How Purchase Order Acknowledgements Can Transform Your Supply Chain

by | Jan 20, 2021 | Retailers, Suppliers

With the growth of eCommerce and omnichannel shopping, fulfilling orders has become increasingly complex. This makes communication between buyers and sellers more important than ever, particularly when it comes to exchanging information about the status of orders. That’s where the purchase order acknowledgement comes in. Although order acknowledgements are sometimes overlooked, they have become one of the most crucial EDI documents for buyers and sellers. 

What is a purchase order acknowledgement (POA)?

Also known as an EDI 855 document, the POA has several functions including:

  • Acknowledges receipt of a purchase order
  • Communicates the supplier’s intent to fulfill the order
  • Reports any errors on the order (including pricing and correct part numbers)
  • Indicates issues with fulfilling the order, such as insufficient quantities or items on backorder and may request changes or reject the order altogether
  • Provides retailers with delivery status information to share with end-customers for direct-to-consumer drop shipments

Want to learn more about getting the data you need from suppliers to efficiently manage orders? Get our free order management playbook. 

Put simply, order acknowledgments tell a buyer how much of the product they can expect from a seller.

If all parties are on automated, integrated EDI systems, this exchange of information can happen automatically — without any faxing, emailing or manually entering orders into the system.

What happens without automated purchase order acknowledgements?

Let’s say a retailer orders 5,000 units of a particular product, but the supplier only has 2,500 units. The supplier ships the 2,500 units, however, they don’t tell the retailer ahead of time that they’re only sending half as much as they ordered. The retailer finds out at the last minute, when it arrives, and now they don’t have the inventory they need at the right time.

This causes issues with satisfying customers, managing inventory, and later, reconciling invoices against what was ordered. 

Purchase order acknowledgements enable proactive order management

Using the same example, let’s say that a retailer orders 5,000 units but this time, they have automated order acknowledgements in place. The supplier lets the retailer know that they only have 2,500 units and they’re shipping them to arrive Wednesday.

Now the retailer knows they’re getting 2,500 units. They can proactively find another supplier for the additional 2,500 units rather than scrambling to meet the quantity needed after the short order hits their receiving dock. All the required inventory shows up when expected, customers’ expectations are met and it’s easy to reconcile the invoice when it arrives.

With automated purchase order acknowledgements, all the information about an order is contained in one location. Retailers can be notified whenever they receive a POA from a supplier, or if they don’t receive it in a certain amount of time after sending an order. 

Automated order acknowledgements reduce time-consuming and costly issues, such as ordering and holding more inventory than needed. In addition, they eliminate the need for hiring additional staff to manually manage order status with suppliers. 

Getting more timely and complete order data from suppliers — including purchase order acknowledgements — can have a multi-million-dollar impact for many buying organizations. Talk with an SPS Commerce specialist or download our free playbook to learn more about how SPS can help you proactively manage orders.

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Scott Bolduc