White Paper: 

The ABCs of EDI: 
A Comprehensive Guide 
for 3PL Warehouses 

EDI means a lot of things to a lot of people.

As a public warehouse, EDI support often
means the difference between winning and
losing a customer.

This Guide covers the critical touch points

your warehouse management system (WMS)
must have in order to be "EDI friendly."

820 Manhattan Ave.

Suite 102
Manhattan Beach, CA 90266
1-888-375-2368
info@3plcentral.com

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 Introduction: The ABCs of EDI

Electronic Data Interchange (EDI) means a lot of things to a lot of people. As a public warehouse, EDI
support often means the difference between winning and losing a customer. By supporting EDI, a public
warehouse is able to support larger and more sophisticated customers. Also, once implemented, EDI
connectivity is a solid foundation for partnerships with customers and it encourages more strategic and
long-term customer relationships.

It is important to highlight that this guide is focused on 3PL warehouses which manage inventory of
others. Typically this inventory is not owned by the 3PL, but is owned by suppliers and shipped based
on the supplier's direction to retailers, distributors, businesses and consumers. This Guide covers the
basics of 3PL warehouse EDI and outlines the critical touch points your warehouse management
system (WMS) must have in order to be "EDI friendly." Most importantly, it will give you an EDI overview
that will help improve your bottom line.

3PL Warehouse Business Requirements

EDI provides a platform for system-to-system communication between businesses. In the world of 3PL
warehousing, the center of the universe is the supplier. As a 3PL, therefore, EDI is used to allow more
efficient and accurate communications between the supplier and their trading partners which includes
transportation providers and retailers.

The other nuance of a 3PL environment is that the 3PL warehouse holds inventory for multiple
suppliers. In essence, for the 3PL there are multiple individual supplier warehouses within one larger
3PL warehouse facility. This 3PL warehouse business structure necessitates having a WMS system
that can support a multi-client and multi-user environment. EDI capabilities put further demands on the
multi-client requirement of the WMS because the WMS must also address the various trading partners
associated with each supplier.

Key EDI trading partners for 3PL warehouses:

 Suppliers
 Retailers
 Transportation Providers

Build a Scalable 3PL

Warehousing Operation
Since suppliers often have many
different trading partners, it is critical
to have a WMS which also can
support multiple different EDI
connections per supplier

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 Across these multiple trading partners, the following are the most typical systems that are
integrated with a 3PL warehouse management system:
 Suppliers: ERP/Accounting software
 Suppliers: eCommerce
 Retailers: Direct connections
 Retailers: EDI service providers
 Transportation Providers: TMS systems
 Transportation Providers: Direct system connectivity

What EDI Means to 3PL Warehouses

The broadest definition of EDI refers to the structured transmission of data between organizations
by electronic means without human interaction. For example, the transmission of orders from one
trading partner to another.

EDI is best known for communication between retailers and suppliers and between original
equipment manufacturer (OEM) and supplier within the automotive industry. As technology has
improved, EDI is increasingly common for communication between a variety of trading partners.
This growth of integration streamlines communications and reduces friction in any supply chain.

For 3PL warehouse, EDI includes three main categories:

–Excel Documents (via email)
–Files via FTP (multiple different formats)
–Web Service Calls

When a supplier is speaking about EDI in the United States, they are typically referring to a family
of ANSI ASC X12 standard documents.

What are the benefits of EDI?

By implementing system-to-system integrations, there are many benefits for both the 3PL
warehouse and supplier. Those EDI benefits include:

3PL Warehouse Benefits

 Handle more shipments per day
 Handle more customers
 Enhanced worker efficiency -- focus staff on value-added functions
 Increase accuracy and reduce manual data entry
 Secure larger and more sophisticated clients
 Differentiation from the competition and enhance ability to win business

3PL Customer (Supplier) Benefits

 Reduce manual data entry
 Reduce Order-to-Cash cycle
 Real-time data for accurate reporting
 Minimize retailer chargeback fees (retailer EDI)

The 3 Components of an EDI Message

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 To simplify the discussion, it is helpful to separate the components that make up an EDI
transmission. Some formats are transmitted by just one method. For explanation purposes, we
separate the data format from transmission method to help 3PL warehouses better classify and
discuss EDI with current and potential customers (suppliers).

