Trade relationships are built on purchase orders (POs). Whether it’s a wholesale or a dropship relationship, retailers need to buy products from their suppliers to sell them to customers.
POs have come a long way from their paper-based format. Now, API-based integrations between retailers and brands (facilitated by platforms like Convictional) mean that orders can flow seamlessly between systems without having to manually generate POs.
But what if your trading partner remains reliant on electronic data interchange (EDI) to transact with you? That’s when you’ll receive EDI 850 files from them and you need to understand what they are to transact with them effectively.
In this article, we’ll explain what EDI 850 documents are and why they’re used. We’ll also share an example of an EDI 850 document and walk you through it so that you know what to look for when you’re sending and receiving 850 documents with your partners.
What is an EDI 850 document?
The EDI 850 Purchase Order document is used to place and receive orders between trading partners. It contains important information about where to ship the order, the requested products and their quantities, as well as the purchase order number. This order number functions as a unique identifier for the purchasing party across the life of an order, which is important in a dropship context where multiple order updates usually take place.
When an 850 Purchase Order is placed, it is standard practice for the receiver to respond back with an EDI 855 Purchase Order Acknowledgement document.
850 documents are formatted in the ANSI x12 EDI standard in North America and in the EDIFACT standard in Europe and Asia.
Intended benefits of using EDI 850
Retailers continue to use EDI more out of convenience than because it is the best standardized electronic format to do trade with their suppliers. A few of the intended benefits of using EDI 850 are:
- Speed and accuracy: Instead of sending paper POs back and forth, EDI 850 files are intended to reduce processing times for producing POs and sending them from one trading partner to another. Since they’re electronically generated, they’re less prone to human errors that delay the purchase process in the supply chain.
- Standardized format: EDI allows different parties to communicate with each other in a shared language. Retailers can process 850s for multiple suppliers and not have to worry about formatting them a different way each time, which also saves them time and effort.
Drawbacks of using EDI 850
EDI vendors love to talk about the benefits of using different EDI documents and EDI transactions, but it’s important to share the drawbacks of using EDI for your purchase orders too.
- EDI is time consuming to set up
If your trading partner doesn’t have EDI, good luck trying to send them EDI 850 files quickly. Industry research shows that the average onboarding time for suppliers takes three to four months. Usually, this delayed onboarding time is a result of setting up EDI solutions for brands.
- EDI is expensive to implement
Modern suppliers don’t have access to large-scale IT teams that they can leverage for their EDI implementation. And because EDI is a legacy technology that isn’t part of the modern tech stack, only a handful of engineers can handle EDI implementations, making it prohibitively expensive to implement.
- EDI networks commoditize trade relationships
Once you’ve gone through the hoops of setting up an EDI integration with your supplier, you’ve usually forfeited your exclusive trade relationship with that brand. The reason for this is EDI providers open their trade networks to all parties operating in the network as an incentive to join the network.
If you have an existing trade relationship that runs on EDI, that’s totally fine. However, if you’re trying to set up new trade relationships to keep your catalog fresh and differentiated, EDI is inefficient and can affect your ability to onboard your suppliers at scale.
Convictional can help with this. We’re a trading platform that helps you connect with suppliers, regardless of how they would like to integrate with you. Whether they have a Shopify, WooCommerce, or BigCommerce store, or they prefer to transact with CSV or EDI files, we can help you connect with them and start trading in days.
Key EDI 850 segments
Here’s an example EDI 850 file:
EDI files are made up of segments, which are standardized sequences of data elements. Each segment has a segment identifier (ex: ST or PID are segment identifiers) with data elements attached to them. We won’t cover each segment here; only the ones that are essential to understanding EDI 850 files.
Let’s break it down further:
ST*850 refers to the 850 transaction set — this refers to the file as an 850 document.
BEG refers to the beginning of the purchase order. It contains relevant information such as a the PO number and the date and time it was issued.
A PO’s shipping and billing information needs to be included in an 850 file. The N1*ST segment identifier refers to shipping address information. The N1*BT segment identifier refers to billing information for this PO.
The PO1 segment identifier provides product information included in the PO. In this example, products are identified by their UPC code (UP). To provide more context with the product information in the file, PID is the segment identifier that contains the product’s title.
In addition to these segments, the CTT and SE identifiers provide additional context to the recipient of the file. CTT refers to the number of line items in the file and SE refers to the number of included segments.
Looking to learn more about EDI? We have some more resources for you:
Convictional handles your EDI files (and so much more)
EDI provides limited functionality to retailers who are looking to move quickly and provide a best-in-class trade experience for their partner brands.
Convictional was created to help retailers connect with their suppliers, regardless of the integration method they use.
- Modern sellers can connect with you with our native Shopify, BigCommerce, and WooCommerce integrations.
- Classic sellers can connect with you with CSV uploads or EDI x12 files.
- For sellers with custom systems that need a specialized integration solution, they can connect with us directly via the Convictional API.
Having the ability to connect with sellers through their preferred integration methods make it more appealing for them to do business with you. To learn more about how we help you connect with your suppliers, get in touch with our sales team today!