What Is An EDI 850? All About Purchase Orders

Transform your business with EDI 850s and Orderful

Understanding the ins and outs of the most common EDI codes is the first step toward automating your business’s essential tasks. There are various types of EDI that can streamline your supply chain operations, improve accuracy, and save you money on labor and costly mistakes.

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A major bank lost nearly $1 billion due to a clerical error. Half a million voters in Virginia received faulty ballots because a spreadsheet was misaligned. A buyer’s rep sent an email requesting 100 cases of SKU 8484, and two weeks later, the warehouse received 14,000 oranges when they thought they were getting 1,000 reams of copy paper (SKU 8444).

Oops.

Software mismatches and manual errors in documentation can have startling ripple effects. It’s another reason many companies are standardizing supply chain management with electronic data interchange (EDI).

An EDI 850 purchase order revolutionizes how you order goods and services. It’s your gateway to efficient order management, letting vendors know you’re ready to buy.

What is an EDI 850?

An EDI 850, aka an EDI purchase order, is a document or transaction set businesses use to digitally place an order for a collection of goods or services. It initiates the purchase process, indicating that the sender wants to buy something or contract a service. If the vendor agrees to fulfill the request, further EDI transactions from both parties will facilitate the sale.

An EDI 850 purchase order formally begins the ordering process. It’s more precise and official than an email saying, “We’d like to buy 50 pounds of salt,” and it establishes a digital document trail that accompanies each EDI order from start to finish.

Elements of an EDI 850 document

EDI transaction sets like the 850 follow formatting requirements set forth by the American National Standards Institute (ANSI). These standards ensure every EDI 850 document includes the same basic elements, making the forms comprehensive, accurate, secure, and easy to read.

The most common elements of an EDI 850 include the following:

• A unique purchase order (PO) number
• The order date
• A requested shipping and/or delivery date
• The buyer’s contact information (e.g., name, delivery address, phone number, email address)
• The vendor’s contact information
• Billing details
• SKUs or UPCs associated with the items being purchased
• Quantities or units of measurement for the items being purchased
• Pricing details (per unit and in total)
• Shipping terms, such as the approved shipping method and preferred carrier
• Payment terms (e.g., due on delivery or net 30 with a 10% discount if paid within 14 days)
• Additional comments, terms, available discounts, or miscellaneous instructions

How is an EDI 850 used?

EDI 850s are used to kickstart the ordering process. They’re usually the first documentation exchanged between purchasers and vendors, although they often follow informal discussions about product lines and service options.

Once a supplier receives an EDI 850, they’ll typically send an EDI 997 or EDI 855 in response. These documents — a functional acknowledgment and purchase order acknowledgment, respectively — are formal ways for the vendor to say, “We got your PO, and the purchase process is now underway.” Some companies may skip the formal acknowledgment and go straight to an EDI 810, invoicing the buyer for their request.

Although many industries use the same codes for common documents, such as purchase orders and invoices, some have their own EDI codes to reflect industry-specific processes. For instance, transportation EDI includes codes associated with package locations and shipment statuses, and other unique codes are exclusively used to simplify retail transactions.

It’s up to the buyer to specify what documentation they require from the seller. Communicating that information up front prevents confusion and mistakes.

3 benefits of the EDI 850 purchase order

An automated EDI approach offers several benefits over manual ordering, especially during purchase initiation. EDI 850 provides the following advantages:

1. Streamlines the ordering process

Relying on emails, phone calls, or text messages to anchor your orders is messy and risks miscommunications that cost time and money. EDI 850s offer standard formatting, so both parties know what information to include and what data to look for. It’s apparent what needs to be done and what information, if any, is missing.

2. Boosts accuracy

Human error is inevitable. Standardized EDI documentation helps reduce costly and embarrassing mistakes, such as sending the wrong product or quantity. It also minimizes miscommunications because everyone works with the same file and data.

3. Increases efficiency

Humans are awesome, but they’re also relatively slow compared to computers. Phone calls and faxes introduce extra steps that can delay the ordering process by hours, days, or even weeks. Lost time adds up quickly. Fortunately, EDI cuts back on tedious data entry tasks and saves on labor by automating supply chain management.

Crucial considerations of an EDI 850

Before you achieve EDI capability and start using EDI 850s to launch your purchases, it’s vital to consider EDI 850 specifications tied to the process.

EDI 850 specifications are part of the X12 transaction set that determines how purchase orders used in tandem with EDI should look and what information they must contain. These specs also define how the 850 should be used — namely, for placing new orders only, not for changing an existing purchase order or acknowledging a purchase request.

Some or all of the following documents may be required to accept an EDI 850 from a business partner (based on the trading partner’s requirements):

• EDI 997 (Functional acknowledgment): The 997 is sent by the vendor to acknowledge the receipt of a request from the buyer, such as an EDI 850 PO.
• EDI 855 (Purchase order acknowledgment): The 855 is similar to the 997, but it’s used specifically in response to a purchase order. It indicates whether the vendor has accepted, rejected, or requested modifications to a PO.
• EDI 860 (Purchase order change request): The 860 is used when a buyer needs to change a previously sent and acknowledged purchase order or accept a change from the vendor.
• EDI 810 (Invoice): Once a vendor accepts a purchase order, they usually send the buyer an EDI 810 to request payment.
• EDI 856 (Advance ship notice): Vendors send buyers an EDI 856 to notify them an order is packed, how it’s packed, and what the shipment contains. EDI 856 is similar to a packing slip, but the buyer receives it as soon as the package leaves the vendor’s hands.

EDI 850 formats

The 850 EDI document type can be formatted in one of two ways.

Raw data

To the untrained eye, this version looks like computer gibberish. Read closely, and you can pick out details, such as the buyer’s name and address.

The readable version

This version of an EDI purchase order looks more like a typical printed PO. The average person could look at the document and quickly understand the organizations and products involved.