
  • ISA12 – Interchange Control Version Number. Code ‘0400’ specifies the standard issued as ANSI X12.5-1997.
  • ISA13 – Interchange Control Number
  • ISA14 – Acknowledgement Requested. Code ‘0’ indicates that no acknowledgment has been requested.
  • ISA15 – Usage Indicator. Code ‘P’ indicates that the interchange envelope contains production data.
  • ISA16 – Component Element Separator

GS represents the functional group header. It marks the start of a functional group and provides control information.

  • GS01 – Functional Code Identifier. The code ‘PO’ indicates purchase order.
  • GS02 – Application Sender’s Code
  • GS03 – Application Receiver’s Code
  • GS04 – Date
  • GS05 – Time
  • GS06 – Group Control Number
  • GS07 – Responsible Agency Code is X which represents Accredited Standards Committee X12
  • GS08 – Version/Release/Industry Identifier Code. The code 004010 indicates that the draft standards approved for publication by ASC X12 Procedures Review Board through October 1997.

ST (transaction set header) marks the beginning of the transaction set and is used to set a control number. For instance: ST*850*05210 indicates a purchase order with a control number of 05210. 850 denotes the purchase order transaction set.

BEG starts the beginning of the purchase order transaction. It marks the beginning of that transactions set and provides identifying dates and numbers. 00 indicates a new purchase order, and SA indicates it is a standalone order. It will also include the purchase order number and the date of issuance.

N9 represents the reference identification. ‘PO’ indicates purchase order. It also includes the purchase order number.

DTM stands for date/time qualifier. This is used to specify the pertinent dates and times, including the transaction creation date and time.

MSG represents message text to contain instructions for shipping and any other special instructions.

N1 represents multiple data elements, including entity identifier codes, names, identification code qualifiers and identification codes.

N3 represents address information for the organization.

N4 is the geographic location and includes the city, state, and zip code.

PER is the administrative contact.

PO1 represents purchase order item data, including line number, quantity ordered, unit of measure, and price. IN stands for item number. VC stands for vendor catalog number. SN stands for serial number.

The PID segment includes the product’s description.

The REF segment is reference identification to specify identifying information.

SDQ refers to destination quantity and is used to specify details as to the destination and quantity.

CTT (transaction totals) shows the number of line items and the number of units ordered.

SE (transaction set trailer) details the number of segments in the order and the transaction set control number.

GE indicates the end of a functional group and provides control information.

IEA represents the interchange control trailer, which specifies the number of functional groups involved in the interchange and the control numbers assigned by the sender.

5. How Do 850 EDI Orders Work?

We all know what happens after a buyer places an order. The vendor sends an invoice to the buyer and ships the items. But how does that translate into EDI lingo?

First, the buyer prepares the order in the ERP or another purchasing system. The order is then converted into an EDI format and transmitted to the trading partner directly via the Internet or, more commonly in the U.S., through a Value-Added Network (VAN).

When the EDI 850 reaches the intended recipient, it gets translated into the format that is compatible with the receiver’s ERP or other internal system.

After receiving the purchase order, the seller validates the specifications and sends a Functional Acknowledgement (EDI 856) to the buyer to confirm that the purchase order has been received, and/or a Purchase Order Acknowledgement (EDI 855) to accept or reject the order.

The buyer can also use a Purchase Order Change Request (EDI 860) to make some changes to the purchase order that has been previously submitted or to accept a change from the seller.

Once the items have been shipped, the seller sends an Advanced Ship Notice (EDI 856) containing all the important shipping details to the buyer. The seller then sends an Invoice (EDI 810) to request payment for the goods.

Again, specific EDI requirements that specify which documents must be exchanged and how are usually agreed upon between the trading partners beforehand and are most often dictated by the retailer (the buyer). For example, some retailers request that the purchase order acknowledgement (EDI 855) is sent within a specific time frame after the purchase order has been received.

How is the ANSI X12 EDI 850 Format called in other EDI Message Standards?

The ANSI X12 standard is widely used in North America and includes two EDI purchase order document types, the 850 (CPG Retail) and 875 (For fresh foods like grocery).

Depending on location and industry vertical other EDI message standards might be preferred, for example:

EDIFACT is the standard proposed by the UN and is widespread in Europe as well as most parts of Asia. EDIFACT uses a single document, ORDERS document, to cover all purchase order message types. TRADACOMS is the still widely used standard in the UK retail industry where the purchase order message is called ORDHDR.

