EDI2XML

When a company decides to outsource warehouse functionalities such as shipping and fulfillment operations to a 3PL (a third-party logistics provider), it is faced with the fact that 3PL providers require the exchange of documents in electronic format – EDI (Electronic Data Interchange). The most exchanged EDI documents in this industry are: EDI 940, EDI 945, and EDI 856. Although companies already using EDI, are familiar with the common EDI transactions like EDI 810 (invoice) and EDI 850 (Purchase Order), the transactions used by the 3PL industry, might create confusion for them.

In this article, we will look closer at what EDI X12 940 is, why and who uses it, what information a Warehouse Shipping Order contains, and other important information.

EDI 940 definition

Who uses the EDI 940 – Warehouse Shipping Order?

Warehouse Shipping Order (or the ANSI X12 940 Transaction set) is used by the supplier/depositor (i.e. manufacturer or wholesaler) to notify the third-party logistics warehouse of the need to ship the goods to the buyer (i.e. retailer, distributor); this 940 transaction set, provides detailed information about the goods, the required timing to ship, and the recipient.
Companies use EDI 940 as instructions for shipping goods from a third-party warehouse in two different ways: either to instruct the 3PL partner to send one type of products to several different destinations, or, to send instructions to shipping various items to one location or destination.

Why do warehouses and 3PL providers use EDI?

The main business process of any warehouse or third-party logistics company is to optimize the procedure to store goods, improve efficiency when preparing shipment for delivery to its destination.

To provide uninterrupted service on time and with the least errors, warehouses and 3PL providers need to automate their business processes, which is the main reason to use EDI (Electronic Data Interchange).

Using EDI, logistics companies, 3PL providers, and warehouses can get important benefits in their operations such as:

Key information included in an EDI 940 Warehouse Shipping Order

The 940 document is a kind of shipping instruction for warehouse; it provides the receiver with necessary information to be to prepare a shipment. At a minimum an EDI 940 transaction must include:

Depending on the type of goods and preliminary agreements with the warehouse, the Warehouse Shipping Order may contain the following:

Warehouse Shipping Order Transaction Set (EDI 940) Sample File

Warehouse Shipping Order Transaction Set (EDI 940) Specification

EDI 940 Warehouse Shipping Order is a transaction set of the X12 Standard that is widely used in North America.

A three-code number – 940, identifies the warehouse Shipping Order Transaction Set. The document consists of the following segments:

Message Envelop / Group:
• ISA Interchange Control Header
• GS Functional Group Header

Heading:
• ST Transaction Set Header
• W05 Shipping Order Identification (N = Original Order)
• N1 Name (‘SF’ – Ship-from, ‘SF’ – Ship-from)
• N3 Address Information
• N4 Geographic Location
• G62 Date/Time (‘02’ – Requested Arrival ‘10’ – Pick-Up Date)
• NTE – Notes/Special Instructions (‘WHI’ Warehouse Instruction)
• W66 Warehouse Carrier Information

Detail (Begins detail loop):
• LX – Assigned Number
• W01 – Line Item Detail – Warehouse
• G69 Line Item Detail – Description
• N9 Reference Identification
• W20 – Line-Item Detail (Miscellaneous)
• AMT – Monetary Amount

Summary:
• W76 Total Shipping Order
• SE Transaction Set Trailer (the last segment of each transaction set)

Message Envelop / Group Footer:
• GE Functional Group Trailer
• IEA Interchange Control Trailer

Workflow to Exchange EDI 940 Warehouse Shipping Order

Let’s look at one of the possible and simplest scenarios in which the exchange of an EDI 940 document is involved. It should be considered that the manufactured or ordered products, are delivered in advance to the 3PL warehouse (your fulfillment partner) and the inventory of your store in your CRM is synchronized with the inventory of the 3PL warehouse. The standard workflow for exchanging a warehouse shipping order can be described as follows:

1. The customer (or buyer) sends a Purchase Order (EDI 850) to the supplying company (or seller).

2. The seller responds to the customer by EDI, transmitting an 855 Purchase Order Acknowledgment to accept / reject / modify the Purchase Order.

3. Based on the EDI 850 order, the supplier than sends the warehouse shipping order (EDI 940) to the 3PL warehouse, describing the order details.

4. The warehouse picks, packs, and ship the order

5. The warehouse sends back a warehouse shipment notification (EDI 945) to the vendor to confirm the shipment that was transmitted to the buyer.

6. Upon receipt of the EDI 945 transaction, the supplier (or seller) generates an EDI 856 – Advance Ship Notice to notify the buyer of an upcoming delivery.

7. The supplier than sends an Invoice (EDI 810) to the buyer upon receipt of the goods; sometimes the invoice is sent just about the same time when the merchandise is dispatched to the buyer.

The above workflow is for a general understanding of the process, so keep in mind that there can be a much more complex relationship between buyer, seller, and third-party warehouse. In addition to the transactions mentioned above, the 3PL provider and supplier can exchange other documents such as:

• Warehouse Stock Transfer Shipment Advice ( EDI 943)
• Warehouse Stock Transfer Receipt Advice (EDI 944)
• Inventory Inquiry/Advice (EDI 846)
• Warehouse Inventory Adjustment Advice (EDI 947)

EDI 940 and EDI 945

The Warehouse Shipping Advice (EDI 945) is playing a special role in the partnership between the 3PL provider and supplier. The function of Warehouse Shipping Advice is like an EDI 856 (Advance Ship Notice).
Using the EDI 945 warehouse notifies the seller of the shipment. Moreover, by EDI 945, the 3PL provider notifies the seller whether a full order has been shipped or has been shipped with exceptions.
EDI 945 usually contains the following information:
• buyer’s order number
• the actual date of shipment
• used carrier
• bill of lading number
• Item and quantity
The warehouse can also explain why the shipment date was changed, why the products were excluded from the batch and information about the replacement of the product.

Benefits of using an EDI 940 Warehouse Shipping Order

The advantages of using EDI in general and EDI 940 transaction, over traditional methods of communications such as e-mail, paper or fax, are undeniable:

1. Reduced time of order processing.

2. Reduced expenses related to office supplies and delivery of documents, as well as for staff salaries.

3. Reduced manual data entry, making it easier for both sellers and warehouses

4. Elimination of loss of documents and human errors.

5. Instant delivery and receipt of documents.

6. Speed up payments

3PL Warehouse EDI Integration

You can start exchanging EDI 940 messages in less than an hour using our EDI2XML REST web service. You do not need to commit to any contracts; We provide a free 15-days trial period.

You can also take advantage of our over 21 years of EDI integration experience by choosing a fully managed EDI service.

Contact us for a free consultation with one of our EDI experts to choose what works best for your business.

You may also be interested in reading about:
– Electronic Data Interchange (EDI) in the Supply Chain
– How EDI can speed the receiving of goods in a warehouse
– EDI for Third-Party Logistics providers (3PL)
– DELFOR, DELJIT, DESADV – key EDI messages in supply chain management for manufacturing

Our EDI2XML Blog was selected by Feedspot as one of the Top 10 EDI (Electronic Data Interchange) Blogs on the web.