The 3 components of an EDI message are:

#1 - Transmission Method: How data is transmitted (Email, File upload, FTP, Web Service
Calls)
#2 - Document Type: Which document data will be sent - Orders (940/945), Receipts
(943/944), and Inventory Levels.
#3 - Data Format: The format in which the data going to be transmitted (X12, XML,
CSV, Flat File)

While business users will determine the Document Type and workflow, it is the Information
Technology (IT) team that will work through the integration details. The optimum transmission
method and file format is determined by the two systems that are communicating. Determining
which documents will be transmitted, in what format and by what method is usually determined
between the trading partners and the 3PL warehouse.

#1 - TRANSMISSION METHODS

The various Transmission Methods of an EDI message are:

Email
A significant improvement over manual data entry, emailing of data eliminates manual typing, but
still necessitates human involvement.

File Upload
In the world of 3PL-focused WMS systems, file upload is quite common and can be handled by
either the 3PL front office staff or directly by the customer. One example is the uploading shipment
request - AKA Warehouse Shipping Order. This could be done once a file has been emailed to the
3PL warehouse operator or could be uploaded directly by the customer thought a web portal. File
uploads are a terrific way to empower customers while minimizing the need to manually type (or
retype) data.

File Transfer Protocol (FTP)

FTP is an Internet standard method of sharing files between people or systems in a reliable and
secure fashion. FTP is how the majority of system-to-system integrations are implemented. The
mechanics of FTP revolve around a shared file location setup on a computer (FTP server) that is
accessible by both trading partners (i.e. Supplier and 3PL) via the Internet. This allows one trading
partner to "post" a document to the FTP server at any time. The receiving trading partner checks
this shared location on a regular basis (typically every 15 minutes) to see if a file has been posted.
Once retrieved, the sent file is archived and the process is repeated for the next batch of orders.
Value Added Networks (VAN) often use the FTP protocol to exchange data.

Web Service Call

The World Wide Web Consortium (W3C), a trade association focused on Internet standards,
defines a web service call as "a software system designed to support machine-to-machine
interaction over a network.” Web service calls are formatted in XML programming language and
typically follow the SOAP protocol. The biggest benefit is that all communications are real-time and
synchronous -- making Web Service Calls the best solution for modern systems.

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 #2 - DOCUMENT TYPE

There are a limited number of document types that are typically shared between 3PL warehouse
and others. These primary documents focus on the receiving and shipping process. These
"standard" documents are pre-formatted X12 data structures which could also be transmitted in any
other file format. For this reason, there is a brief description of the document to help highlight its
purpose and content of the document.

Key EDI X12 Documents

940 - Warehouse Shipping Order Request for shipment includes consignee, item numbers,
quantities, shipment method, etc. – often originates from a retailer 850 Purchase Order.
943 - Warehouse Stock Transfer Shipment Advice Notice to a warehouse from a supplier that a
receipt will arrive including item numbers and quantities.
944 - Warehouse Stock Transfer Receipt Advice Notice to a supplier that a receipt arrived
including actual quantities received.
945 - Warehouse Shipping Advice Notice to a supplier that a 940 has shipped and includes carton
IDs, UCC-128 carton numbers, and tracking numbers where appropriate -- often converts into a
retailer 856 Advanced Ship Notice and 810 Invoice.
947 - Warehouse Inventory Adjustment Advice Notice to a supplier when inventory has been
adjusted.

A full list of X12 EDI transaction sets can be found here:

http://www.x12.org/x12org/docs/EDITransactions.pdf

#3 - DATA FORMAT
The four most common data formats for EDI are: X12, XML, CSV, Flat File (tab-delimited, fixed-
position).

X12 - ANSI ASC X12

X12 is the standard developed by ANSI ASC X12. It is a fixed position with a fixed number of
characters (width) per position. This format provides consistency, but is generally limited in its
flexibility.