6. Exchanging an EDI 850 Purchase Order Workflow

When a buyer sends the EDI purchase order to the supplier, it is an indication the buyer wishes to purchase the listed goods and services from the supplier. When the supplier receives the purchase order, they will validate the document against EDI 850 specifications and respond with their own EDI document, the 855 Purchase Order Acknowledgement.

If the purchaser needs to make a change to the purchase order after it was sent and received by the vendor, but before the order has been filled, they can create and send and EDI 860: Purchase Order Change Request – Buyer Initiated. Things included here may be:

  • Additional items
  • Change of items
  • Change of dates
  • Change of quantity
  • Price change
  • Reschedule

Once the buyer acknowledges the purchase order change, they will send an EDI 865 Purchase Order Acknowledgment with Change in response. This will alert the buyer to the fact that the seller that they accept or reject the buyer’s changes. If the seller needs to, they may also use the 865 to request changes to the original PO, with a different code than the one that is used to acknowledge the order.

When the EDI 850 is received by the vendor, it is translated to a usable format. EDI translation software serves as the interface between the document and the computer’s infrastructure. The translation software will take the EDI document and translate it into a usable format for the computer system. Then a mapper is used to change the file, formerly the EDI document, into a format that is compatible with the vendor’s enterprise resource planning (ERP) system. At this point, the EDI 850 is no longer an EDI document, and is now a usable purchase order (just like the one the buyer started with before translating into EDI format) that the company can process according to their workflow.

The Purchase Order Acknowledgement alerts the buyer that the seller has confirmed receipt of the purchase order. This document removes the need for the buyer to call, email, or fax the seller to make sure the order was received.

In the event the original purchase order was not accepted as is, such as in the case of items being out of stock, and the supplier made changes to it, the Purchase Order Acknowledgement includes those changes. The EDI 855 document includes:

  • Purchase order number
  • Expected ship date
  • Expected delivery date
  • Vendor number
  • Item numbers or part numbers
  • Item description
  • Unit prices

Once the order has been prepared, the supplier’s system will create and send an EDI 856 Advance Ship Notice document.

This document includes:

  • Shipment level information such as the carrier information and the tracking number
  • Order level information such as purchase order numbers
  • Item level information, such as items and quantities
  • Pack level information such as barcodes on item packaging

The buyer will receive the items and check the order to make sure everything is there as it should be.

The supplier will send an EDI 810 invoice, which includes:

  • Items ordered and their cost
  • Quantities ordered
  • Payment terms
  • Any discounts offered
  • Billing and shipping details

The EDI 810 Invoice is converted to an invoice the buyer’s purchase order management and accounting system can use, to allow accounts payable department can to payment to the supplier.

7. Benefits of the EDI 850 for Buyers and Sellers

7.1 Benefits using EDI and the ANSI X12 EDI 850 Message

The use of EDI offers many benefits for both the customer and the supplier:

  • Avoiding manual data entry processes: Increase of data quality and reduction of errors
  • Fast fulfillment of delivery: As a consequence, this enables targeted production and delivery processes. This way, customers and suppliers can reduce their on hand inventories and have the option of establishing a Vendor Managed Inventory (VMI) business.
  • The entire B2B transaction becomes paperless and without administrative overhead   
  • Time savings allows companies to focus on strategic tasks

7.2 Benefits specific for suppliers

  • Faster processing of orders
  • Better supplier ratings due to less chargebacks
  • Cost reduction because of more efficient sales processing

7.3 Benefits specific for customers

  • Faster Placing of orders
  • Reduced capital allocation due to lower inventory levels
  • Cost reduction due to streamlined and automated purchasing

7.4 Typical Errors when using the ANSI X12 EDI 850 Message

The efficiency of routine EDI workflows depends on the quality of the data involved. Typical challenges are new master data records in the customer’s ERP system which are not known in the supplier’s ERP system and may cause errors with the EDI 850 Purchase Order Message:

  • New shipping addresses: The customer uses a new ship-to address that is not yet added to the supplier’s system.
  • Wrong items: The customer orders expired items or item numbers no longer available in the supplier’s system.
  • Different Price Labels: The customer sends a different price than agreed with the supplier.

