In this article, learn about:
What is a purchase order?
EDI 850 vs. EDI 875
Documents that go with each PO
Knowing which PO to use
What is a Purchase Order?
A purchase order is typically the starting point of your supply chain. It is a legally binding agreement between a trading partner and a buyer, detailing items that the buyer would like to order from the trading partner. It contains prices that both parties have agreed to, including discounts and delivery terms. Once a purchase order has been sent to the trading partner, then the whole life cycle of the order begins.
The Purchase Order Process
The purchase order process is a structured way to manage the buying process, and can be explained through several key steps:
What are EDI 850s and 875s?
The EDI 850 transaction is a Standard Purchase Order with comprehensive details such as product descriptions, unit prices, payment terms, and delivery dates.
Standard Purchase Orders (EDI 850)
Standard purchase orders are the most widely adopted type of purchase order. They are used for vendors that are not regularly used and one-time purchase. A standard purchase order typically includes the following information:
The buyer’s name, address, and contact details.
The seller’s name, address, and contact details.
A description of the purchased goods or services, including the quantity, price, and delivery date.
The payment terms, including the payment method and date.
The delivery information, including the shipping address and expected delivery date.
Standard purchase orders are best used when sellers don’t expect to enter into a long-term contract with the buyer. They provide a clear and concise record of the transaction, outlining the terms and conditions of the sale. This clarity helps ensure both parties understand their obligations and can fulfill them accordingly, leading to smoother transactions and fewer disputes.
Common Segments of the 850:
BEG – Purchase Order Number: This unique identifier helps the buyer and vendor manage and track the order as it moves through the supply chain.
DTM – Delivery Date: The Delivery Date segment specifies when the buyer wants to receive the products.
N1ST and N1BT – Ship-to and Bill-to DUNS: The 'ship-to' DUNS tells the vendor where the goods should be delivered, while the 'bill-to' DUNS indicates where the invoice should be sent.
Related Reading: What Is a DUNS Number?
PO1 – Item Details: The PO1 segment breaks down the specific items being ordered, providing details like the Universal Product Code (UPC), quantities, retailer item number, and descriptions.
AMT – Total Amount: The Total Amount segment represents the total cost of the entire purchase order, factoring in any discounts or special pricing that may have been agreed upon.
Grocery Products Purchase Order (EDI 875)
On the other hand, the EDI 875 is a Grocery Products Purchase Order. It carries all the information in an EDI 850, but it is specifically designed for the grocery sector. The primary distinction lies in the nature of the submitter; while EDI 850 caters to a broad range of retailers, EDI 875 is tailored for grocery stores and wholesalers.
Related Reading: What is EDI (Electronic Data Interchange)?
Common Segments of the 875:
W05 – Depositor Order Number: Similar to the purchase order number in other EDI transactions, the W05 uniquely identifies the order. For grocery products, this number may also be important in relation to the depositor's internal tracking or inventory systems.
G62 – Delivery Date: The G62 outlines the date by which the buyer wants the grocery products delivered. This is particularly important for grocery items, as the delivery date must be met to ensure product freshness and quality.
Ship-to and Bill-to DUNS: As with the EDI 850, these segments use the DUNS numbers to identify the 'ship-to' and 'bill-to' locations.
G68 – Item Details: This specifies each item in the order, including the UPC, quantities, and retailer item numbers. For grocery orders, the G68 might also include additional details like sizes, weights, or packaging requirements.
G76 – Total Weight: Unique to the EDI 875, this segment provides the total weight of the ordered products. This is especially important for grocery items sold by weight, such as produce and meat.
How Do I Know Which Purchase Order to Use?
As you can see, many of the segments have different names, but they contain similar data. Functionally, there is very little difference between the two transactions. The main difference is who is sending the files. The EDI 850 can be used by all retailers wishing to purchase goods. However, the EDI 875 is specifically for grocery stores and wholesalers. Here is an example:
Your company makes organic gummy bears that have fun flavors, such as lemon-lime or strawberry-kiwi. You want to reach a wide array of customers, so you sell your product to many buyers, such as Stater Bros. Markets, TJ Maxx, and UNFI. When setting up your EDI, you will have to contact these buyers to begin the integration process. Stater Bros. is a grocery chain, so they have decided to only create the EDI 875 documents. However, TJ Maxx is not a grocery store, but they do sell snacks. They would not be able to create an EDI 875, so they would go with the EDI 850 instead. UNFI is a distributor of natural foods to all sorts of stores, so they will typically use an EDI 850 as well.
Related Reading: B2B Integrations, Demystified: EDI vs API
What About Invoicing?
Purchase orders and invoices are typically the beginning and end of an order’s supply chain. An invoice can go out once the order has been created, boxed, shipped, and received. There are other EDI documents for invoicing as well, and they couple with the type of purchase order used. The standard is an EDI 810 which is simply called an Invoice. This document is used with the EDI 850 as its payment transaction. However, the EDI 875 does not use the EDI 810 as its correspondent. Instead, it uses the EDI 880, called a Grocery Products Invoice. Again, the data sent is very similar.
Other Documents That Go With Both the EDI 850 and EDI 875:
855 – Purchase Order Acknowledgment: used to confirm you can meet the requirements in the purchase order.
860 – Purchase Order Change Request (Buyer Initiated): used to request an update to the details on the original purchase order.
940 – Warehouse Shipping Order: used to authorize a shipment of items from a warehouse.
945 – Warehouse Shipping Advice: used to notify the trading partner of a shipment.
997 – Functional Acknowledgment: used to confirm receipt of the 856.
Further Reading about EDI at SupplierWiki
For more free educational content on EDI, download our 'EDI for Retail Supply Chains' cheat sheet. This simple guide explains EDI documents for retail suppliers and provides over 200 retail and supply chain EDI codes.
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