3 Great Ways to Utilize UNSPSC/NIGP Codes

By Scott Walls

In the past week alone, two readers have asked about UNSPSC codes (universal product coding scheme) and Don Sweeney, Partner at Emerging Solutions, forwarded a related question he noticed via a Yahoo Group seeking assistance re UNSPSC codes as PeopleSoft categories.  For these reasons and because UNSPSC codes offer amazing value, I thought it would be helpful to write a quick BLOG about UNSPSC codes, their government equivalent NIGP codes, and three examples of how these codes can be very useful to today’s best in class procuring organization.  For more information, please email me directly at scottwalls@srm-plus.com.

UNSPSC & NIGP Codes

Definitions via Wikipedia:

• UNSPSC – the acronym for the United Nations Standard Products and Services Code. UNSPSC is a coding system for the classification of both products and services for use throughout the global marketplace. It is managed by the GS1 US, which is responsible for overseeing code change requests, revising the codes by interfacing with industry projects, issuing regularly scheduled updates to the code, communicating with members, as well as managing special projects and initiatives as determined both by the UNDP and by member requests.
• NIGP – The NIGP Commodity/Services Code is an acronym for the National Institute of Governmental Purchasings Commodity Services Code. The NIGP Code is a coding taxonomy used primarily to classify products and services procured by state and local governments.

While I have known about UNSPSC codes for much longer, their adoption has picked up dramatically over the past 5 years.  I am seeing NIGP more and more now that the predominant amount of work being sold is in the United States government arena.  From a 10,000 foot level, I attribute the rise in popularity of these universal coding mechanisms to the need to identify common items and their attributes among buyers, suppliers, and third-parties.  For more on buyer, supplier, third-party connections, see Supply Integration Solutions. 

3 Major Advantages Offered by UNSPSC/NIGP Codes

Because all serious marketplaces and suppliers provide this information for free and it is relatively accurate, here are a few great ways to take advantage of your procurement partner’s efforts.  The following three sections provide a high level overview of the advantages offered by universal coding schemes such as UNSPSC and NIGP:

1. Assign set downstream defaults with little to no effort.  When using an external organizational marketplace (SaaS marketplaces, AKA content management, are a best of breed must for every company) these values come back automatically assigned and all setup/maintenance is performed by the marketplace/supplier.  All marketplace items are assigned a UNSPSC code.  The SRM application uses those codes to set its downstream defaults.  Here are a few valuable examples
   1. Use universal codes to set the asset profile – determine depreciable life, capitalization, and more
   2. Use universal codes to set the asset tracking information – require receiver to tag and note ID in SRM app
   3. Use universal codes to set a default GL account – requester gets the correct GL account without any accounting knowledge
   4. Use universal codes to set the NIGP Code (Periscope and others translate UNSPSC to NIGP codes)
2. Real-time acquisition (requests/purchases) reporting with little to no effort.  Again, when using an external organizational marketplace, the purchasing/reporting categories (in PeopleSoft these are called categories and required on ALL requisitions) within the SRM application can be setup to mirror the UNSPSC/NIGP codes.  Using the SRM application to set the category, or a portion of it, to the SRM category allows for an easy, free classification for all acquisitions.
3. Identify items for special routing automatically.  Items requiring imaging, special workflow, safety concerns, etc can be identified at request, purchase, receipt, etc. via their UNSPSC/NIGP code.

I would be remiss if I didn’t mention that UNSPSC has some complications; which version suppliers use, keeping current, cross referencing.  However, the benefits almost always outweigh the related costs.

 

About SRM Plus

SRM+ is a boutique procurement business consulting firm.  We provide procuring organizations with the strategic and tactical consulting services required to dramatically reduce operational expenses, create revenue streams (1 million per every 200 million in spend), and decrease their Cost Of Goods Purchased (COGP).  Whether defining a strategy, creating measurable objectives, designing / deploying solutions, or creating a continual improvement framework, SRM+ wants to turn your cost centers into cash centers.  Visit us at www.srm-plus.com.

Marketplace Content Strategy

By Scott Walls

Marketplace Content Strategies align the creation, management, and usage of marketplace purchasable content with the overall procurement business strategy.  Having a well defined marketplace content strategy allows both the providers of content (sourcing function) and consumers of content (requesters) to understand the value of the marketplace and use it appropriately.

Here are the three steps required to create an Marketplace Content Strategy:

Step 1 – Understanding Marketplace Data Elements or “Content Structures”

First, the group designing the marketplace must understand the content structures available to them.  Content Structures are the marketplace term for the data elements being used within an organizational marketplace to represent purchasable content (items, forms, catalogs, contracts, suppliers, procuring orgs, content consumers, and content providers).  Content structures vary based on the organization’s business requirements.  Each organization needs to ensure the content structures required to represent their business are available (on-contract/off-contract, requisitionable/non-requisitionable, sub-org security, sorting classes, product priorities, etc.).  In addition, the Shared Marketplace Model allows for multiple versions of the same content structure (i.e. Microsoft being vendor 123 in one ERP/SRM application and vendor 123 in a second ERP/SRM application).  Hence, the organization needs to understand how those values in multiple worlds are linked correctly within the marketplace.  For a more detailed explanation of marketplace content structures, click here.

 

Step 2 – Define Marketplace Content Structure Rules

Second, the design group will need to create the content structure rules.  Content structure rules transform a collection of data elements into an intuitive, functioning marketplace.  They define what type of content will be in the marketplace (contracted content, requisitionable content, etc.), how that content will be organized (under contracts, organized by supplier), how it will be presented to the requester upon search (recycled appears first in a search, all items in one results box), and how ALL requesters (even the most inexperienced) will understand what to do with the content when located.  When designing the marketplace, it is not enough to simply say contracts and suppliers will exist in the marketplace.  There should be well defined rules telling market participants what content, contracts suppliers, etc.  These are content structure rules.  For a more detailed explanation of marketplace content structure rules, click here.

 

Step 3 – Create Measurable Content Objectives

Lastly, the design group will need to create measurable content objectives.  Measurable content objectives indicate the extent to which marketplace content is supporting the overall business procurement strategy.  Content objectives can be organized around 5 basic criteria (this can differ by engagement); scope, adoption, breadth, depth, and payback.  Each criteria must have a definition (i.e. the scope of the market is all spend on contract regardless of whether or not it is initiated using a requisition) and an evaluation criteria (total number of contract-related order lines purchased / number of contract-related order lines originating from the marketplace).

Additionally, content objectives can exist at the macro level (marketplace as a whole) or the micro level (for a given sub-org or by sourcing group).  For example, if a firm wants to evaluate the payback numbers (revenue generation) for its content, it may want them market-wide, but also at a level similar to how their employees are organized.  The latter would be helpful in evaluating one group of sourcing agents against another group.

To obtain understand more about or discuss what an appropriate Marketplace Content Strategies might look like in your organization, email Scott Walls at scottwalls@srm-plus.com.

 

 

About SRM Plus

SRM+ is a boutique procurement business consulting firm.  We provide procuring organizations with the strategic and tactical consulting services required to dramatically reduce operational expenses, create revenue streams (1 million per every 200 million in spend), and decrease their Cost Of Goods Purchased (COGP).  Whether defining a strategy, creating measurable objectives, designing / deploying solutions, or creating a continual improvement framework, SRM+ wants to turn your cost centers into cash centers.  Visit us at www.srm-plus.com.