Customer Experiences: UNSPSC Classification
“Thanks to data ladder we succesfully classified our products to UNSPSC at a fraction the cost of other providers. We cut our spend by 4% and supplier count by over 85 % in certain categories”
– Fortune 500 Distributor
The UNSPSC, or United Nations Standard Products and Services Code®, offers a single global classification system that can be used for:
1. Company-wide visibility of spend analysis: Categorizing spend within a standard enhance visibility and cost/supplier reduction possibilities.
2. Cost-effective procurement optimization
3. Full exploitation of electronic commerce capabilities
Like any new item classification system, it can be very difficult and time consuming to implement quickly, correctly, and consistently.
Data Ladder has been a pivotal player in helping companies classify their items into UNSPSC .
To keep it simple: There are 4 high level options for classifying items into UNSPSC or any other hierarchies.
1. Manual. Great option for small firms with few items. This option is cheap, but very time consuming, inconsistent, and not sustainable in the long term. Here is a copy of the UNSPSC.xls to get you started.
2. Self service automation. Using matching software such as DataMatch 2009, setup rules (Example: all items that contain the text “Pen” and “Refill” = UNSPSC 44121903) and use fuzzy matching technology to map your products to UNSPSC. Benefits: Low cost, rapid implementation, and build consistency across your business.
3. Buy as a Service. Use an outside firm to classify your items. Benefits: Keep to your core competency and let us worry about the details. Please Contact us if you are interested in this approach.
4. A phased approach: Start with options 2 or 3, upon classifying 95% of spend, shift to in house self service. Benefits: highest ROI. Low initial cost obtains benefits in spend that can pay for service. Once majority of items are classified shift back in house. Please contact us if you are interested in this approach and we will get you started right away.
ROI varies by business and industry, however we have noticed certain trends in small to large companies.
The first pass mapping to UNSPSC is almost alway less than 50% of spend (Only 50% of your spend will appropriately coded by automated rules). The 80/20 rule applies to a large extent.
As a Service provider we endeavor to get to 80% classified , but diminishing marginal returns take place after the initial 80% is classified. Note classifying only 50% of spend will still lead to major savings and will have an immediate ROI that can easily fund the classification.
Average savings are 4% of spend categorized and a 70-80% reduction in supplier count.