Adopting

UNSPSC
From vision to reality

w w w. z y c u s . c o m
For more information: information@zycus.com

w w w. z y c u s . c o mBetter supply
managementwith UNSPSCUNSPSC, the global product and services classification
standard, has been revolutionizing purchasing and supply
management across the world.

Leading companies like GE have adopted UNSPSC acrossthe enterprise.

“There are other codes available, but the United Nations
Standard Products and Services Code is the one we rely on
to support our strategic sourcing process,” says Gary Reiner,
Senior VP and CIO of General Electric.

“The UNSPSC

effectively gives us the means to capture a uniform,
enterprise-wide view of our spending,” he adds.

Whether you are deliberating on the need for a common
product and classification standard for your company, or
are an advanced UNSPSC adopter, we hope that " UNSPSC
for better Spend Analysis" will answer some of yourquestions and perhaps help you in some way to improveyour purchasing and supply management processes.

UNSPSC for better Spend Analysis

31

UNSPSC for better Spend Analysis

What’s Inside
Classification edge in Supply Management

17What is UNSPSC

13

Why UNSPSCClassification edgein Supply Management
The rapid growth of e-business has led to the widescale
automation of transactions. But , the content ofthese transactions (descriptions and names of
products/services) has largely remained unstandardized.
To facilitate the smooth conduction of business, the codingof products and services according to a standardized
classification convention is essential. According

20

Adopting UNSPSCUNSPSC driven Spend Analysis

ANNEXURE: UNSPSC best practices

to a recent study, more than half of companies surveyed
were already using codes to classify products and services,with some of them having several complex codes of 10 or

34

more categories. However, adopting a uniform coding system

40

allows organizations to manage their purchasing and supply

for classifying products and services with standard
descriptive nomenclature has its unique advantages. It

processes with increased efficiency and effectiveness, while
reducing

the

cost

of

creating

and maintaining a proprietary code and lowering the costof doing business for its partners and suppliers.

32

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

33

UNSPSC for better Spend Analysis

What’s Inside
Classification edge in Supply Management

17What is UNSPSC

13

Why UNSPSCClassification edgein Supply Management
The rapid growth of e-business has led to the widescale
automation of transactions. But , the content ofthese transactions (descriptions and names of
products/services) has largely remained unstandardized.
To facilitate the smooth conduction of business, the codingof products and services according to a standardized
classification convention is essential. According

20

Adopting UNSPSCUNSPSC driven Spend Analysis

ANNEXURE: UNSPSC best practices

to a recent study, more than half of companies surveyed
were already using codes to classify products and services,with some of them having several complex codes of 10 or

34

more categories. However, adopting a uniform coding system

40

allows organizations to manage their purchasing and supply

for classifying products and services with standard
descriptive nomenclature has its unique advantages. It

processes with increased efficiency and effectiveness, while
reducing

the

cost

of

creating

and maintaining a proprietary code and lowering the costof doing business for its partners and suppliers.

32

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

33

The benefits of standard products and services
classification system

the company
A uniform, standard code acts as a glue which flows
throughout the organization and its supply chain. It ties
together all departments and divisions, including business
functions such as purchasing and settlement, and links
the organization with its suppliers and partners, thus
ensuring that everybody is speaking the same language
when it comes to products and services information. It
can be used in enterprise applications like ERP, eprocurement and PLM systems, and can also be integrated

Classifying Products and Services leads
to better Purchasing and Supply
Management! Enables buyers and employee requisitioners to find all suppliers ofa given category! Enables purchasing managers to analyze expenditures and perform
strategic sourcing! Consistent coding across company divisions, suppliers, and information
systems gives uniform picture of company expenditures.
! Integrates procurement card statement categories with all purchasetransactional data.

