What are UNSPSC and how are they used to perform MRO Purchasing Analytics?
What is your role within your organization?
The answer to that question will determine how you respond to the title of this blog.
If you are a CEO or CFO, you may ask a follow-up question, …is my Buying Group using UNSPSC to perform MRO purchasing analytics in order to reduce indirect material spend? If not, why not, and how could using UNSPSC save us money?
If you are a Buying Professional, you already know about UNSPSC and how they can be used, so if your company is not using UNSPSC to perform MRO purchasing analytics, you may ask, …does your procurement software provide the ability to capture and analyze material spend using UNSPSC?
If you are an IT Professional, you probably don’t give a hoot about UNSPSC, but it would be good to know a little about what they are and how they are used in the event that the business folks come to you with this requirement.
What is UNSPSC?
UNSPSC, the United Nations Standard Products and Services Code, is an open, global standard for efficient, accurate classification of products and services. The system was jointly developed by the United Nations Development Programme and Dun & Bradstreet in 1998 and has been managed by GS1 US since 2003.
The code is a five-level hierarchical classification system that enables analysis at grouping levels relevant to individual needs, and is supported by virtually every supplier of corporate indirect goods and services.
The UNSPSC code is broken down into five segments of two characters each:
XX – Segment – The logical aggregation of families of products and services for analytical purposes
XX – Family – A commonly recognized group of inter-related commodity categories
XX – Class – A group of commodities sharing common characteristics
XX – Commodity – A group of substitutable products or services
XX – Business Function – The function performed by an organization
The following breakdown shows how it works: For example, for code 4320150114 it would be:
|Segment||43||Information Technology Broadcasting and TeleCom devices and accessories.|
|Family||20||Components for IT or broadcasting or telecom computer equipment and accessories|
|Class||15||Computers – computer accessories|
|Commodity||01||Computer switch boxes docking stations|
How is UNSPSC used?
By classifying their products and services, businesses can assist their customers with:
Finding and Purchasing – a product and service coding convention makes it easier to find what you want.
Product Discovery – a common naming convention allows computer systems to automatically list similar products under a single category; a person can find precisely what is needed and nothing else.
Expenditure Analysis – when every purchase transaction is tagged with a common set of product identifiers, purchasing managers are able to analyze enterprise expenditures.
Control and Uniformity – codes bring a single, uniform view of all expenditures; it ties together all departments and divisions.
This classification of products and services with a common coding scheme between buyers and sellers is becoming mandatory in an era of electronic commerce. Large companies already code purchases to analyze their spending, and smaller companies can take advantage of this technology to improve their buying power.
UNSPSC provides company-wide visibility of spend analysis, easier exploitation of e-Commerce capabilities, and allows companies to see what they buy, from whom, from where, and when. This single, global classification system makes it easier to build better buying contracts and to control spending.
Does your company use UNSPSC for analyzing material spend?
All companies should consider using the UNSPSC routinely, but this may seem like a daunting task to a company with lots of demands on resources. Fortunately, because all of the major supply companies have already done the work, it can be leveraged quite easily. Whether your Requisitioners and/or Buyers are purchasing from an on-line Supplier catalog or from a downloaded electronic Supplier catalog, eProcurement solutions capture and retain UNSPSC information electronically from those catalogs so that the users (ie; Requisitioners, Buyers, Approvers, etc.) do not need to determine the appropriate UNSPSC code (like determining the appropriate GL Account) when creating a PO Requisition line item. Once the UNSPSC code is obtained from the Supplier catalog, it is retained in the PO Requisition and subsequent Purchase Order for analysis purposes. By using these codes to determine who buys what and from where, companies can better analyze their indirect spend, using that information to negotiate buying agreements that can be enforced company wide.
If you would like to learn more about UNSPSC and how it can apply to your organization, go to www.unspsc.org
ISS Group will be hosting a webinar on September 12, 2013, click here to register for the 11:00 am est time period. or click here to register for the 2:00 pm est time period; titled, ‘How to reduce MRO spend via UNSPSC Analytics’. We will have business process expert and QAD alumnus Mr. Bruce McIntyre as a special guest discussing his years of experience working with QAD user organizations and their purchasing processes, as well as a brief demonstration of the ISS Group eProcurement solution called ‘iPurchase’, showing how it captures and uses UNSPSC to perform spend analytics which has allowed ISS Group Clients to save as much as 3% of their indirect material spend. Please be on the lookout for a webinar invite in your email, or please visit our website at www.issgroup.com to register for this informative session.