In this post, I’ll give a brief overview of the top 6 EDI transactions used in the Retail industry, the main differences between documents exchange via EDI and email, and how you can quickly satisfy the request of a large retailer (such as Walmart, Target, Costco) about EDI compatibility and start exchanging EDI documents fairly quickly.
What is Electronic Data Interchange (EDI)?
EDI is a protocol to exchange business information between two organizations electronically based on a predefined standard. EDI has replaced the use of paper documents or the exchange of business information by email.
EDI in the Retail Industry
Electronic Data Interchange (EDI) has been widely adopted in the retail industry to facilitate efficient and accurate communication between trading partners. EDI is the electronic exchange of business documents between two or more organizations in a standardized format.
The retail industry has been using EDI for over 30 years. Can you imagine the volume of business documents flow at large retailers? They have thousands of transactions every month with hundreds of suppliers and tens of thousands of products.
For such large trading companies, it is simply impossible to do business without exchanging EDI. That is why they force their suppliers to exchange documents through EDI.
What is a retail supplier?
Supplier is any legal entity (organization, enterprise) or individual that provides goods to another entity. Retail suppliers are business-to-business (or B2B); they sell products to other companies, and not directly to the consumer.
Suppliers can be manufacturers, as well as various resellers (including wholesalers).
The supplier carries out business activities by the terms of the concluded supply agreement.
Giant retailers such as Best Buy, Wal-Mart, Costco, and Target have supply agreements with many different suppliers from whom they buy goods in bulk and then sell them to the final consumer in their stores or online stores.
What is the difference between EDI and email?
Let us make a comparison between sending a purchase order from a Retailer to a supplier by email and another one by EDI. Here are some major differences:
1. Transfer or exchange of business information
Both methods have secure communication channels, however, EDI communication channels use higher security standards.
2. Standards and structure
The content of the email is not structured at all. There is no standardization when placing a purchase order via email. Thus, the supplier needs to check many elements such as subject, message body, attachments, because the information about the purchase order can be either in the body or in one or multiple attachments.
The content of an EDI Purchase Order (EDI 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.
3. The ability to integrate with business systems (ERP/CRM)
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 EDI X12 850 for example, or a UN/EDIFACT ORDER is much more standard.
As a conclusion: exchanging business documents complying with EDI standards, enables companies and business partners in the retail to automatically integrate data into their internal business systems, efficiently and with great accuracy without human intervention.
Commonly used EDI documents in retail
Large retailers using EDI can standardize the process with their trading partners, thereby improving all business processes, increasing profits and customer satisfaction. For all size suppliers, the use of EDI gives access to large retailers and therefore a stable volume of orders. Let us look at the main EDI transactions used in B2B trading between retailers and suppliers.
1 – EDI 846 – Inventory Inquiry/ Advice | EDIFACT INVRPT
EDI 846 (EDIFACT/INVRPT – Inventory Report) is a notification that the supplier usually sends to the retailer, which contains information about the availability of goods. This EDI transaction is used to inform your trading partners (retailers) about stock levels but does not oblige them to make a purchase. Usually, EDI 846 also includes pricing information.
For more information about EDI 846 read our article: What is EDI 846 document?
2 – EDI 850 – Purchase Order | EDIFACT ORDERS
EDI 850 (EDIFACT/ORDERS) is an electronic document that is used to place an order for goods.
EDI 850 is usually sent by retailers to their supplier of goods. This document indicates the quantity of the required goods as well as all the details regarding the order (Item description, price, and quantities, shipping details, requested delivery date, and location(s) of delivery).
If you want to know more about EDI 850 read the article: All you need to know about EDI ANSI X12 Transaction Set 850 Purchase Order
3 – EDI 855 – Purchase Order Acknowledgement | EDIFACT ORDRSP
The EDI 855 (EDIFACT/ORDRSP – purchase Order Response) is a reply to the message (EDI 850). It is sent by the supplier after receiving the order from the retailer.
By returning the 855 messages, a supplier agrees to fulfill the order or proposes to amend. In other words, using EDI 855, the supplier either notifies the full, partial, or refusal to fulfill the order. This message helps the retailer avoid supply disruptions.
You will find detailed information about EDI 855 in this article: What is EDI 855 Purchase Order Acknowledgment?