Enables superior spend analysis and better
strategic sourcing
By classifying every purchase transaction, companies areable to get visibility into spend across the enterprise.
Using codes (acting as "meta tags") that are part of ahierarchical taxonomy, individual purchases can be rolled
up into contractible groups (and vice versa). This allows
supply management to rationalize the supplier base and! One numbering system integrates entire processing flow – from
RFPs, to ordering, to accounts payable, to general ledger.
! Facilitates control over and compliance to spending limits and authorizedcommodities by individuals and departments.
! A standardized, already devised code is easy to implement andsaves the company time and expense in developing its own.

leverage enterprise demand to negotiate better prices.
Adopted from "Product Classification Using The UNSPSC" by Granada Research

Enables Spend Control and Uniformity across

34

UNSPSC for better Spend Analysis

http://www.unspsc.org/AdminFolder/Documents/UNSPSC_White_Paper.doc

UNSPSC for better Spend Analysis

35

The benefits of standard products and services
classification system

the company
A uniform, standard code acts as a glue which flows
throughout the organization and its supply chain. It ties
together all departments and divisions, including business
functions such as purchasing and settlement, and links
the organization with its suppliers and partners, thus
ensuring that everybody is speaking the same language
when it comes to products and services information. It
can be used in enterprise applications like ERP, eprocurement and PLM systems, and can also be integrated

Classifying Products and Services leads
to better Purchasing and Supply
Management! Enables buyers and employee requisitioners to find all suppliers ofa given category! Enables purchasing managers to analyze expenditures and perform
strategic sourcing! Consistent coding across company divisions, suppliers, and information
systems gives uniform picture of company expenditures.
! Integrates procurement card statement categories with all purchasetransactional data.

Enables superior spend analysis and better
strategic sourcing
By classifying every purchase transaction, companies areable to get visibility into spend across the enterprise.
Using codes (acting as "meta tags") that are part of ahierarchical taxonomy, individual purchases can be rolled
up into contractible groups (and vice versa). This allows
supply management to rationalize the supplier base and! One numbering system integrates entire processing flow – from
RFPs, to ordering, to accounts payable, to general ledger.
! Facilitates control over and compliance to spending limits and authorizedcommodities by individuals and departments.
! A standardized, already devised code is easy to implement andsaves the company time and expense in developing its own.

leverage enterprise demand to negotiate better prices.
Adopted from "Product Classification Using The UNSPSC" by Granada Research

Enables Spend Control and Uniformity across

34

UNSPSC for better Spend Analysis

http://www.unspsc.org/AdminFolder/Documents/UNSPSC_White_Paper.doc

UNSPSC for better Spend Analysis

35with procurement card programs. It becomes the essential
component for streamlined control of the list of
authorized items and vendors, approval workflows, andallocated budgets. It also sets the stage forstandardization and simplification initiatives.
Enables better product / services search and discovery
A common naming convention allows search engines andrepositories to automatically list similar products undera single category. When a person is searching for the
category, he or she finds precisely the things being
discovered and nothing else. Simply using text string
searches on such document collections leads to a great
number of irrelevant hits. It paves the way for parametric

What is UNSPSC?

searching - where once the parameters for a particular
category are defined, the user can select appropriate
parameter values to find precisely what he or she needs.
There have been several attempts at creating a uniform
classification, the most notable being United States’ SIC(Standard Industrial Classification) superceded by the NorthUNSPSC (United Nations Standard Products and Services
Code) is an open, global electronic commerce standard
that provides a logical framework for classifying goods
and services. It allows commodities and products to be

American Industry Classification System (pronounced‘nakes’) in 2000. However, it is the United Nations
Standard Products and Services Code (UNSPSC), a globalclassification standard created by the United Nations inassociation with Dun & Bradstreet, that has emerged as

properly and uniquely classified, so that companies cantrack purchasing patterns more efficiently, ensure contract
compliance, and pave the way for superior catalog search.

the most appropriate and popular classification standard
for purchasing and supply management across the world.

The hierarchical structure of UNSPSC allows drilling down
and rolling up, which is integral for tactical and strategic
spend analysis. It is a global standard and is freely available
to the public with no copyright protection issues - which
has led to its widespread adoption all around the world.

36

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

37with procurement card programs. It becomes the essential
component for streamlined control of the list of
authorized items and vendors, approval workflows, andallocated budgets. It also sets the stage forstandardization and simplification initiatives.
Enables better product / services search and discovery
A common naming convention allows search engines andrepositories to automatically list similar products undera single category. When a person is searching for the
category, he or she finds precisely the things being
discovered and nothing else. Simply using text string
searches on such document collections leads to a great
number of irrelevant hits. It paves the way for parametric

What is UNSPSC?

searching - where once the parameters for a particular
category are defined, the user can select appropriate
parameter values to find precisely what he or she needs.
There have been several attempts at creating a uniform
classification, the most notable being United States’ SIC(Standard Industrial Classification) superceded by the NorthUNSPSC (United Nations Standard Products and Services
Code) is an open, global electronic commerce standard
that provides a logical framework for classifying goods
and services. It allows commodities and products to be

American Industry Classification System (pronounced‘nakes’) in 2000. However, it is the United Nations
Standard Products and Services Code (UNSPSC), a globalclassification standard created by the United Nations inassociation with Dun & Bradstreet, that has emerged as

properly and uniquely classified, so that companies cantrack purchasing patterns more efficiently, ensure contract
compliance, and pave the way for superior catalog search.

the most appropriate and popular classification standard
for purchasing and supply management across the world.

