EDI 855 Purchase Order Acknowledgment: Definition & Structure

Gone are the days of responding to purchase orders at a leisurely pace. Buyers now expect you to acknowledge their orders quickly and confirm that their requested items are in stock. But lightning-fast response times are difficult if you still rely on manual processes. That’s why EDI 855 purchase order acknowledgments are so handy.

Electronic data interchange, better known as EDI, lets businesses share electronic documents in a standardized format. An EDI 855 is one of many EDI transactions that can streamline operations and improve your business relationships. Sellers use the EDI 855 transaction set to confirm purchase orders (EDI 850) and let buyers know if they need to make any changes.

How is an EDI 855 Used?

An EDI 855 is sent by a seller to confirm they received and processed a buyer's purchase order. Large companies, including distributors and retailers, often require vendors to use an EDI 855. Some buyers require the document within a time constraint, so check each buyer's trading requirements.

Sellers also use the EDI 855 to verify their ability to fulfill orders and inform buyers of any mistakes in the initial purchase order, such as price discrepancies. If there are errors, vendors can use an EDI 855 to reject the purchase order or request corrections.

The 4 Main Components of an EDI 855 Transaction Set

Every EDI transaction set follows a standard format — a significant benefit of EDI for consistent, scalable operations. An EDI 855 contains the following components, ensuring buyers and sellers share vital information:

• Purchase order details: The document provides details about the original purchase order, such as the PO number, accepted product quantities, and delivery information.
• Proposed changes: If an item is out of stock, the seller may propose a substitution. Sellers also use an EDI 855 to alert buyers to backordered items, discontinued items, and delivery changes.
• Errors: A buyer may make errors when filling out a purchase order, such as transposing two digits in a product identification number. Sellers use an EDI 855 to point out these errors so buyers can correct them.
• Vendor number: The 855 EDI format always lists the vendor number, making it easier for buyers to organize documents related to purchases.

6 Benefits of Using an EDI 855 for Sellers and Buyers

The EDI purchase order acknowledgment benefits buyers and sellers. Some advantages depend on the size of your organization and your overall workflow, but you can generally expect the following:

EDI 855 for Sellers

1. Better customer service: EDI saves time by eliminating the need to confirm purchase orders via telephone, fax, or email. Fast responses lead to happy customers and stronger business relationships.
2. Increased accuracy: EDI eliminates the need to type in purchase order numbers or customer details, reducing the risk of data-entry errors. That means no more wasted time tracking down and addressing mistakes.
3. Improved workflow: Implementing EDI increases efficiency by eliminating manual processes that distract employees from more essential activities. You may even increase your output without significantly increasing your resource usage.

EDI 855 for Buyers

1. Improved decision-making capabilities: An EDI 855 helps sellers alert you to out-of-stock, discontinued, and backordered items so you can make informed business decisions. For example, if an item is on backorder, you can decide whether to wait for the next shipment or substitute a similar item.
2. Better inventory management: With an EDI 855, it's easier to manage your inventory, preventing stockouts while minimizing inventory carrying costs, such as storage, handling, and insurance. You’re also better equipped to respond to inventory inquiry/advice transactions (EDI 846) from partners when you automate your inventory management.
3. Expedited accounting processes: When you send purchase orders via mail, you must wait days or weeks for vendors to confirm your proposed payment terms. An EDI 855 speeds up purchase order processing, giving your accounting team the necessary information to schedule payments and manage other order-related accounting functions

An EDI 855 Example

The EDI 855 follows the X12 format specified by the American National Standards Institute (ANSI). Although it’s a standardized format, buyers and sellers often use different systems for viewing and managing EDI documents. As a result, you may need to employ EDI mapping so your trading partners can view the data you're transmitting.

For example, if you use an enterprise resource planning system (ERP) and one of your partners uses a warehouse management system (WMS), you may need to reformat your data or use a different file type. An EDI 855 mapping document helps you meet each trading partner's requirements.

EDI 855s vs. 997s

The EDI 855’s definition may seem indistinct from the EDI 997’s. Both documents respond to purchase orders, but they serve different functions.

As noted previously, the 855 transaction set is used by a vendor to confirm it has received and processed a purchase order. It may also inform a buyer of any problems preventing the purchase order’s fulfillment.

The EDI 997 functional acknowledgment isn't as detailed as EDI 855. It simply confirms that a purchase order has been delivered without specifying whether the seller agreed to the terms or has the ordered items in stock. Therefore, EDI 855s and EDI 997s aren't interchangeable.

Transform your Business with EDI 855s and Orderful

Integrating EDI 855s into your supply chain operations streamlines the order acknowledgment process, helping you achieve greater efficiency, accuracy, and communication throughout your network. This leads to improved relationships among trading partners.

Orderful’s modern EDI platform makes it easy for manufacturers, retailers, distributors, and logistics experts to start using electronic data interchange. We offer rapid testing and onboarding, so you can enjoy the benefits of the EDI 855 and other transaction sets within days, not months. Speak to one of our experts to learn how to transform your business with a modern EDI solution.