8. Four Unexpected Benefits of the EDI 850 for Buyers and Sellers

The most crucial step in the retail supply chain is sending and receiving purchase orders. However, our retail experts discovered this document tends to be the most inefficient and difficult to maintain within supply chains. Why? Too many businesses are using email, fax or phone to exchange this vital information.

The perception is that multiple methods of sending and receiving orders makes your business seem accommodating, but you’re opening your business up to inefficiencies and tracking difficulties.

Leveraging EDI purchase order to connect to your supply chain is more than just a compliance request. Did you know the EDI 850 has many benefits beyond compliance? Here are four advantages for both buyers (retailers, grocers or distributors) and sellers (vendors or suppliers).

8.1 Why should buyers care about the EDI purchase order?

The EDI 850 allows buyers to request a specific product, delivery date, location and packaging configuration from a seller. It is a foundational part of an automated EDI system.

Here are 4 key benefits of the EDI 850 for buyers:

8.1.1 Speed up order fulfillment

Electronic purchase orders help you get products to store shelves or to consumers faster. Instead of taking hours or days to process an order, you can process orders in minutes. You can also automate the vendor’s response to ensure your order will be delivered on-time in full.

8.1.2 Improve order accuracy

Sending orders manually to suppliers can lead to errors, both in receiving the order and entering it into their system. Using the EDI 850 can improve order accuracy by 10 percent. That’s because EDI purchase orders include automated content validation and more timely attribute updates.

8.1.3 Streamline invoice reconciliation

The EDI 850 is a vital component of the invoice reconciliation. With EDI automation, you can reduce time spent reconciling invoices by 40 to 70 percent, which allows you to increase earned cash discounts by 5 to 10 percent. EDI automates the documents throughout the process to validate and pay invoices without looking for documents.

8.1.4 Reduce safety stock and inventory

Most importantly, you can reduce the amount of on-hand inventory by leveraging EDI purchase orders. You will no longer need to buy extra to make sure you have inventory on-hand. You will know that your vendor can fill the order and when. Allowing you to reduce safety stock by approximately 5 percent.

8.2 Supplier benefits of receiving EDI 850 Purchase Orders

Suppliers also benefit from automating the order cycle with EDI. Here are 4 ways suppliers can use the EDI 850 to their advantage.

8.2.1 Minimize paperwork and manual processes

Receiving phone, fax or email orders is inefficient for suppliers, as there may be a unique process for each customer. Once you receive an order, you dedicate resources to enter it into your system or spreadsheet. The EDI 850 provides an automated process to receive and confirm orders.

8.2.2 Reduce order errors

Mistakes in the EDI 850 can lead to delayed orders, late shipments and damaged customer relationships. EDI purchase orders dramatically reduce the potential for order entry errors and give you the ability to confirm or adjust the order to the customer upon receipt.

8.2.3 Fulfill orders faster

By processing orders electronically, suppliers can fulfill orders more quickly to a DC, store or directly to a consumer. Faster fulfillment translates into happy customers and better cash flow!

8.2.4 Enhance buyer relationships

Ultimately, accepting electronic orders helps improve buyer relationships. With faster and more accurate order fulfillment, you’ll meet your customers’ delivery expectations. As a reliable trading partner, you’ll be well-positioned to meet your customers’ needs today and in the future.

9. EDI X12 850 Purchase Order Sample

The following EDI X12 850 format lists the different data elements, segments, and EDI 850 specification:

ISA*00* *00* *ZZ*5489002 *01*197607336 *20000616*1549*U*00400*191154908*0*P*|ISA represents interchange control header.It marks the beginning of one or more functional groups and control segments.ISA01 – Authorization Information Qualifier. Code 00 indicates that no authorization information present in I02.ISA02 – Authorization InformationISA03 – Security Information Qualifier. Code 00 indicates that no security information present in I01.ISA04 – Security InformationISA05 – Interchange ID QualifierISA06 – Interchange Sender ID. The ID here is 5489002.ISA07 – Interchange ID QualifierISA08 – Interchange Receiver IDISA09 – Interchange Date. The date is 16/06/2000.ISA10 – Interchange Time. The interchange time is 15:49.ISA11 – Interchange Control Standards Identifier. ‘U’ indicates that U.S. EDI Community of ASC X12, TDCC, and UCS is responsible for the control standard used by the message.ISA12 – Interchange Control Version Number. Code ‘0400’ specifies the standard issued as ANSI X12.5-1997.ISA13 – Interchange Control Number. The control number for this transaction is 191154908.ISA14 – Acknowledgement Requested. Code ‘0’ indicates that no acknowledgment has been requested.ISA15 – Usage Indicator. Code ‘P’ indicates that the interchange envelope contains production data.ISA16 – Component Element Separator
GS*PO*5489002*197607336*20000616*1549*191154909*X*004010GS represents functional group header.It marks the beginning of a functional group and is used to provide control information.GS01 – Functional Code Identifier. The code ‘PO’ indicates purchase order.GS02 – Application Sender’s Code is 5489002.GS03 – Application Receiver’s Code is 197607336.GS04 – Date is 16/06/2000.GS05 – Time is 15:49.GS06 – Group Control Number is 191154909.GS07 – Responsible Agency Code is X which represents Accredited Standards Committee X12GS08 – Version/Release/Industry Identifier Code. The code 004010 indicates that the draft standards approved for publication by ASC X12 Procedures Review Board through October 1997.
ST*850*191154910ST represents transaction set header.It marks the beginning of a transactions set and is used to assign a control number.This is a purchase order with transaction set control number 191154910.
BEG*00*SA*144**20000616BEG represents the beginning segment of the purchase order.It marks the beginning of the purchase order transactions set and convey identifying dates and numbers.00 represents a new purchase order.SA shows that it is a stand-alone order.144 is the purchase order number.Date of issuance was 16/06/2000.
N9*PO*144N9 represents reference identification.PO shows that it is a purchase order.144 is the purchase order number.
DTM*097*20000616*1549DTM stands for date/time qualifier.It is used to specify important dates and times.097 specifies transaction creation date.The date was 16/06/2000.The time was 15:49.
MSG*PLEASE SHIP ASAPMSG*NET 30 DAYSMSG represents message text.This segment contains special instructions for shipping. For example, “Please ship ASAP”.
N1*BY*GENERAL HOSPITAL*91*123456N1*BT*GENERAL SUPPLIES*91*55123456N1*ST*WEST PARK*91*77756N1 represents several data elements including entity identifier code, name, identification code qualifier, and identification code.‘91’ shows assigned by seller.123456, 55123456, and 77756 are vendor customer numbers.Buying party is General Hospital.Bill to party is General Supplies.Ship to West Park
N3*1000 Pacer Drive*SUITE 400N3 represents address information.This segment contains address information of the organization.
N4*CHICAGO*IL*60020N4 represents geographical location including the name of the city, state and zip code.The City is Chicago.The State is Illinois.The Zip Code is 60020.
PER*SR*BARRY WILSON*TE*8475374800PER represents administrative contact.Sales Representative, Barry Willson’s telephone number is 8475374800.
PO1*1*1*CS*0.01**IN*7237823*VC*7219D*SN*BRD951028817PO1 represents purchase order item data.PO line number is 1Quantity ordered is 1Unit of measure is casePrice is 0.01IN stands for item number which is 7237823.VC stands for vendor catalog number which is 7219D.SN stands for serial number which is BRD951028817.
PID*F****PCD 100ML VIALSThis segment contains product’s description.
REF*CA*1000*1-WESTREF represents reference identification.It is used to specify identifying information.CA stands for Cost Allocation.
SDQ*CS*57*1000*1SDQ represents for destination quantity.This is used to specify destination and quantity details.CS stands for case which is unit of measure.57 is the identification code.1 represents the quantity.
MSG*PLEASE SHIP THIS ITEM ASAPMSG*SN:BRD8327495 BILL ONLY PT:SMITH,JOHNThis segment contains special instructions.For example, the message text is “please ship the item as soon as possible.”
CTT*1*1CTT represents for transaction total.The total number of purchase order line items is 1.Total number of units ordered is also 1.
SE*24*191154910SE represents transaction set trailer.The number of segments included between ST and SE is 24The transaction set control number is 191154910.
GE*1*191154909GE represents the end of a functional group and provides control information.
IEA*1*191154908IEA*1*000000002~IEA represents interchange control trailer.1 represents the number of functional groups involved in an interchange.191154908 and 000000002 are the control numbers assigned by the sender.
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