The hierarchical structure of UNSPSC allows drilling down
and rolling up, which is integral for tactical and strategic
spend analysis. It is a global standard and is freely available
to the public with no copyright protection issues - which
has led to its widespread adoption all around the world.

36

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

37

UNSPSC at a glance

UNSPSC-A Brief History
The result of the merger of the United Nations' Common
Coding system (UNCCS) and Dun & Bradstreet's Standard
Products and Services Code (SPSC), UNSPSC was developedin 1998 through the efforts of a team of analysts andCharacteristics

Based on a four tiered hierarchy of productresearchers from both D&B and the Inter-Agencygroupings defined as: segment, family, class,

Procurement Services Organization (IAPSO) of the UNDP

commodity.

(United Nation Development Program).
The code was originally managed by the Electronic

Classification Philosophy

Commodities are classified with other commodities
that serve or support a common function, purpose
or task.

Commerce Code Management Association (ECCMA), but in
February 2001, due to the need to submit the services forthe management, maintenance and update of UNSPSC
through a competitive selection process in accordance with
its Financial Regulations and Rules, UNDP took a copy of

Maintenance /Management

UNSPSC derived from a merger by Dunn andthe UNSPSC V 5.0 from the ECCMA website and declared it

Bradstreet and the United Nations Development

as frozen. After an 11-month search for an organization

Program United Nations Common Coding System inthat would manage the code, the UNDP appointed Dun &1998. As of Nov’02 D&B and ECCMA code merged

Bradstreet as the interim manager in January 2002 for an
initial period of three months, which was extended till

Licensing requirement

UNSPSC is available free, for use and printing,toend of 2002. However, despite the developments, ECCMA

the public with no copyright restrictions.

and its members remained committed to developing andmaintaining UNSPSC as an open standard, and subsequently

Function – productCommon naming conventions allow computer

released Version 10.0 of the code.

searching & selection

systems to automatically list similar products underIn October 2002, The United Nations Developmenta single category to promote browse-style

Management Association (ECCMA) announced that they

searching.

Function – spend analysis

Programme (UNDP) and the Electronic Commerce Codehave amicably resolved their differences with regard to

Well-structured hierarchical system facilitatespurchasing /spend analysis.

their respective versions of the coding system forclassification of goods and services.
The amicable resolution included that:

38

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

39

UNSPSC at a glance

UNSPSC-A Brief History
The result of the merger of the United Nations' Common
Coding system (UNCCS) and Dun & Bradstreet's Standard
Products and Services Code (SPSC), UNSPSC was developedin 1998 through the efforts of a team of analysts andCharacteristics

Based on a four tiered hierarchy of productresearchers from both D&B and the Inter-Agencygroupings defined as: segment, family, class,

Procurement Services Organization (IAPSO) of the UNDP

commodity.

(United Nation Development Program).
The code was originally managed by the Electronic

Classification Philosophy

Commodities are classified with other commodities
that serve or support a common function, purpose
or task.

Commerce Code Management Association (ECCMA), but in
February 2001, due to the need to submit the services forthe management, maintenance and update of UNSPSC
through a competitive selection process in accordance with
its Financial Regulations and Rules, UNDP took a copy of

Maintenance /Management

UNSPSC derived from a merger by Dunn andthe UNSPSC V 5.0 from the ECCMA website and declared it

Bradstreet and the United Nations Development

as frozen. After an 11-month search for an organization

Program United Nations Common Coding System inthat would manage the code, the UNDP appointed Dun &1998. As of Nov’02 D&B and ECCMA code merged

Bradstreet as the interim manager in January 2002 for an
initial period of three months, which was extended till

Licensing requirement

UNSPSC is available free, for use and printing,toend of 2002. However, despite the developments, ECCMA

the public with no copyright restrictions.

and its members remained committed to developing andmaintaining UNSPSC as an open standard, and subsequently

Function – productCommon naming conventions allow computer

released Version 10.0 of the code.

searching & selection

systems to automatically list similar products underIn October 2002, The United Nations Developmenta single category to promote browse-style

Management Association (ECCMA) announced that they

searching.