4 – EDI 856 – Advance Shipment Notice | EDIFACT DESADV
EDI 856 (EDIFACT/DESADV – Despatch Advice) is a notification sent by the supplier immediately after the shipment of the goods leaves its warehouse.
The idea behind this message is that the retailer may know in advance about the fact that the products have been loaded, its quantity, and the expected delivery date. This way, he can efficiently plan the receipt and scanning of the goods at his warehouse.
You will find detailed information about EDI 856 in this article: What is Advanced Ship Notice (ASN) 856 transaction set?
5 – EDI 861 -Receiving Advice/Acceptance Certificate | EDIFACT RECADV
The EDI 861 (EDIFACT RECADV – Receiving Advice) acts as a response message to EDI 856 which confirms the acceptance of the goods.
Acceptance is communicated from the retailer to the supplier. It indicates there is a discrepancy between what was sent by the supplier and what was received by the retailer and details the list of goods received.
Besides, the retailer can provide additional information such as information about damaged items during transportation, etc.
Complete List of EDI Transactions, Sets & Codes for ANSI ASC X12 Standard
6 – EDI 810 – Invoice | EDIFACT INVOIC
EDI 810 (EDIFACT INVOIC – Invoice) is an electronic document provided by the supplier to the retailer to bill for the goods delivered. EDI 810 contains a list and description of goods, their quantity, and price, as well as information about the sender and recipient.
For complete information on EDI 810 read this article: What is an ANSI ASC X12 EDI 810 invoice?
EDI flow in the retail industry
Let us look at a typical EDI flow between trading partners (where the retailer acts as a buyer) in which the top 6 EDI transactions described above are involved.
1. The supplier sends or feeds the retailer his inventory status, to inform about the availability of goods – Inventory Inquiry/ Advice (EDI 846).
2. The retailer sends the Purchase Order to the supplier (EDI 850).
3. The supplier checks the availability of the goods in the warehouse and sends the Purchase Order Acknowledgment (EDI 855), in response to the Purchase Order.
4. The supplier immediately after shipment of the goods, generates and sends to the retailer an Advanced Ship Notice (EDI 856).
5. The retailer, after acceptance of the ASN received from the previous step, generates and sends the supplier a Receiving Advice/Acceptance Certificate (EDI 861).
6. The supplier, based on the above acceptance notifications, generates an Invoice (EDI 810).
This EDI flow is considered for the case when the trade agreement between the retailer and the supplier has already been concluded, and the retailer has a list of goods from each supplier in its business system.
Benefits of using EDI
EDI has long been an integral part of B2B especially in the retail vertical. Using EDI to exchange business information provides many business benefits to both large and small businesses. Here is a short list of those benefits:
Speeds up workflows
You can send any document in seconds.
Prompt exchange of documents speeds up the process of ordering and delivery of goods. The main benefit for the retailer is the uninterrupted replenishment of goods. For the supplier, a quick payment for the delivered goods.
Saving resources and time
No need to use operators for manual processing of business documents, duplicate on paper, store, send by mail, or courier.
One standard for everyone
EDI makes it easy to start selling to large retailers. Exchange EDI documents without worrying about format differences and compliance with business systems (ERP /CRM) of your trading partner.
Accelerate the acceptance of goods
When EDI is integrated into the retailer’s business system, data from suppliers goes directly to the accounting system. Thanks to automatic item matching, goods are accepted very quickly. The process of accepting the goods is quick and easy.
EDI eliminates errors associated with manual data input, as well as the loss of documents.
Secured data transmission
EDI documents are transmitted over secured channels in encrypted form, or through private value added network, no concern about data breach.
About EDI2XML services
EDI2XML offers a wide range of EDI services to automate the exchange of documents between all parties in the retail and transportation industry, whoever they are: retailers, suppliers, shippers, consignees, and transport companies.
We help your company get started on exchanging EDI with your partners in a fairly and relatively short period of time, and on budget. Whether adopting our Fully EDI managed EDI Service or our EDI2XML self-service Web service, we can empower your company with the ability to send and receive any type of electronic documents such as Purchase Order (EDI 850) PO Acknowledgment (EDI 855), Invoices (EDI 810), ASN (EDI 856) and many more.
Useful Reading: Fully managed EDI service VS HTTP Web Service: Which is Better for Your Business ?
Contact us for more information and a free consultation.