XML - eXtensible Markup Language

eXtensible Markup Language (XML) is an open Web standard for encoding documents in machine-
readable form. The most common XML-based language is SOAP which is used to facilitate Web
service calls. XML is extremely flexible and terrific for system-to-system application programming
interfaces (APIs).

CSV - Comma Separated Values

A comma-separated values (CSV) file is a simple text format for a database table. Each record in
the table is one line of the text file. Each field value of a record is separated from the next by a
character (typically a comma.) CSV is a simple file format that is widely supported. It is often used
to move tabular data between different computer programs that support the format including
Microsoft Excel.

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 Flat File (tab-delimited, fixed-length)
A flat file is a plain text file which usually contains one record per line. Within such a record, the
single fields are separated by delimiters such as tabs or can be separated by having fixed length.

The chart below summarizes the accuracy and efficiency of the most common transmission
methods and data formats combinations:

Fully-Automatic: FTP & Web Service Calls

Bet

X12 XML CSV Flat Files

ter

g
s in
Semi-auto: Email / Direct Import

rea
CSV

Inc
Accuracy Automation
Wo

Manual: Manual Data Input

Real-Time Data
rse

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 Real-Life EDI Scenarios
The best way to truly understand how the technology previously discussed works together is to
illustrate some real-world scenarios. The five most common 3PL warehouse EDI scenarios are:
1. Retailer Orders via Direct Supplier Connection
2. Retailer Orders via EDI Service Provider
3. eCommerce Shopping Cart Integrations
4. B2B (Non-Retailer) Orders Directly with Supplier
5. Communication with Carriers/TMS systems

SCENARIO 1: Retailer Orders via Direct Supplier Connection

The most common reason for a 3PL warehouse to need EDI capabilities is to support retailer
orders for their supplier customers. Historically, supporting EDI is one of the most difficult 3PL
warehouse functions. Today even very small 3PL warehouse can competitively support EDI
requirements with the combination of modern WMS systems and EDI service providers.

This diagram highlights the document flow between retailer, supplier and 3PL warehouse. As you
can see, the primary integration is between supplier's ERP/Accounting system and 3PL warehouse
WMS system.
EDI X12

Supplier/Importer 3PL Warehouse

EDI 850/856
Retail Customers
Standard Formats via FTP
(X12, Tab-delimited, Fixed
Position Flat File or XML)
Web Service
(XML via HTTP) 943 Warehouse
Stock Transfer
or
Excel File 944 Warehouse Stock
Transfer Receipt Advice
Web Stores

940 Warehouse
Shipping Order UCC-128 Labels
Manual Orders ERP Systems (SAP,
Oracle, etc.) 945 Warehouse
Shipping Advice

Salesperson Samples

Some of the 3PL’s challenges executing retailer EDI include:

Capturing Shipment Request (EDI 940) by Customer/Retailer

– Necessitates system that supports many customers doing business with many retailers

Pick, Pack, Palletizing and Labeling Orders Correctly

– Assigning unique carton IDs
– Generating retailer-compliant UCC-128 Labels
– Proper label placement

Routing and Printing of Bill of Ladings (BOL)

–Support for EDI 753 routing requests
–Batch BOL (if necessary)

Capturing and Returning ASN (EDI 856) Data

–Includes carton level details

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 Without a strong WMS system, a 3PL warehouse must do a variety of workarounds and manual
tasks to meet each Retailer’s specific requirements. Here is a list of workarounds and the pitfalls
associated with each:

Manually downloading orders from an external system and entering into your own system
(Supplier’s ERP or EDI provider’s web account):
– Significant chance for data entry errors
– Does not allow you to leverage pick tickets to have location and allocation (FIFO) rules.

Receiving pre-printed UCC-128 labels via mail, PDF files via email or printing them on separate
label printing software:
– Time consuming
– Compliance Issues
– Possible issues with label quality (via PDF)
– Accuracy issues from retyping of information between systems

Manually typing carton level ASN information into an external system on shipments that have
shipped:
– Time consuming
– Accuracy issues from retyping of information between systems

As the workarounds detailed above highlight, handling retailer shipments without a strong system is
difficult and error prone. Unlike non-retailer shipping errors, retailer misshipments and mislabeling
will result in significant financial penalties, which retailers call "charge-backs." Thus, having a
Warehouse Management System that can fully support multiple customers, retailers and compliant
retailer UCC-128 labels is critical.