Function – spend analysis

Programme (UNDP) and the Electronic Commerce Codehave amicably resolved their differences with regard to

Well-structured hierarchical system facilitatespurchasing /spend analysis.

their respective versions of the coding system forclassification of goods and services.
The amicable resolution included that:

38

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

39

1 There will be only one version of the code, which will
exist under the name of the United Nations Standard
Products and Services Code (UNSPSC), and will beowned by UNDP.
2 The two currently existing versions of the UNSPSC
will be unified into the single code, with discrepancies
reconciled.Pending implementation of this unified code,
both organizations will “freeze” their codes effective

UNSPSC Design

immediately. At the completion of the unification
process, UNDP will submit the unification proposal tothe voting members of the ECCMA Code and the UNDP
Code, and the voting will occur on a segment-bysegment basis.

Each Level contains a two character numerical value and a textual description as
follows

3 A new independent and non-profit code management
organization will be appointed to replace D&B, thecurrent interim management organization for UNDP.

Segment
The logical aggregation of families for analytical purpose

FamilyA commonly recognized group of inter-related commodity categoriesClass
A group of commodities having a common group of function

Commodity
A group of substitutable products and services

Example23 Industrial Manufacturing and Processing Machinery and Accessories

13 Lapidary machinery and equipment
15 Grinding and sanding and polishing equipment and supplies
03 Grinding wheels

310

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

23

2313
23131523131503

11

1 There will be only one version of the code, which will
exist under the name of the United Nations Standard
Products and Services Code (UNSPSC), and will beowned by UNDP.
2 The two currently existing versions of the UNSPSC
will be unified into the single code, with discrepancies
reconciled.Pending implementation of this unified code,
both organizations will “freeze” their codes effective

UNSPSC Design

immediately. At the completion of the unification
process, UNDP will submit the unification proposal tothe voting members of the ECCMA Code and the UNDP
Code, and the voting will occur on a segment-bysegment basis.

Each Level contains a two character numerical value and a textual description as
follows

3 A new independent and non-profit code management
organization will be appointed to replace D&B, thecurrent interim management organization for UNDP.

Segment
The logical aggregation of families for analytical purpose

FamilyA commonly recognized group of inter-related commodity categoriesClass
A group of commodities having a common group of function

Commodity
A group of substitutable products and services

Example23 Industrial Manufacturing and Processing Machinery and Accessories

13 Lapidary machinery and equipment
15 Grinding and sanding and polishing equipment and supplies
03 Grinding wheels

310

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

23

2313
23131523131503

11

Why UNSPSC?
According to Granada Research a useful product classification scheme mustbe hierarchical, so that individual commodities represent unique instancesof larger classes and families. Hierarchical organization allows a given company
to focus on a level of specificity that best suit its purposes and situation.
By classifying products and services with a common coding scheme commerce
between buyers and sellers and is becoming mandatory in the new eraof electronic commerce. Large companies are beginning to code purchases
in order to analyze their spending.

!

312

The UNSPSC can be further extended by adding a ninth and tenth digit after thecommodity number. These numbers can indicate business relationships to the
supplier or original equipment manufacturer (OEM). Alternatively, the numbers
can be used to explode the 4th level UNSPSC commodity codes into futher categories
or item.

UNSPSC for better Spend Analysis

Although there exist multiple systems for classifying purchasing data there are
obvious advantages that UN/SPSC enjoys over other classification systems like
SIC, NIGP, and vertical ones like eCl@ss.

UNSPSC for better Spend Analysis

13Why UNSPSC?
According to Granada Research a useful product classification scheme mustbe hierarchical, so that individual commodities represent unique instancesof larger classes and families. Hierarchical organization allows a given company
to focus on a level of specificity that best suit its purposes and situation.
By classifying products and services with a common coding scheme commerce
between buyers and sellers and is becoming mandatory in the new eraof electronic commerce. Large companies are beginning to code purchases
in order to analyze their spending.

!

