E-Sourcing Forum » To UNSPSC, or Not to UNSPSC???

To UNSPSC, or Not to UNSPSC???

December 16th, 2009 at 09:38am David Bush - Iasta

I have noticed an interesting trend that has played out over time, and seems to be increasing in popularity. And that is, many companies are no longer looking to classify their data to UNSPSC codes. What I have noticed over literally more than a 100 Spend Analysis projects over the past 10 years, is that companies do not “source” by UNSPSC codes. And UNSPSC codes do not naturally roll-up to sourcing categories as the company would like to see.

For example, If you were to go and source IT spend within UNSPSC, then you would have to look in segments 43 for all the equipment, 8111 for Computer Services, 80101507 for IT Consulting, and 831124 for Internet service providers. That is 4 different segments across the range of Segment, Family, Class, Commodity codes. If you were a category manager looking into UNSPSC you may find one or two of the categories fairly quickly but to find it all may take time, and it is not totally trusted that you “have it all”. Another common example is software…the actual software codes are in one area (4323 and below), and the support and maintenance fees are in a completely different segment (811122). When you source software you need to look at both components…because both are negotiable as a combined Spend.

The above are good examples of why a category roll-up feature is critical. And there are many more examples across many UNSPSC codes – codes that need to be tied together or “rolled-up” into company sourcing categories. I find that all organizations want the trusted category roll-up information for larger sourcing leverage, and to match their sourcing needs. As such, UNSPSC has become a “middle man” – a way to move the ball up and down the field and get some insights into Spend data. UNSPSC seems to apply better on the direct side of a companies Spend, but not so much on the indirect side – a big area for savings opportunities, and an area where details are more difficult for UNSPSC classifications.

What companies are doing in many cases now, and with new capabilities provided by Spend Classification tools, is classifying raw data straight to sourcing categories. That is the end-goal, after all, correct? And as that increases in popularity, the old standards like UNSPSC, or eCl@ss, etc will become less and less important. They all become a means to analyze data, but are not necessary to create sourcing categories and support company sourcing programs.

Of course with the new Spend Analysis tools you can have both, and more, if you desire. Both UNSPSC classification and company Sourcing Categories – all tied together. And you can add other taxonomies as needed. Multiple taxonomies can provide multiple dimensions for advanced Spend Analysis, and that is good. The more classification taxonomies, the more you can break down and analyze data. But increasingly so, the focus is on classifying to Sourcing categories, and longer term management around those categories. That seems to be leaving the “middle man” out of the picture.

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