EDI Chargeback Transactions

What Is an EDI Chargeback Transaction?

An EDI chargeback transaction is not a standard EDI document like a PO or Invoice.

It is a financial penalty imposed by a retailer on a supplier when EDI or logistics rules are violated.

Retailers usually deduct this amount directly from the supplier’s payment and communicate it through EDI documents or retailer portals.

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Why Do EDI Chargebacks Happen?

Chargebacks happen when a supplier fails to meet retailer EDI compliance requirements, such as:

• Late or missing ASN

• Incorrect ASN quantity or carton data

• Invalid item numbers (SKU, GTIN, FNSKU)

• Late or incorrect invoice

• Incorrect ship-to / GLN / store number

• Labeling or packaging mismatch

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There is no universal EDI “Chargeback” document, but retailers communicate chargebacks using different EDI transactions.

Common EDI Documents Used for Chargebacks

1. EDI 810 – Invoice Deduction

• Retailer deducts chargeback amount from invoice payment

• Seen as a short-paid invoice

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2. EDI 812 – Credit/Debit Adjustment

• Explicit document showing:

  • Chargeback reason

  • Deducted amount

Example reasons:

• Late ASN

• Routing non-compliance

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3. EDI 864 – Text Message

• Used to explain the chargeback in detail

• Often includes free-text reason codes

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4. EDI 824 – Application Advice

• Sent when an EDI document is rejected

• Not a chargeback itself, but often leads to one

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5. EDI 997 / 999 – Functional Acknowledgment

• Confirms whether a document was accepted or rejected

• Rejection and no fix = chargeback later

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Chargeback Flow (Example)

1. Supplier sends ASN (856)
2. Retailer detects ASN quantity mismatch
3. Shipment accepted, but violation logged
4. Retailer issues chargeback
5. Deduction appears in 810 payment or 812 debit memo

How EDI Works: From ERP to Trading Partner (Step-by-Step)

Electronic Data Interchange (EDI) connects two businesses by allowing their systems to exchange documents automatically—without emails, PDFs, or manual data entry. Let’s walk through the complete journey of an EDI document, from ERP to trading partner, in simple steps.

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Step 1: Business Transaction Created in ERP

• A business event occurs in the ERP system (SAP, Oracle, NetSuite, etc.)

• Example: A buyer creates a Purchase Order

• The ERP stores data like item, quantity, price, ship-to address

Note: This is raw business data, not yet EDI

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Step 2: Data Extracted from ERP

• Relevant data is picked from ERP tables or flat files

• Extraction happens via IDoc, XML, CSV, or database query

• Only required fields are selected based on trading partner rules

Note: ERP data is prepared for EDI translation

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Step 3: Data Translated into EDI Format

• EDI translator converts ERP data into standard EDI format

• Common formats: X12 (850, 855, 856, 810) or EDIFACT (ORDERS, ORDRSP, DESADV, INVOIC)

• Partner-specific mapping rules are applied

Note: Business data becomes an EDI document

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Step 4: Validation & Compliance Check

• EDI file is validated against standards and partner rules

• Checks include:

  • Mandatory segments

  • Correct codes and qualifiers

  • Control numbers

Note: Invalid files are rejected before transmission

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Step 5: Secure Transmission to Trading Partner

• The validated EDI file is sent using an agreed method:

  • AS2

  • SFTP

  • VAN

  • API

  • FTP

  • OFTP2

• Security features include encryption and authentication

Note: File is securely delivered

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Step 6: Functional Acknowledgment (997/CONTRL)

• Trading partner sends acknowledgment confirming receipt

• Confirms file structure, not business acceptance

• Helps ensure no data is lost

Note: Sender knows the file arrived successfully

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Step 7: Trading Partner Receives & Translates

• Partner’s EDI system receives the file

• EDI is translated back into their internal format

• Data is mapped into their ERP system

Note: EDI becomes usable business data again

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Step 8: Business Processing in Partner ERP

• Partner’s ERP processes the transaction automatically

• Example actions:

  • PO creation

  • Shipment planning

  • Invoice matching

Note: No human intervention required

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Step 9: Response EDI Document Sent Back

• Partner sends a response document:

  • 855 (PO Acknowledgment)

  • 856 (ASN)

  • 810 (Invoice)

• Same EDI flow repeats in reverse direction

Note: Two-way automated communication

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Simple Real-World Flow Example

1. Buyer sends EDI 850 → Purchase Order

2. Supplier sends EDI 855 → Order confirmation

3. Supplier sends EDI 856 → Shipment details

4. Supplier sends EDI 810 → Invoice

5. Buyer sends EDI 820 → Payment

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Why This Flow Matters

• Eliminates manual data entry

• Reduces errors and delays

• Enables real-time supply chain visibility

• Scales easily for high transaction volumes

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Summary

EDI works like a digital conveyor belt—moving business data smoothly from one ERP system to another. Once set up, it runs silently in the background, powering global trade every second.

Understanding this flow is the foundation for learning EDI mapping, testing, troubleshooting, and integration projects.

Understanding the EDI Workflow

An EDI (Electronic Data Interchange) workflow is the automated process that enables businesses to exchange documents (like Purchase Orders, Invoices, ASNs, etc.) electronically, without manual intervention.

It defines how an EDI document:

1. Is generated

2. Is sent to a trading partner

3. Is received

4. Is processed by the receiving system (ERP or other)

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Typical EDI Workflow (Step-by-Step)

1. Data Creation

• A user enters an order in their ERP system (like SAP, Oracle, etc.)

• This triggers the generation of an EDI document (e.g., 850 = Purchase Order)

2. Outbound EDI Mapping

• Internal ERP data is mapped to the EDI format (X12, EDIFACT, etc.)

• This mapping is handled by the EDI translator or middleware (like Cleo, IBM Sterling, BizTalk)

3. Transmission

• The EDI document is sent to the trading partner using a communication method like:

  • AS2

  • FTP/SFTP

  • VAN (Value-Added Network)

  • OFTP2

  • API (modern hybrid EDI)

4. Inbound Processing

• The trading partner receives the EDI document

• It’s translated into their internal format and processed into their ERP system

5. Acknowledgment (optional)

• An EDI 997 or CONTRL file is sent back to acknowledge receipt of the document

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Tools That Manage EDI Workflows:

• Cleo Integration Cloud (CIC)

• IBM Sterling B2B Integrator

• OpenText

• MuleSoft

• Boomi

• SAP PI/PO (for SAP customers)