312

The UNSPSC can be further extended by adding a ninth and tenth digit after thecommodity number. These numbers can indicate business relationships to the
supplier or original equipment manufacturer (OEM). Alternatively, the numbers
can be used to explode the 4th level UNSPSC commodity codes into futher categories
or item.

UNSPSC for better Spend Analysis

Although there exist multiple systems for classifying purchasing data there are
obvious advantages that UN/SPSC enjoys over other classification systems like
SIC, NIGP, and vertical ones like eCl@ss.

UNSPSC for better Spend Analysis

13buckets of transaction.
Because the coding system is hierarchical, the company

Advantages of UNSPSC

can organize an entire group of purchase transactions into
relevant UNSPSC categories which in turn can be mapped
to the organization’s commodity structure (andcontractible groups) – leading to effective spend visibility,
optimization, and control.

1. UNSPSC’s hierarchical taxonomy allows “Drill Down”
and “Roll Up” analysis
The hierarchical organization of UNSPSC allows anorganization (or a user) to focus on a level of specificity
that best suits its purpose and situation. For example, it
allows searchers to drill down among a large group of
products and services to precisely find what they need,

Example (Drill Down)

2. UNSPSC supports multi-language uses
In UNSPSC, each specific name of the classification has
a unique number associated with it – andit has a unique code for each item. This ensuresthat no ambiguity will exist as to what product or service
the name refers to. This is especially important for
multinational

companies

where

UNSPSC can serve as the reference code forand also enables sourcing strategists to get a bird’s eye

multi-language

view of enterprise spend by ‘rolling up’ a vast groupservices information.

translationsofproduct

andof purchase records into broader, appropriate

314

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

15

buckets of transaction.
Because the coding system is hierarchical, the company

Advantages of UNSPSC

can organize an entire group of purchase transactions into
relevant UNSPSC categories which in turn can be mapped
to the organization’s commodity structure (andcontractible groups) – leading to effective spend visibility,
optimization, and control.

1. UNSPSC’s hierarchical taxonomy allows “Drill Down”
and “Roll Up” analysis
The hierarchical organization of UNSPSC allows anorganization (or a user) to focus on a level of specificity
that best suits its purpose and situation. For example, it
allows searchers to drill down among a large group of
products and services to precisely find what they need,

Example (Drill Down)

2. UNSPSC supports multi-language uses
In UNSPSC, each specific name of the classification has
a unique number associated with it – andit has a unique code for each item. This ensuresthat no ambiguity will exist as to what product or service
the name refers to. This is especially important for
multinational

companies

where

UNSPSC can serve as the reference code forand also enables sourcing strategists to get a bird’s eye

multi-language

view of enterprise spend by ‘rolling up’ a vast groupservices information.

translationsofproduct

andof purchase records into broader, appropriate

314

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

15

3. UNSPSC supports schema modifications to suit organization

5. UNSPSC is responsive to the marketplace

specific needs

UNSPSC is continuously getting enhanced as per

Organizations can customize UNSPSC to suit their unique needs –demands of the market. Individual organizations orwhether to map into their internal classification system

industry groups can play an active role in management

or to get customized views of the data. UNSPSC allows users toof UNSPSC schema, by suggesting and lobbying formove items around within the same classification taxonomy andschema modifications and enhancement

not lose its identification power.

Enterprises can organize an entire group of purchase

4. UNSPSC schema is consistent and complete
In UNSPSC, a single item is identified in once place only –You canthus enabling similar products to be rolled up into logicaltransactions into relevant UNSPSC categories which inhigher groupings. The comprehensive coverage ofleveragethe power of

UNSPSC also allows it to represent all relevant

Exampleturn can be mapped to the enterprise’s commodity
structure (and contractible groups) – leading to

UNSPSCeffective spend visibility, optimization, and control.

without having
6. UNSPSC is an open standard, which comes and free ofto give up yourcharge for use
UNSPSC is free for use for everybody in a supply (andproprietaryschema and its

316

demand) chain, and not proprietary to any particularcompany – leading to absence of implementation barriers.
categories – more than 18,000 commodities. It also

It has gained significant adoption by dominant e-

associatedensures that all suppliers are covered by thecommerce platform vendors (e.g. Ariba) across allclassification schema, thus enabling effective supplierindustries. (“Don’t reinvent the wheel.”)advantages.

rationalization and demand aggregation. While the
UNSPSC

schemaisgettingenhancedon

7. UNSPSC has a clear advantage over other popular codes

a continuous basis, classifying an increasing number

Over the years, there have been several attempts toof commodities into granular detail, an organization

create a uniform classification code such as the Uniform

can also split the 4th level UNSPSC commodity into

Code Council’s (UCC) bar codes, the European Article

further detail, if it suits their purpose.