SCENARIO 2: Retailer Orders via EDI Service Provider

This second scenario is very similar to Scenario #1, except instead of a supplier connecting directly
to retailers, an EDI service provider handles the translation from the variety of retailer-specific X12
formats and normalizes them into one data feed. So, EDI service providers serve as both VAN and
translation/transformation engines. Some of the larger EDI Service Providers include:
 DiCentral
 Inovis/GXS
 SPS Commerce
 Sterling Commerce
 TrueCommerce

EDI service providers offer many significant benefits for both suppliers and their 3PL warehouses.
The biggest benefit is the elimination of the need for a staff of EDI programmers; instead, the 3PL
outsource this function to the service provider who is responsible for maintaining the many retailer,
ERP system and 3PL warehouse WMS connections. This model is also very cost-effective, since
once a retailer connection is established that connection is reusable for other service provider
clients. With this capability, expenses for the 3PL are generally limited to the service provider
testing required to ensure the transmission of supplier data through the pre-wired connection.

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 This diagram below highlights the integration of an EDI Service Provider into the overall solution.
The corresponding steps in a typical order workflow are:
1 – Retailer sends EDI 850 order to Supplier
2 – Supplier receives 850 PO
3 – Supplier reviews and sends 940 warehouse order to 3PL
4 – 3PL receives 940 warehouse order to ship goods
5 – 3PL sends 945 shipping notification once shipped
6 – Shipping notification 856 goes to Retailer
7 – Shipping notification 945/856 goes to Supplier
8 – Supplier sends Retailer invoice 810
9 – Retailer receives electronic 810 invoice

Retail Meets Retailer Flexible to meet any

Customers requirements customer requirements Supplier
1 2

EDI
850 PO 850 PO
EDI Service 940 Warehouse 3
6 Provider Shipping Order
EDI

856 ASN
(e.g. Sterling, DiCentral, Whse Shipping
SPS Commerce) Advice 945 / 856 7
9
EDI

810 Invoice
810 Invoice 8

Pre-wired integration

4 5
940 Warehouse 945 Warehouse
Shipping Order Shipping Advice

1,300 plus Retailers 12,000 Supplier /

and Distributors in our Logistics customers in
network our network

3PL Warehouse
UCC-128 Labels

SCENARIO 3: eCommerce Shopping Cart Integrations

eCommerce Shopping Carts have sophisticated application programming interfaces (API) which
are interfaces implemented by a shopping cart program that enable it to interact with other
software. eCommerce engines typically provide these APIs as Web Service Interfaces for the
export and update of orders in real-time. These Open APIs include the ability to:
 Query Orders
 Update Orders with Shipping Details
 Update Inventory for Always Current "On-Hand" Stock Levels

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 Since orders begin at the eCommerce shopping cart, having these same interfaces available on a
3PL warehouse's WMS system will allow the process to be initiated by the shopping cart with Web
service calls made from the shopping cart to the WMS system. A typical workflow would be as
follows:

1. A consumer goes to an online store and searches for a product they wish to purchase;
2. Store provides information on items that are in/out of stock;
3. Consumer adds products to their cart and places order;
4. Orders are automatically transmitted to the 3PL's WMS (since the inventory is located at the
3PL warehouse which ships on behalf of the supplier);
5. The 3PL warehouse receives the order and picks, packs and ships the goods to the consumer;
6. The shopping cart software is then updated by the WMS or by calling the WMS open APIs so
there is visibility that the order has shipped and provides tracking number details back to the
shopping cart;
7. The consumer's credit card is charged and an email is sent to the consumer notifying them
their order has been shipped.

This 7 step workflow is typical of any modern system where Order Creation (940 equivalent) and
Shipment Details (945 equivalent) data is shared bidirectional to provide real-time information to
consumers and suppliers.

