Understanding the EDI 850: The Purchase Order in Electronic Data Interchange

In today’s fast-paced business world, communication between trading partners must be quick, accurate, and efficient. Electronic Data Interchange (EDI) plays a vital role in making this possible. Among the many transaction sets in EDI, the EDI 850 Purchase Order is one of the most commonly used. But what is it, and how does it work? Let’s break it down in simple terms.

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What is the EDI 850?

The EDI 850 is essentially an electronic version of a purchase order (PO). It is used by a buyer to request goods or services from a supplier. Think of it as a digital handshake between two businesses that confirms an agreement to purchase.

Key Features:

Replaces traditional paper or email-based POs.
Structured in a standardized format that both the buyer and supplier systems can understand.
Automates the procurement process, reducing manual errors and speeding up order processing.

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How is the EDI 850 Used?

The 850 is exchanged between two businesses (trading partners) as part of a larger EDI workflow. Here’s how it typically works:

Buyer Creates the Order:
The buyer’s system generates an EDI 850, detailing what they need, quantities, delivery dates, and more.
EDI Translation:
The purchase order is translated into the EDI 850 format and sent to the supplier through an EDI network (e.g., Hendricks).
Supplier Receives and Processes:
The supplier’s system reads the EDI 850, validates the data, and prepares to fulfill the order. Often, this is followed by sending an EDI 855 Purchase Order Acknowledgment to confirm receipt and acceptance.

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Important Segments in the EDI 850 (and How They Work)

The EDI 850 consists of specific "segments" that convey critical information about the purchase order. Here are the most important ones:

1. Header Segments

These provide general information about the transaction.

ST (Transaction Set Header): Marks the start of the EDI transaction and identifies it as an 850.
BEG (Beginning Segment for Purchase Order): Specifies the PO number, type, and date.
- Example: PO# 12345, dated November 27, 2024.

2. Detail Segments

These contain the specifics of the items being ordered.

PO1 (Purchase Order Line Item): Lists each item, including:
- Item Number (SKU or UPC code)
- Quantity Ordered
- Price Per Unit
- Item Description
- Example: 50 units of a Jeep Wrangler spare tire cover at $25 each.
PID (Product/Item Description): Provides a detailed description of the product if needed.

3. Summary Segments

These wrap up the transaction details.

CTT (Transaction Totals): Indicates the total number of line items in the order.
- Example: 10 line items in the order.
SE (Transaction Set Trailer): Marks the end of the transaction and provides a control number for verification.

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Why is the EDI 850 Important?

Efficiency: Speeds up order processing, ensuring faster fulfillment.
Accuracy: Reduces errors by eliminating manual data entry.
Standardization: Allows businesses using different systems to communicate seamlessly.
Cost Savings: Cuts down on paper, printing, and administrative expenses.

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Conclusion

The EDI 850 is more than just a digital purchase order; it’s a cornerstone of modern supply chain management. By standardizing and automating the procurement process, it fosters stronger, more efficient relationships between buyers and suppliers. Whether you’re a small business starting with EDI or a seasoned enterprise scaling up, understanding the EDI 850 is key to thriving in today’s digital commerce landscape.

Hendricks does a great job at capture each unique requirement into a standard app on our app store. We help teams get connect between platforms like Shopify, WooCommerce, Big Commerce, Adobe Commerce and EDI. We work with your EDI partners on your behalf to save you the effort of having to become an EDI expert. Think of Hendricks as the “Google Translate between EDI and E-Commerce platforms”.

If you have any questions, feel free to reach out to hello@hendricks.so.