Number (EAN) retail bar codes and the United States’

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

17

3. UNSPSC supports schema modifications to suit organization

5. UNSPSC is responsive to the marketplace

specific needs

UNSPSC is continuously getting enhanced as per

Organizations can customize UNSPSC to suit their unique needs –demands of the market. Individual organizations orwhether to map into their internal classification system

industry groups can play an active role in management

or to get customized views of the data. UNSPSC allows users toof UNSPSC schema, by suggesting and lobbying formove items around within the same classification taxonomy andschema modifications and enhancement

not lose its identification power.

Enterprises can organize an entire group of purchase

4. UNSPSC schema is consistent and complete
In UNSPSC, a single item is identified in once place only –You canthus enabling similar products to be rolled up into logicaltransactions into relevant UNSPSC categories which inhigher groupings. The comprehensive coverage ofleveragethe power of

UNSPSC also allows it to represent all relevant

Exampleturn can be mapped to the enterprise’s commodity
structure (and contractible groups) – leading to

UNSPSCeffective spend visibility, optimization, and control.

without having
6. UNSPSC is an open standard, which comes and free ofto give up yourcharge for use
UNSPSC is free for use for everybody in a supply (andproprietaryschema and its

316

demand) chain, and not proprietary to any particularcompany – leading to absence of implementation barriers.
categories – more than 18,000 commodities. It also

It has gained significant adoption by dominant e-

associatedensures that all suppliers are covered by thecommerce platform vendors (e.g. Ariba) across allclassification schema, thus enabling effective supplierindustries. (“Don’t reinvent the wheel.”)advantages.

rationalization and demand aggregation. While the
UNSPSC

schemaisgettingenhancedon

7. UNSPSC has a clear advantage over other popular codes

a continuous basis, classifying an increasing number

Over the years, there have been several attempts toof commodities into granular detail, an organization

create a uniform classification code such as the Uniform

can also split the 4th level UNSPSC commodity into

Code Council’s (UCC) bar codes, the European Article

further detail, if it suits their purpose.

Number (EAN) retail bar codes and the United States’

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

17

Standard Industrial Classification (SIC) code now known

UNSPSC v/s other classification standards

as NAICS (North American Industry Classification System).
Before adopting a corporate taxonomy, organizations
usually evaluate other codes like eCl@ss, NIGP, NATO,vertical specific, and their own proprietary codes.).
However,

these

codes

have

been

designedfor purposes other than product/service awareness,
discovery and spend analysis. They do have most of thecharacteristics of a good naming convention needed toperform spend analysis, data and supplier normalization
and rationalization. Some have hierarchies, but then again
they do not provide for granular classification the way
UNSPSC does. NAICS, for example, is too broad based.
eCl@ss is yet to gain popularity and adoption beyond
Germany,

while

NIGP

is a proprietary code, ensuring fee based usage, and NATOis usually suitable for a few specific verticals(and doesn’t permit easy spend analysis).

318

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

19

Standard Industrial Classification (SIC) code now known

UNSPSC v/s other classification standards

as NAICS (North American Industry Classification System).
Before adopting a corporate taxonomy, organizations
usually evaluate other codes like eCl@ss, NIGP, NATO,vertical specific, and their own proprietary codes.).
However,

these

codes

have

been

designedfor purposes other than product/service awareness,
discovery and spend analysis. They do have most of thecharacteristics of a good naming convention needed toperform spend analysis, data and supplier normalization
and rationalization. Some have hierarchies, but then again
they do not provide for granular classification the way
UNSPSC does. NAICS, for example, is too broad based.
eCl@ss is yet to gain popularity and adoption beyond
Germany,

while

NIGP

is a proprietary code, ensuring fee based usage, and NATOis usually suitable for a few specific verticals(and doesn’t permit easy spend analysis).