SCENARIO 4: B2B (Non-Retailer) Orders Directly with Supplier

Even though retailer related orders are the most common type associated with EDI, many
businesses never do business with retailers yet benefit significantly from EDI. One example of this
is for manufacturers. Manufacturers leverage EDI to manage the purchase and delivery of raw
materials for their manufacturing/assembly plants. In this scenario, orders would be auto-generated
by the manufacturer and sent to their suppliers ERP system. Once approved and ready for
shipment, orders would then be sent from the supplier ERP system to the 3PL warehouse for
shipment. Thus, to maintain a strong supplier supply chain, a 3PL must have a system which is
capable of integrating with 3PL customers (suppliers) as seamlessly as the supplier integrates with
their customer(s).

SCENARIO 5: Communication with Carriers/TMS systems

The final scenario involves EDI with carriers or Transportation Management Systems (TMS), as it
relates to tendering a shipment. The workflow for communication with carriers includes these steps:

1. Warehouse Management System processes shipment and facilitates pick and pack process;
2. When ready to ship, details are transmitted via EDI to the carrier;
3. Carrier schedules a pick-up;
4. When delivered, carrier transmits proof of delivery information back to WMS for updating and
notification of the supplier.

Although not as common of an EDI connection as order management, the efficiencies gained from
integration with carriers and backend TMS systems could yield some significant cost savings
depending on shipment volumes and business processes.

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 Summary
Having EDI capabilities can substantially enhance a 3PL’s competitiveness in the industry and
improve the bottom line. By understanding the ABCs of EDI as described in this Guide, any 3PL
warehouse is well on its way to mastering the EDI world.

Remember, a good place to start is to ask the following questions to current and prospective
customers who inquire about EDI services, they are:
 What trading partner(s) are you connecting to?
 Does your customer require an Advanced Ship Notice (856)?
 Does your customer require special labels like UCC-128 label(s)?
 How do you want to exchange electronic documents?
 How are you doing EDI today? Are you using in-house software, or are you working with
an EDI Service Provider?

We wish you good luck and hope the knowledge shared today will help you grow your 3PL
warehouse operation.

“Having a Warehouse
Management System that
can fully support multiple
customers, retailers and
compliant retailer UCC-128
labels is critical.”

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 Web‐Based/SaaS 
UNIQUE ADVANTAGES
Web-based applications are rapidly overtaking
traditional software. Its numerous advantages are
compelling and are making traditional, installed
software obsolete. Web based software, also
known as SaaS (software as a service), converts
the costs of a WMS from a large capital expense to
a subscription for a service.

AUTOMATED PROCESSES This on-demand pricing structure is ideally suited for

how 3PL’s run their business. Aside from making
robust applications affordable, SaaS allows 3PL’s to
- ORDER MANAGEMENT pay for what they use. Other benefits include:
- RECEIVING OPERATIONS
 Full functionality is available anytime from any
- AUTO NOTIFICATION MESSAGES internet-enabled PC.
 Set-up and integration is simple and
- ONLINE REPORTING inexpensive.
- INVENTORY MANAGEMENT  No IT investments – no expensive hardware
required.
- UCC-128 LABEL PRINTING  Product improvements are accessible to all
users at the same time.
- SHIPPING MANAGEMENT  No long-term contracts.
- BILLING MANAGEMENT  No upgrade fees.
- IN-HOUSE EDI SUPPORT
About 3PL Central 
BUILT EXCLUSIVELY FOR 3PLs

3PL Central is the only web-based WMS built

exclusively for the unique needs of a 3PL.
3PL Central provides easy-to-use, on-demand
warehouse management software (WMS)
exclusively for third-party logistics companies.
3PL Central’s product, 3PL Warehouse
Manager, helps 3PL’s run more efficiently,
grow their business and satisfy customers –
beginning at less than $500 per month per
warehouse.

Based in the Los Angeles area, 3PL Central is

one of the fastest growing software providers
to the third-party logistics industry.

To learn more, contact 3PL Central:

1-888-375-2368, or at
info@3plcentral.com.

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