An EDI 940 is a critical electronic data interchange transaction set that supports communication between suppliers or sellers and their third-party logistics providers (3PLs).
Knowing the EDI 940 standards, core elements, and uses will show you how to streamline your warehouse-management operations and expedite communications with 3PLs. An EDI 940 can enhance inventory oversight, shipment-management capabilities, and overall supply chain efficiency.
What is an EDI 940, and how do you use it?
Also known as a Warehouse Shipping Order, an EDI 940 is typically sent to a 3PL by a seller or supplier. It’s a formal request to arrange a shipment of goods from a remote warehouse to the location designated by the buyer.
After receiving the EDI 940, the 3PL will send an automated EDI 997, also known as a Functional Acknowledgement. The EDI 997 confirms the 3PL received the EDI 940 document.
However, an EDI 997 isn’t employed exclusively by 3PLs; any trading partner can use them to confirm the receipt of various digital documents, including the following:
- An EDI 810: Invoice Transaction
- An EDI 820: Payment Order
- An EDI 846: Inventory Inquiry/Advice
- An EDI 850: Purchase Order
- An EDI 855: Purchase Order Acknowledgement
After processing the order, the warehouse will submit an EDI 945, Warehouse Shipping Advice. This document provides shipment details and delivery estimates.
To recap, EDI 940s and 945s facilitate communication between sellers and 3PLs, whereas various trading partners use an EDI 997. Specifically, the EDI 940 is sent by the seller, and the EDI 945 is sent by the 3PL warehouse to confirm that a shipment request has been processed.
As a seller, you can use an EDI 940 to instruct remote warehouses to send orders to your buyers. You can also use it to cancel a previous order or modify a shipment.
Main elements of an EDI 940
The EDI 940 standards were established by the American National Standards Institute (ANSI). According to the standardized X12 format, EDI 940 forms must have the following elements:
- Purchase order number (REF)
- Ship-to address (N1)
- Warehouse order details, such as the included products, quantity, units of measure, item identification number, and expected shipping date (W01)
- Receiver contact information (PER)
- Shipping instructions (NTE)
- Special equipment requirements (W66)
An EDI 940 must include this information for the order to be processed.
Advantages of EDI 940
Here are some of the primary benefits of an EDI 940:
Streamlined shipment management
Using standardized documents like the EDI 940 streamlines the process of managing shipments. You can ensure your 3PL partner receives all relevant information when you communicate via standardized documents. This decreases the chances of miscommunications and shipping delays.
From the buyer’s standpoint, streamlining shipment management with an EDI 940 transaction leads to a better overall experience. The information in an EDI 945 provides shipping status updates and keeps them in the loop about their order.
Enhanced logistics efficiency
Manually submitting and reviewing shipping order documents takes considerable time and effort. By replacing these laborious processes with an EDI 940 and other documents, you can accelerate the flow of information between you and your 3PL.
3PLs also save time since they don’t have to devote resources and staff to processing paper shipping documents. Instead, they can rapidly process your request and begin fulfilling your orders.
Without the EDI framework, you and your 3PL will likely exchange orders in various formats, including CSV, fax, and email. This creates recordkeeping headaches and leads to costly miscommunications.
An EDI 940's unified format keeps everyone on the same page. There’s no need to convert data between formats — both parties can focus on processing the request.
Using multiple file formats and relying on manual processes increases the chances of introducing errors. Even a tiny mistake can lead to significant setbacks for 3PLs and buyers.
The EDI 940 transaction set provides superior accuracy and significantly reduces errors. Every EDI 940 document must include specific information. If any of these details are missing, the 3PL can locate the errors immediately and request the necessary information.
An EDI 940 is much more secure than faxed, emailed, or paper shipping orders. They’re a valuable tool for protecting critical business data and preserving your buyers’ privacy.
These documents can undergo several types of encryption, including in-transit and at-rest encryption. Additionally, if you use a leading EDI software like Orderful, your solutions will require multi-factor authentication to prevent unauthorized use or viewing.
Ready to implement EDI solutions? Connect with Orderful
Looking for modern solutions that streamline communication between you and your vendor partners? If so, Orderful’s cloud-based EDI solutions and innovative APIs can empower your organization to improve productivity and efficiency. Talk to one of our experts to learn how we can get your organization up and running.