EDI Business Processes: Order-to-Cash, Procure-to-Pay, and Plan-to-Produce

EDI (Electronic Data Interchange) automates business transactions between trading partners. Below are the three primary EDI business processes and their key steps:

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1. Order-to-Cash (O2C) Process

This process involves the complete sales cycle, from receiving a customer order to collecting payment.

Key Steps:

1. Order Placement (EDI 850 - Purchase Order)

   • The customer sends a purchase order to the supplier.

2. Order Acknowledgment (EDI 855 - PO Acknowledgment)

   • The supplier confirms order receipt and acceptance.

3. Order Fulfillment & Shipping (EDI 856 - Advance Ship Notice)

   • The supplier ships the order and notifies the customer about shipment details.

4. Invoicing (EDI 810 - Invoice)

   • The supplier sends an invoice after shipping the products.

5. Payment Processing (EDI 820 - Payment Order/Remittance Advice)

   • The customer sends payment with details on applied invoices.

6. Order Reconciliation (EDI 812 - Credit/Debit Adjustment, EDI 997 - Functional Acknowledgment)

   • Any disputes or adjustments (returns, pricing issues) are handled electronically.

✅ Outcome: The supplier receives payment, and the customer gets the ordered goods.

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2. Procure-to-Pay (P2P) Process

This process focuses on a company’s procurement of goods and services from suppliers and making payments.

Key Steps:

1. Requisition & Purchase Order (EDI 850 - Purchase Order)

   • The buyer generates and sends a PO to the supplier.

2. Order Confirmation (EDI 855 - PO Acknowledgment)

   • The supplier confirms order acceptance or modifications.

3. Shipping & Goods Receipt (EDI 856 - ASN, EDI 861 - Receiving Advice/Acceptance Certificate)

   • The supplier ships goods and the buyer acknowledges receipt.

4. Invoice Submission (EDI 810 - Invoice)

   • The supplier submits an invoice for payment.

5. Invoice Approval & Payment (EDI 820 - Payment Order/Remittance Advice)

   • The buyer processes the invoice and initiates payment.

✅ Outcome: The buyer successfully procures and pays for goods/services while maintaining financial control.

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3. Plan-to-Produce (P2P) Process

This process ensures efficient production planning, inventory management, and supply chain execution.

Key Steps:

1. Demand Forecasting & Planning (EDI 830 - Planning Schedule, EDI 862 - Shipping Schedule)

   • The buyer provides demand forecasts to suppliers.

2. Material Procurement (EDI 850 - PO, EDI 855 - PO Acknowledgment)

   • The manufacturer orders raw materials based on production needs.

3. Manufacturing Execution (EDI 866 - Production Sequence)

   • The production team follows the planned sequence for manufacturing.

4. Shipment to Warehouse/Customer (EDI 856 - ASN, EDI 940 - Warehouse Shipping Order)

   • Finished goods are shipped to warehouses or customers.

5. Inventory & Sales Reporting (EDI 852 - Product Activity Data, EDI 846 - Inventory Inquiry/Advice)

   • Real-time inventory updates are shared with partners.

✅ Outcome: The manufacturer efficiently produces goods to meet customer demand with optimal inventory levels.

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Summary

Each of these processes plays a vital role in optimizing supply chain efficiency. EDI integration automates transactions, reduces errors, and enhances collaboration between trading partners.