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How EDI enables the Retail Supply Chain

Suppose a company such as Walmart, Carrefour or Metro needed to place an order for $1 million from a clothing supplier. Perhaps the order consists of an assortment of “basics” such as black socks and white t-shirts for the men’s departments of its stores in the US.  The merchandising team at the retailer first analyzes the various brands, colors, sizes, styles, prices, and packaging to select an appropriate assortment for their stores.

Once a decision is made to purchase a particular set of products from a vendor, the retailer issues a Purchase Order (PO). In the US, the PO is routed to the supplier as an ANSI 850 EDI transaction. The supplier assesses the quantities, timing and terms of the retailer’s PO to determine if they have the capacity and resources to fulfill the request. If so, the supplier acknowledges the order using an EDI transaction called the 855. Buyers may adjust the order quantities or compositions later based upon changes to their sales forecasts. A Purchase Order Change will then be issued to the supplier in the form of an EDI 860 transaction.

The supplier then routes the confirmed order to its warehouse. For most basic products, apparel suppliers keep inventory on hand to fulfill retailer purchase orders. However, if sufficient inventory does not exist, then the supplier forwards the order to one of its manufacturing plants requesting that additional quantities be produced. 

Once the goods have been packaged for delivery, the supplier forwards an Advanced Shipment Notice (ASN) to the retailer. The ASN—an EDI 856 transaction—provides details about the goods shipped such as the descriptions, quantities, weights and packaging configuration. The ASN will also provide an estimated delivery date and the name of the trucking company carrying the load. As the goods are transported the trucking company may provide a shipment status update electronically to the buyer and/or supplier. When the goods arrive at their final destination, the transportation carrier typically sends an electronic proof of delivery back to the supplier as a confirmation.

The process can be slightly more complex for goods manufactured overseas. In such a case, EDI might be used by the supplier to submit export declarations to its local customs agency. There are also EDI transactions that can be exchanged with ocean freight carriers to arrange for transportation of goods.

This excerpt was taken from my new book on B2B e-commerce, Herding Geese – available on

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