What is EDI 850? A Complete Guide to Purchase Orders

Electronic Data Interchange (EDI) 850 is the standard format for purchase orders in the retail and e-commerce industry. If you're a supplier working with major retailers like Walmart, Target, Amazon, or any other big-box retailer, understanding EDI 850 is crucial for your business operations.

Understanding EDI 850 Purchase Orders

An EDI 850 document is an electronic purchase order that retailers send to their suppliers. Instead of sending a paper PO or email, the retailer transmits a structured, machine-readable document that contains all the information needed to fulfill an order.

Key Components of an EDI 850

Every EDI 850 purchase order contains several critical pieces of information:

Header Information: Basic details like PO number, date, and buyer/seller information
Line Items: Each product being ordered with quantity, unit price, and product codes
Shipping Details: Where and when the order should be delivered
Payment Terms: NET30, NET60, or other payment arrangements
Special Instructions: Any specific handling or delivery requirements

Why EDI 850 Matters for E-commerce

Speed and Accuracy

Traditional purchase orders require manual data entry, which is slow and error-prone. EDI 850 eliminates this bottleneck by:

Processing orders in seconds instead of hours
Reducing data entry errors by up to 90%
Automating inventory updates
Triggering fulfillment workflows instantly

Retailer Requirements

Most major retailers require EDI capability from their suppliers. This includes:

Walmart: Mandatory EDI for all suppliers
Target: Required for vendors doing over $50k annually
Amazon Vendor Central: EDI preferred for high-volume sellers
Home Depot: Required for direct suppliers
Kroger: Mandatory for all vendors

How EDI 850 Works: Step by Step

Customer places order: Retailer's system generates an EDI 850 document
Transmission: EDI 850 is sent via AS2, SFTP, or VAN to the supplier
Receipt: Supplier's EDI system receives and validates the document
Processing: Order data is imported into the supplier's ERP or order management system
Acknowledgment: Supplier sends EDI 997 (Functional Acknowledgment) to confirm receipt
Fulfillment: Order is picked, packed, and shipped
Ship Notice: Supplier sends EDI 856 (ASN) with tracking information
Invoice: Supplier sends EDI 810 invoice for payment

Common Challenges with EDI 850

Integration Complexity

Integrating EDI into your existing systems can be challenging:

Legacy Systems: Older ERP systems may not have native EDI support
Multiple Formats: Different retailers may have slightly different EDI requirements
Testing: Thorough testing is required before going live
Maintenance: EDI connections need ongoing monitoring and updates

Cost Considerations

Traditional EDI solutions can be expensive:

VAN Fees: Value-Added Networks charge transaction fees
Implementation Costs: Can range from $5,000 to $50,000+
Ongoing Support: IT resources needed for maintenance
Per-Transaction Fees: Some providers charge per EDI document

Modern Solutions: Automated EDI Processing

OrderSync automates the entire EDI 850 workflow:

Automatic Parsing: EDI documents are converted to readable formats instantly
Smart Mapping: Product codes and customer data are automatically matched
Real-time Validation: Catch errors before they become problems
ERP Integration: Seamlessly connect to your existing systems
No Per-Transaction Fees: Predictable monthly pricing

Getting Started with EDI 850

Step 1: Understand Your Retailer's Requirements

Each retailer has specific EDI requirements. Start by:

Requesting EDI implementation guides from your retailer
Understanding required transaction sets (850, 997, 856, 810)
Learning about testing requirements
Identifying connection methods (AS2, SFTP, VAN)

Step 2: Choose an EDI Solution

You have several options:

In-house Development: Build your own EDI parser (complex and time-consuming)
Traditional EDI Provider: Use a VAN or traditional EDI service (expensive)
Modern EDI Platform: Use automated solutions like OrderSync (recommended for growing businesses)

Step 3: Set Up Testing

Before going live:

Set up a test environment
Process sample EDI 850 documents
Validate data accuracy
Ensure proper acknowledgment flows
Test error handling

Step 4: Go Live

Once testing is complete:

Schedule go-live date with your retailer
Monitor first production orders closely
Have support resources ready
Document any issues for future reference

EDI 850 Best Practices

1. Automate Acknowledgments

Always send EDI 997 acknowledgments immediately upon receiving an 850. This confirms receipt and helps retailers track their orders.

2. Validate Data Thoroughly

Check for common issues:

Invalid product codes
Incorrect quantities
Missing required fields
Invalid dates
Wrong ship-to addresses

3. Monitor for Errors

Set up alerts for:

Failed transmissions
Parsing errors
Missing required data
Duplicate orders
Unusual order patterns

4. Maintain Documentation

Keep detailed records of:

EDI specifications from each retailer
Testing results
Production issues and resolutions
Configuration changes
Contact information for EDI support

Real-World Example: Walmart EDI 850

Here's what a typical Walmart EDI 850 workflow looks like:

Walmart customer places online order at 10:00 AM
Walmart generates EDI 850 at 10:05 AM
EDI 850 transmitted to supplier via AS2 at 10:06 AM
OrderSync receives and parses EDI 850 at 10:06 AM
Order automatically created in supplier's system at 10:07 AM
EDI 997 acknowledgment sent to Walmart at 10:07 AM
Supplier picks and packs order
EDI 856 ship notice sent when order ships
EDI 810 invoice sent after delivery confirmation

Total time from customer order to supplier notification: 7 minutes

Conclusion

EDI 850 is the backbone of modern retail supply chains. While it can seem complex at first, understanding and implementing proper EDI 850 processing is essential for any supplier working with major retailers.

The key is choosing the right solution that balances cost, functionality, and ease of use. Modern platforms like OrderSync make EDI accessible to businesses of all sizes, eliminating the complexity and high costs of traditional EDI solutions.

Ready to simplify your EDI 850 processing? Try our free EDI visualizer to see how easy EDI can be.

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