Saturday, April 5, 2025

Procure to Pay in EDI Flow

 The Procure to Pay (P2P) process using EDI (Electronic Data Interchange) automates the complete procurement cycle—from requisitioning goods/services to making payment. This flow is typical for buyer-supplier interactions, often used in supply chain management and ERP systems.


Procure to Pay – EDI Step-by-Step Flow

StepBusiness ProcessEDI Transaction SetDescription
1Purchase RequisitionInternalCreated by buyer in ERP (not usually EDI)
2Purchase OrderEDI 850Buyer sends PO to Supplier
3PO AcknowledgmentEDI 855Supplier confirms receipt/acceptance
4Ship NoticeEDI 856Supplier sends ASN before delivery
5Receipt of GoodsInternal/EDI 861Buyer receives and confirms goods
6Invoice SubmissionEDI 810Supplier sends invoice
7PaymentEDI 820Buyer sends payment/remittance
8AcknowledgmentsEDI 997Confirms document delivery integrity

Detailed Step-by-Step Explanation




1. Purchase Requisition (Internal Step)

  • What Happens: Buyer initiates the request internally (manual or automated).

  • EDI? Not exchanged via EDI.


2. Purchase Order – EDI 850

  • Who: Buyer → Supplier

  • Content:

    • Item descriptions, quantity, price

    • Delivery location and date

    • Terms & conditions

Triggers the procurement formally.


3. PO Acknowledgment – EDI 855

  • Who: Supplier → Buyer

  • Purpose: Confirms PO received and accepted.

  • Can also:

    • Propose changes (e.g., quantities)

    • Indicate shipment date

Enables synchronization between buyer and supplier.


4. Advance Ship Notice – EDI 856

  • Who: Supplier → Buyer

  • Purpose: Notify buyer about an upcoming shipment.

  • Contains:

    • Shipment date

    • Tracking info

    • Items in shipment (pallet/carton-level)

 Allows warehouse to prepare for receiving.


5. Goods Receipt (Internal or EDI 861)

  • Who: Buyer → Internal ERP or via EDI

  • EDI Optional:

    • EDI 861 used to confirm receipt to the supplier

    • Acknowledges received quantity and condition

Starts the payment approval process.


6. Invoice – EDI 810

  • Who: Supplier → Buyer

  • Details:

    • Invoice number

    • Line items and pricing

    • Tax and shipping charges

Used to request payment formally.


7. Payment – EDI 820

  • Who: Buyer → Supplier

  • Includes:

    • Amount paid

    • Invoice numbers being paid

    • Bank info and payment method

Confirms financial settlement.


8. Functional Acknowledgment – EDI 997

  • Who: Bidirectional

  • Purpose: Confirms receipt of EDI transactions (e.g., 850, 810)

Ensures transaction was received successfully.


X12 EDI transactions used in the Procure-to-Pay (P2P)

 

1. Procurement (Purchase Request to Order)-->
840-->-->Request for Quotation              -->Buyer requests pricing and terms         
843-->-->Response to Request for Quotation  -->Supplier responds to 840                 
850-->-->Purchase Order                     -->Buyer places an order                    
855-->-->Purchase Order Acknowledgment      -->Supplier confirms acceptance/modification
860-->-->Purchase Order Change Request      -->Buyer sends changes to an existing PO    
865-->-->Purchase Order Change Acknowledgment Supplier responds to PO change           

 

2. Fulfillment (Shipment and Delivery)-->
856-->-->Advance Ship Notice (ASN)             -->Supplier notifies buyer about shipment         
861-->-->Receiving Advice/Acceptance Certificate Buyer confirms goods were received             
862-->-->Shipping Schedule                     -->Buyer specifies delivery schedule (used in JIT)
863-->-->Report of Test Results                -->Sends quality/test results if required         
864-->-->Text Message                          -->Unstructured message related to order/shipment

 

3. Inventory / Warehouse Transactions (if applicable)-->

 

940-->-->Warehouse Shipping Order     -->Request to ship goods from warehouse
945-->-->Warehouse Shipping Advice    -->Notification that goods have shipped
943-->-->Stock Transfer Shipment Advice Transfer to warehouse notification  
944-->-->Stock Transfer Receipt Advice-->Acknowledgment of stock receipt     

 

4. Invoicing & Payment-->
810-->-->Invoice                       -->Supplier sends billing information          
880-->-->Grocery Industry Invoice      -->Variant of 810 for grocery                  
820-->-->Payment Order/Remittance Advice Buyer sends payment info or confirms payment
824-->-->Application Advice            -->Used for invoice errors or acceptance status

 

5. Acknowledgment & Status-->
997-->-->Functional Acknowledgment   -->Confirms receipt of any EDI transaction    
999-->-->Implementation Acknowledgment Confirms format/structure (used with 5010+)

Optional Supporting Transactions

EDI CodePurpose
EDI 860PO Change Request
EDI 865PO Change Acknowledgment
EDI 864Text Message (free-form notes)
EDI 840Request for Quotation
EDI 843Response to RFQ

Wednesday, April 2, 2025

EDI flow in the Order to Cash process

 The Order to Cash (O2C) process in EDI (Electronic Data Interchange) refers to the automated exchange of documents between a buyer and a seller, covering the full cycle from placing an order to receiving payment. Here's a step-by-step outline of the EDI flow in the Order to Cash process:


Order to Cash EDI Flow

StepBusiness ProcessEDI Transaction SetPEPPOL Equivalent (if needed)
1Customer sends Purchase OrderEDI 850 – Purchase OrderOrder (PEPPOL BIS 3.0)
2Seller sends Order AcknowledgmentEDI 855 – PO AcknowledgmentOrder Response
3Seller sends Advance Ship Notice (ASN)EDI 856 – ASNDespatch Advice
4Seller sends InvoiceEDI 810 – InvoiceInvoice (PEPPOL BIS 3.0)
5Buyer sends PaymentEDI 820 – Payment Order/RemittanceISO 20022 Payment Messages
6 (optional)Buyer sends Functional AcknowledgmentsEDI 997 – Acknowledgment-

Example Real-World EDI Flow

  1. Buyer sends EDI 850 to Supplier to order 500 units of a product.

  2. Supplier responds with EDI 855 confirming receipt and availability.

  3. When shipping, the Supplier sends EDI 856 ASN including shipment tracking info.

  4. After goods ship, the Supplier sends EDI 810 Invoice.

  5. The Buyer processes the invoice and initiates payment via EDI 820.

  6. Throughout, both parties may exchange EDI 997 Functional Acknowledgments.


Key Transactions

EDI CodeDescription
850Purchase Order
855Order Acknowledgment
856Advance Ship Notice
810Invoice
820Payment Order/Remittance Advice
997Functional Acknowledgment















Here is a detailed, step-by-step explanation of the Order to Cash (O2C) flow using EDI:


Step-by-Step Order to Cash EDI Flow


1. Purchase Order – EDI 850

  • Who: Customer → Seller

  • What Happens:
    The customer initiates the process by sending an EDI 850 document containing the details of the order:

    • Items ordered

    • Quantities

    • Prices

    • Delivery date

    • Shipping address

This replaces a manual purchase order (email, phone, or fax).


2. Order Acknowledgment – EDI 855

  • Who: Seller → Customer

  • What Happens:
    The seller confirms receipt of the purchase order by sending an EDI 855:

    • Acknowledges the order

    • Confirms item availability

    • May suggest changes (e.g., quantity, delivery date)

Helps the customer know if the order is accepted as is or if changes are needed.


3. Advance Ship Notice (ASN) – EDI 856

  • Who: Seller → Customer

  • What Happens:
    Before the goods arrive, the seller sends an EDI 856:

    • Describes contents of the shipment

    • Carrier details, tracking number

    • Packing structure (pallets, cartons, items)

    • Expected arrival date/time

This helps the customer prepare for receipt and automates goods receipt.


4. Invoice – EDI 810

  • Who: Seller → Customer

  • What Happens:
    After shipping, the seller sends an EDI 810 invoice:

    • Billing details for the shipped items

    • Payment terms

    • Any discounts or taxes applied

This document triggers the Accounts Payable process on the customer’s side.


5. Payment/Remittance Advice – EDI 820

  • Who: Customer → Seller

  • What Happens:
    The customer sends an EDI 820:

    • Confirms payment details

    • References invoice numbers

    • May include bank transfer details

 Helps the seller reconcile payments efficiently.


6. Functional Acknowledgments – EDI 997

  • Who: Both Parties (bidirectional)

  • What Happens:
    Every time an EDI file is sent (like 850, 855, etc.), the receiver responds with an EDI 997:

    • Confirms that the EDI file was received

    • Indicates whether it was accepted or rejected

 Ensures message integrity and successful transmission.


 Order to Cash (O2C) process using ANSI X12 EDI

1. Order Management
850-->Purchase Order                                  --> Customer sends an order to the supplier         
855-->Purchase Order Acknowledgment                   --> Supplier confirms receipt and status of the 850 
860-->Purchase Order Change Request - Buyer Initiated --> Buyer requests changes to a previously sent PO  
865-->Purchase Order Change Acknowledgment            --> Supplier confirms acceptance/rejection of 860   

 

2. Inventory & Fulfillment

 

856-->Advance Ship Notice (ASN)                --> Supplier notifies about shipment details            
940-->Warehouse Shipping Order                 --> Request to warehouse to ship goods                  
945-->Warehouse Shipping Advice                --> Confirms shipment from warehouse                    
943-->Warehouse Stock Transfer Shipment Advice --> Sent to notify about stock being moved to warehouse 
944-->Warehouse Stock Transfer Receipt Advice  --> Sent by warehouse when stock is received            

 

3. Invoicing & Payment
810-->Invoice                         --> Supplier sends billing details to the buyer     -->
820-->Payment Order/Remittance Advice --> Buyer sends payment information to the supplier -->

 

4. Status & Reporting
997-->Functional Acknowledgment       --> Confirms receipt of any EDI document                                 
999-->Implementation Acknowledgment   --> Used for X12 5010+ to acknowledge functional group and segment level 
864-->Text Message                    --> Used to send general messages related to orders                      
875-->Grocery Products Purchase Order --> Similar to 850 but specific to the food industry (optional)  

Optional Transactions

  • EDI 940 – Warehouse Shipping Order (to 3PL)

  • EDI 945 – Shipping Advice from 3PL

  • EDI 844/849 – Chargebacks and Allowances