August 13, 2008

Going Global with UNSPSC – What’s in it for you?

Five years ago, IDEA and the ISC (representing over 30 companies within the industry) recognized the need and began working on industry adaptation of the Global Standard UNSPSC code for product categorization. Now it’s time for you to get involved. Learn more about UNSPSC and how it benefits your company.

What is the UNSPSC?

The United Nations Standard Products and Services Code is a hierarchical convention that is used to classify all products and services. It is the most efficient, accurate and flexible classification system available today for achieving company-wide visibility of spend analysis, enabling procurement to deliver on cost-effectiveness demands and allowing full exploitation of electronic commerce capabilities. The UNSPSC was jointly developed by the United Nations Development Program (UNDP) and Dun & Bradstreet Corporation (D&B) in 1998.

What are the benefits of coding products and services?

Today’s customers – internal and external – demand faster fulfillment at a lower cost; increasingly business is becoming eBusiness. The need to approach procurement more strategically has never been greater. All of these combine to make fast, simple, accurate classification of goods and services and imperative in the marketplace. The UNSPSC is a single coding convention that all companies can draw from to speak the same language in order to speed-up and rationalize processes.

When the UNSPSC is inserted in various electronic trade documents and media such as product catalogs, web sites, purchase orders, and invoices used throughout the supply chain, sellers, buyers, procurement specialists, and other users can perform analysis and make decisions in time-critical ways that would not be possible without using the UNSPSC. The UNSPSC is an open standard and is available for use by interested parties free of charge. Companies and organizations worldwide are encouraged to incorporate the code into their business systems. This code set has been widely adopted by the healthcare industry and has shown proven benefits throughout the supply chain. Read the healthcare case study to find out more about their experience.

What does UNSPSC do for me?

By embedding UNSPSC classification standards into your management systems – purchase orders, invoices, electronic documents, product catalogues, websites – all parties throughout the extended supply chain benefit.

  • Procurement can keep an eye on how much is spent buying what. This information is readily available to them to analyze the specifics in the buying process at the level of detail that most suits the business needs in a timely and precise manner. They can cut in half the time it takes to find the products needed by searching by commodity code through brokers, on line exchanges, business partners, etc. across the globe. They can spot buying patterns across departments or business units to leverage better conditions from suppliers and realize overall savings.
  • Marketing is able to get field data fast for market research, product development, and sales analysis, ultimately delivering to the company’s bottom line via customer satisfaction.
  • Sales can monitor sales channels and distribution all the way to the store shelf or end user. They can gather market intelligence quickly via electronic platforms for accurate sales analysis. They can extend the reach of their products to customers across the globe by publishing e-catalogues, registering with search engines or third-party market places.

How does UNSPSC work?

The UNSPSC is a hierarchical classification with five levels. The electrical industry is only focused on the first four levels as the 5th is for services rather than products.

These levels allow analysis by drilling down or rolling up to analyze expenditures. Each level has its own unique number.

    1. Segment – The logical aggregation of families for analytical purposes
    2. Family – A commonly recognized group of inter-related commodity categories
    3. Class – A group of commodities sharing common characteristics
    4. Commodity – A group of substitutable products or services

    All UNSPSC entities are further identified with an 8-digit structured numeric code which both indicates its location in the taxonomy and uniquely classifies it. An additional 2-digit suffix indicates the business function identifier.

    How is IDEA involved in this global standard for product categorization?

    IDEA entered into an agreement in June 2004 with GS1 US, formerly the Uniform Code Council, to develop and support the global classification standards of the United Standard Products and Services Code (UNSPSC). GS1 is a leader in facilitating efficient international business and is the code manager of the UNSPSC. The agreement marked the first time the electrical industry came together to support one global standard for classification.

    Under the agreement, IDEA is responsible for the development and support of the global classification standards of the UNSPSC for the electrical industry and its trading community.

    The committees work began in early 2005. Involvement ensured that the majority of products were represented during the review and development process. Distributors were included so that in the review manufacturers could envision how their products were truly represented and seen in the downstream marketplace. This input was invaluable to the team during the review phase.

    A final submission of 307 changes, and/or additions to UNSPSC was made in November. The electrical industry revisions were accepted and published in the January 2006 release of the UNSPSC code set. The product areas reviewed were as follows:

    • Data and Communication
    • Electric Motors
    • Electrical Distribution
    • Electrical Hardware
    • Electrical Supplies
    • Electrical Wire Management
    • Electrical Wiring Devices
    • Hand and Power Tools
    • Industrial Controls
    • Lighting Products
    • Safety Equipment

    These areas are currently under a second review by the Product Code Sub-Committee:

    • Electrical Wire and Cable
    • Test and Measuring Instruments
    • Chemicals

    The responsibility for the maintenance and upkeep of the electrical product categories in the UNSPSC is still the sole responsibility of IDEA.

    If you are interested in participating in the ongoing development and maintenance of the UNSPSC code set and their associated attributes, please contact Mary Shaw at (647) 722-3406.

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