This post was updated to reflect current trends and information.
In this article, we want to talk about the top EDI messages commonly used by trading partners in the supply chain management. We will explain in a clear and easy matter the purpose of the EDI messages and their benefits.
What is EDI?
The acronym of EDI is Electronic Data Interchange. The main objective of EDI, is to replace the exchange of paper-based business documents.
EDI is a set of standards used in trade operations, thus exchanging structured business documents. The implementation of EDI is almost limitless. In today’s reality, EDI is present in almost every commercial activity: from banking transactions, to supply chain management, to e-commerce; electronic data interchange (EDI) is helping businesses to automate specific business processes, and sometimes to cover an entire cycle of logistics.
In short terms, an “EDI cycle” is a flow where one business partner can create digital and electronic “business documents”, compliant to a specific standard (i.e. X12, EDIFACT, Tradacom, RosettaNet,) and transfer to the second party in a secured telecommunication channel.
What is the difference between EDI and email?
The above question always comes up when talking about EDI and trying to clarify how it works. It is a valid question. So, let’s take a comparison between sending a purchase order from one partner to another, one by email, and another one by EDI. Here are some major differences:
→ At the transport layer, both documents are going through secured communication channels, knowing that the EDI communication channels are using higher security standards, today.
→ The content of the email is not structured at all: I have subject, attachments, and message body where the information of the order for example can be either in the body or in one or multiple attachments.
→ The content of an EDI purchase Order (850) is very well structured, and it conforms to a specific standard (i.e. X12, EDIFACT, …). Each element and loop have a pre-defined purpose, even though trading partners tend to customize and design their EDI data outside of the standard.
→ Extracting the data “automatically” from an order coming by email is very difficult (not to say extremely difficult), while extracting the purchase order information from an 850 for example or an ORDER is much more standard.
As a conclusion to this question: exchanging business documents complying to EDI standards, enables companies and business partners in the supply chain management to automatically integrate data into their respective computer systems, efficiently and with great accuracy, and in a real-time fashion without human intervention.
How does EDI work?
“EDI flows” allow to automate the creation, sending, receiving and processing of electronic documents, in addition to integrate into a company’s software system (ERP, CRM…).
Following is a description of incoming and outgoing EDI flows, based on our EDI2XML full Service
For Incoming EDI documents
• We connect to:
- the Trading Partner’s mailbox, OR
- a mailbox on our clients’ platform, OR
- a mailbox on our EDI2XML platform we provide
• We collect the incoming EDI message (i.e. 850) from the mailbox
• We turn the received EDI document(s), into a format agreed upon with the client IT team (i.e. XML, TXT…)
• We drop the final file into the mailbox, waiting for client IT team to pick up and automatically process into their own software system, OR,
• We integrate directly into the client’s ERP system, be it on premises or in another cloud, using certified connectors of Magic xpi.
⇒ Useful: Download Magic xpi white paper
For Outgoing EDI documents:
• We receive necessary files from our client, based on a format agreed upon with his IT team
• We build the outgoing X12 EDI document (i.e. 810) based on the Trading Partner’s provided X12 format and specifications.
• We connect to the destination’s mailbox & drop the X12 file(s)
The most commonly used set of EDI messages
Following is the list of o the most commonly used EDI transaction sets used in today’s business space, from supply chain management to ecommerce, you will find the following documents as the basics for EDI exchange:
EDI 846 Inventory status
EDI 850 Purchase Order
EDI 855 Purchase Order Acknowledgement
EDI 856 Ship Notice/manifest (ASN)
EDI 860 P/O Change
EDI 810 Invoice
The above EDI messages, called “must-have” because they are necessary to automate the most important trading cycle in the supply chain management, eCommerce and Drop-ship space.
Here is a typical business flow using EDI:
- The supplier needs to always update his inventory status by sending the EDI 846 document regularly
- The buyer sends the order (EDI 850) to the supplier
- The supplier automatically loads the order into its business system
- To confirm the fulfillment of the order, the supplier sends the buyer a Purchase Order Acknowledgement (EDI 855)
- In case of purchase order change, the buyer can send a P/O Change request 860 to advise the supplier of the change
- As soon as merchandise is shipped, the vendor sends an EDI 856 Ship Notice (ASN) to the buyer.
- An invoice 810 will follow so to get paid by the buyer
- The buyer generates a Receiving Advice EDI 861 and sends it to the supplier.
Many companies do not limit itself only on the above EDI messages, they can decide to leverage other transactions and business documents to improve their supply chain effectiveness; as an example, they can request to add the 753, 754, and other documents related to pickup and delivery…
EDI message types
EDI 846 Inventory status. Most trading partners in the supply chain and eCommerce space, request that their suppliers update them with their inventory status by sending the EDI 846 document. You can check the details about this document in this article.
EDI 850 Purchase Order. Often, this is the first type of EDI message that companies such as retail chains, manufacturers, warehouses or 3PL-providers to exchange when they switch to EDI.
Edi 850 contains:
- Order number
- Required date and time of delivery
- Reference to the contract or contract number
- Sender and customer information, the place of delivery
- Information on the contents of the order (bar codes, quantity, the name of the goods, multiplicity of packaging).
With the EDI 850, the product ordering process goes faster and becomes cheaper as the number of people involved in the process is reduced. Thanks to the fast and guaranteed transfer of information about the order, the supplier improves the reliability of the deliveries.
EDI 855 Purchase Order Acknowledgement – response to the Purchase Order is a “couple” message for EDI 850. The supplier sends EDI 855 to the buyer in accordance with the order value or suggesting to make changes regarding order quantities. This helps to avoid disruption in the supply chain.
EDI 856 Ship Notice/manifest or ASN is a pair of EDI 861 Receiving Advice.
These notifications are exchanged between the business partners at the stage of shipment and receipt of the goods.
The supplier sends ASN immediately after the shipment. This EDI message helps to simplify and speed up the process of acceptance of goods. EDI 856 Ship Notice/manifest contains detail shipment information:
- Shipment information (bill of lading number, ship to, ship from, etc.)
- Unit load information about a physical shipping item.
- Order information such as purchase order number, buying place, division number, etc.
- Tare information about the pallets.
- Pack information about the shipping package (cartons, racks, bags, etc.,)
- Item information about the shipped goods, such as SKU identification, quantity shipped, etc.
Companies that have implemented ASN significantly increase the speed of receiving goods and entering data into the business system – with EDI 856 you do not need to drive numbers manually from the invoices. ASN information can go directly to the business system.
For the big trading retailers, this type of EDI message is a vital necessity. Advance notification of the goods delivery helps to prepare for its acceptance. Even before the supplier’s truck arrives, the retailers already have a list of the goods sent.
EDI 860 Buyer triggered P/O change: is a transaction sent to the supplier advising him about a change in Purchase order sent earlier. The change can be to increase/decrease/delete quantities on an order or to change dates.
EDI 810 Invoice: is an electronic invoice transaction sent by the supplier to the buyer.
Becoming EDI Compliant
We will help you save on EDI, quickly perform the integration, configure the connection with any trading partner or supplier.
Contact us today for more information and for pricing.