Classified POs in EDI

An EDI 850 Purchase Order is an electronic version of a paper Purchase Order, generally referred as “PO”. Companies use EDI to reduce the errors and costs associated with the manual keying of data, and to speed up the process of sending and receiving Purchase Orders. A buyer will use the 850 Purchase Order to communicate to a supplier the specific items, price, and quantities they wish to have delivered.

One of the important aspects of PO is the different types of Purchase Orders which is passed through the BEG02 Segment of 850 EDI data transmission depending upon the customer’s requirement. This topic is put up to throw some light on the Purchase Order Type Codes.

Standalone [SA]: A discrete, one-time commitment to a supplier for material.

Rush Order [RO]: Requisition requiring issuance of a Purchase Order in less than 5 days. In order to avoid costly disruption of pre-planned programs, or to eliminate a significant safety or security problem, order must be accompanied by the Purchasers, justifying explanation. Here invoice can be sent after some time but the delivery should happen immediately. Generally this happens in the festive seasons.

Blanket order [BE] / [BK]: A blanket order is defined as an order the customer negotiates with its supplier. This order contains multiple delivery dates scheduled over a period of time for specific goods, sometimes at predetermined prices. It is normally used when there is a recurring need for expendable goods. Hence, items are purchased under a single purchase order rather than processing a separate P.O. each time new supplies is effected.
Types of Blanket Order
There are two types of Blanket Orders, one with firm quantity and the other with Estimated quantity.

Blanket order (firm quantity)[BK]: The Type Code of "BK" will identify a bulk Purchase Order, with store/quantity allocations. The same purchase order number in the bulk "BK" order will be transmitted in the release "RL" order.

Blanket order (Estimated quantity)[BE]: The Type Code of "BE" will identify a bulk Purchase Order, without store/quantity allocations ie Not Firm Commitment. The same purchase order number in the bulk "BK" order will be transmitted in the release "RL" order.

Advantages of Blanket Orders
For the customers, negotiating a blanket order will dispense him from holding large inventories of goods, while letting him avoid the administrative expense of processing frequent purchase orders. Also, it will often give him access to favorable discount pricing through volume commitments.
As for supplier, the advantage in signing blanket orders include better management of its own supplies, as well as better planning of delivery and production cycles. Also, signing blanket orders can ensure a steady workflow, rather than producing / supplying large quantities of products at irregular intervals.

Usage of Blanket Orders

Blanket purchase orders should be used when
• There is repetitive purchase of specific goods and service from the same supplier, which are paid in a predictable manner.
• Orders require numerous shipment / excessive storage.
• Enable the purchaser to obtain favorable pricing through volume discount.
• Supports a long-term relationship between the purchaser and the supplier.

Blanket purchase orders generally should not be used when
• No benefits will be derived over use of a regular Purchase Order (i.e. volume discount).
• Quality of services and goods supplied by vendor are questionable.
• No relationships exist between the purchaser and the supplier

Content of a Blanket Order
Blanket orders format usually include the following information:
• The beginning and ending time period for the blanket order;
• A cancellation clause;
• Items and/or categories of items to be covered by the blanket purchase order;
• The estimated quantity including a maximum (if any);
• Prices and pricing arrangements;
• Terms and billing arrangements;
• Personnel authorized to issue order releases;

Release Order [RL]: An order for goods and services placed against a pre-existing contract or blanket order The Type Code of "RL" will identify a release of a bulk order, with the store/quantity allocations transmitted in the SDQ segment. The same purchase order number transmitted in the bulk "BK" order will be transmitted in the release "RL" order.

Dropship [DS]: Dropshipping is a very common phenomenon in the Retail Industry. It gained popularity for its usefulness and commercial viability. We will discuss about it and also how should do we handle it in EDI ANSI X12.

What is Dropshipping And How Does it Work?
Drop-shipping means shipping products from a wholesale supplier directly to your retail customer. In other words, you sell products in your online store, and ship the goods to your customers directly from the warehouse of your drop-ship wholesale supplier.

Why would you want to do this? Well, you only BUY a product after you already SOLD it to your customer. There's no risk of having piles of unwanted stock in your inventory.

And if you've ever sold anything and sent the products to your customers, you'll know there's a lot of time, effort, and costs involved in packing and shipping things. When you're drop-shipping, the drop-ship supplier takes care of all that for you.

Won't the customers just go direct to my wholesaler and not buy from me any more?
With a good drop-shipper, your customer only has contact with you, not with the supplier. The wholesale products will be sent "blind" by the supplier so that your customers cannot trace the name and address of the drop-ship source.

Why Consider Drop Ship Wholesale Sourcing?
• You can start a business selling products without a large initial investment;
• You don't have to buy electronics in bulk - just order after you get paid by your customers;
• You can 'stock' your online shop with a huge range of the latest products;
• All the item descriptions and pictures, you can just copy from your supplier;
• You can list items for sale, and if they aren't popular, you didn't lose anything;
• No warehouse costs and no risk of 'dead' stock;
• You don't have to worry about packing materials, shipping labels, paying couriers for delivery, or customising the product contents for different regions;
• You can sell and ship to customers anywhere in the world;
• You set your own prices and profit every time you sell something!

Who can avail the benefit of Drop-ship Selling ?
• Anyone who wants to start a home based business
• Anyone who wants to start an online business
• Anyone who has an eBay business
• Anyone who doesn't want to hold inventory
• Anyone who doesn't like overhead costs

Benefits which can be derived from Drop ship consignment
• Eliminates cost of faxing, mailing, or overnighting packing slips
• Eliminates hard copy printing
• Increases availability and accuracy of up-to-date order status, shipping, and invoice information
• Improves customer service
• Reduces labor requirements
• Supports a broader selection of merchandise without additional inventory costs
• Enables faster revenue recognition
• Enhances revenue generation by extending peak/holiday selling seasons
• Improves supplier management

Direct ship—direct shipping [DR] and drop shipping are two terms generally used interchangeably. They describe a process whereby three parties interact with the sales transaction (the buyer, the seller, and the supplier). The buyer initiates a purchase from the seller who then arranges with the supplier to ship the product directly to the seller. The seller does not carry inventory of the product and the supplier does not have any direct communication with the buyer. The buyer pays the seller and the seller pays the supplier. Though both terms (direct ship and drop ship) are generally used to describe the same process, I've always considered a small distinction between the two that relates two where you are in the supply chain. To the seller, direct shipping describes both the process and an inventory/sales strategy, however, the supplier will frequently just use the term "drop ship" to describe the process whereby he is shipping the product to an address other than that of his customer (the business that is paying him for the product). Sometimes the term drop ship also describes the process of shipping to any location that is different from the customer's normal shipping location. This subtle distinction is sometimes evident in the terminology used in software documentation.

There are many more types of POs passed through BEG02, like, New Order [NE], Special Order [OS], Reorder [RE] etc which are also commonly used.

For any other info, mail me at madhurima@crossroadtechnologies.in