EDI 860: Advantages of Purchase Order Change Request

by | Oct 17, 2018 | Compliance, Retailers, Suppliers

Sometimes changes are needed after a purchase order is sent, but before the order has been shipped. Perhaps you need more or less quantity, or a new color variation has become available and you don’t want to wait until you submit the next order. Maybe you just want to cancel the order altogether. These situations and more are when a purchase order change request comes in handy. A purchase order change request is an important electronic data interchange (EDI) document because it ensures that the final order is correct, and it also helps with transaction reconciliation and proper, accurate payment when the invoice for payment arrives.

What’s a purchase order change request?

The purchase order change request is a type of transaction typically sent from a buyer (retailer) to a seller (vendor, distributor, manufacturer) when a revision to a previously submitted purchase order is required. Also known as an 860 in EDI systems, this document provides information describing the original purchase order, as well as the changes needed for the purchase order. Changes may include:

  • Add items
  • Add quantity
  • Change items
  • Price adjustment
  • Order cancellations
  • Reschedule delivery date
  • And more…

PO changes can occur at different times within the order cycle. One might be sent after an order is shipped to perhaps correct pricing before billing happens. They can be sent if a portion of the order has been shipped, but the balance of the order needs a quantity adjustment, new ship date or has to be outright canceled.

In the UN/EDIFACT standard (United Nations Electronic Data Interchange for Administration, Commerce and Transport), the PO change request is referred to as the ORDCHG. Grocers have their own variation of this EDI document, 876: Grocery Product Purchase Order Change.

It’s also important to note some businesses don’t use they documents at all. Instead retailers just provide an updated 850 EDI purchase order.

PO change request for buyers

The EDI 860 enables the supplier to invoice the retailer for the correct amount, and ensures that the retailer doesn’t overpay for items that weren’t delivered. Here is an example for how a typical order transaction process with an 860 might occur.

A retailer originally submitted a purchase order to buy 5,000 units of a product from the seller. However, the seller didn’t have enough on hand, so they sent a purchase order acknowledgement to the buyer that said “We received your purchase order. We have 4,000 of those united, but can’t fulfill 5,000.” The seller also said they’d send the additional 1,000 units at a later date.

The retailer really needed 5,000 units by a certain time; they couldn’t wait for the rest to come later. However the budget had already been allotted for a vendor that couldn’t fulfill the entire order. So the retailer sent the vendor an EDI 860, Purchase Order Change Request, updating the original purchase order from 5,000 to 4,000 units. Now the retailer is free to source the additional 1,000 units from another seller, knowing they have the full budget to do so.

Within an EDI solution, an 860 can be processed automatically, and all order information will be updated and reconciled across the system without the need for manual data entry or human intervention. It may be set up in the Workflow/Approval process so that the POA can be reviewed by human eyes before updating if a decision is needed to be made.

Retailers that practice just-in-time inventory should consider enabling and integrating EDI 860. It helps buyers with order just as many products as are needed, and helps to ensure they’re ordered when they’re needed.

Sellers can request PO changes

A purchase order change request can also be sent from a seller to a buyer, though they may use a different document to accomplish this. Depending on what the retailer or distributor supports, it could be the 855 (purchase order acknowledgement) or EDI 865, Purchase Order Change Request/Acknowledgement – Seller Initiated.

If a seller doesn’t have enough of a product on hand, they can send the 865 (or 855) to the buyer, with the updated quantity of what is available. The buyer can then choose to update the purchase order, or cancel the order altogether if that’s the better choice.

Sellers also use the EDI 865 document to communicate the acceptance or rejection of purchase order changes previously submitted by the buyer.

EDI and the 860

PO change requests are a vital and fundamental EDI document for better inventory management, a more efficient supply chain and accurate financial transactions. Whether added to an automated workflow process or reviewed individually, they can help to ensure that suppliers invoice the right amount, and retailers don’t overpay for product that wasn’t received.

Want to know more about other vital EDI documents for a more efficient and tight supply chain? Take a look at the advanced ship notification (ASN). After the purchase order is sent, and all necessary changes have been made, the seller sends the ASN, letting the buyer know when, where and how the shipment is being sent, as well as other vital information that can help make unloading the delivery faster and more efficient. The ASN is also known as EDI 856, Outbound Ship Notice/Manifest or DESADV.

EDI is fundamental for satisfying consumers and competing on the modern retail landscape. If you would like more info about implementing EDI, the 860 purchase order change request or would just like to learn about our cloud-based EDI solution, please contact an EDI expert at SPS Commerce today.

For more deep-dives into common EDI documents and transactions, take a look at our previous posts about purchase order changes, electronic invoices and advanced shipping notices.

Scott Bolduc