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
| Step | Business Process | EDI Transaction Set | Description |
|---|---|---|---|
| 1 | Purchase Requisition | Internal | Created by buyer in ERP (not usually EDI) |
| 2 | Purchase Order | EDI 850 | Buyer sends PO to Supplier |
| 3 | PO Acknowledgment | EDI 855 | Supplier confirms receipt/acceptance |
| 4 | Ship Notice | EDI 856 | Supplier sends ASN before delivery |
| 5 | Receipt of Goods | Internal/EDI 861 | Buyer receives and confirms goods |
| 6 | Invoice Submission | EDI 810 | Supplier sends invoice |
| 7 | Payment | EDI 820 | Buyer sends payment/remittance |
| 8 | Acknowledgments | EDI 997 | Confirms 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+)
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
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
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
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
997-->-->Functional Acknowledgment -->Confirms receipt of any EDI transaction
999-->-->Implementation Acknowledgment Confirms format/structure (used with 5010+)
Optional Supporting Transactions
| EDI Code | Purpose |
|---|---|
| EDI 860 | PO Change Request |
| EDI 865 | PO Change Acknowledgment |
| EDI 864 | Text Message (free-form notes) |
| EDI 840 | Request for Quotation |
| EDI 843 | Response to RFQ |
No comments:
Post a Comment