318

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

19

AMICABLE RESOLUTION OF DIFFERENCES between UNDP and ECCMA
regarding Ownership and Management of the UNSPSCThe United Nations Development Programme (UNDP) and the Electronic Commerce CodeManagement Association (ECCMA) are pleased to announce today that they have amicably
resolved their differences with regard to their respective versions of the coding system forclassification of goods and services . The amicable resolution includes, inter alia, the following:
1.There will be only one version of the code, which will exist under the name of the United
Nations Standard Products and Services Code (UNSPSC), and will be owned by UNDP.
2.In recognition of the valuable contributions of code users, the two currently existing versionsof the UNSPSC will be unified into the single code, with discrepancies reconciled. Pending

Addressing UNSPSC related concerns“Adopting UNSPSC seems like a great idea, but...

implementation of this unified code, both organizations will “freeze” their codes effective
immediately. At the completion of the unification process, UNDP will submit the unification
proposal to the voting members of the ECCMA Code and the UNDP Code, and the voting will
occur on a segment-by-segment basis.

...I am worried about the conflict between ECCMA

3.A new independent and non-profit code management organization will be appointed toand D&B/UNDP over the management of UNSPSC.

replace D&B, the current interim management organization for UNDP. ECCMA will thus noWould this lead to proliferation of different UNSPSCECCMA members will have the same access to the UNSPSC as other UNSPSC members andlonger be responsible for the maintenance and further development of the UNSPSC, but
ECCMA will continue with its other activities unrelated to the management,maintenance andstandards? I would like to adopt UNSPSC but am
waiting till a clearer picture emerges”

update of the UNSPSC.
Further information with regard to the practical arrangements for the unification of
the two versions of the UNSPSC, and the selection of the new code management

Good news – in October 2002, ECCMA and UNDP decided toresolve their differences amicably and join hands to unify

organization will be made available in the near future.
October 2, 2002.

their UNSPSC coding standards. So there will not be
proliferations of different UNSPSC standards – though anorganization can decide to go for any of the existing UNSPSC
versions, or wait for the joint version to come out (expected

Jan Mattsson
Assistant Administrator and Director
Bureau of Management
UNDP

John Svendsen
Chairman
ECCMA

Source: http://www.unspsc.com/AdminFolder/documents/Joint_ann_signed.rtf

soon this year).

320

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

21

AMICABLE RESOLUTION OF DIFFERENCES between UNDP and ECCMA
regarding Ownership and Management of the UNSPSCThe United Nations Development Programme (UNDP) and the Electronic Commerce CodeManagement Association (ECCMA) are pleased to announce today that they have amicably
resolved their differences with regard to their respective versions of the coding system forclassification of goods and services . The amicable resolution includes, inter alia, the following:
1.There will be only one version of the code, which will exist under the name of the United
Nations Standard Products and Services Code (UNSPSC), and will be owned by UNDP.
2.In recognition of the valuable contributions of code users, the two currently existing versionsof the UNSPSC will be unified into the single code, with discrepancies reconciled. Pending

Addressing UNSPSC related concerns“Adopting UNSPSC seems like a great idea, but...

implementation of this unified code, both organizations will “freeze” their codes effective
immediately. At the completion of the unification process, UNDP will submit the unification
proposal to the voting members of the ECCMA Code and the UNDP Code, and the voting will
occur on a segment-by-segment basis.

...I am worried about the conflict between ECCMA

3.A new independent and non-profit code management organization will be appointed toand D&B/UNDP over the management of UNSPSC.

replace D&B, the current interim management organization for UNDP. ECCMA will thus noWould this lead to proliferation of different UNSPSCECCMA members will have the same access to the UNSPSC as other UNSPSC members andlonger be responsible for the maintenance and further development of the UNSPSC, but
ECCMA will continue with its other activities unrelated to the management,maintenance andstandards? I would like to adopt UNSPSC but am
waiting till a clearer picture emerges”

update of the UNSPSC.
Further information with regard to the practical arrangements for the unification of
the two versions of the UNSPSC, and the selection of the new code management

Good news – in October 2002, ECCMA and UNDP decided toresolve their differences amicably and join hands to unify

organization will be made available in the near future.
October 2, 2002.

their UNSPSC coding standards. So there will not be
proliferations of different UNSPSC standards – though anorganization can decide to go for any of the existing UNSPSC
versions, or wait for the joint version to come out (expected

Jan Mattsson
Assistant Administrator and Director
Bureau of Management
UNDP

John Svendsen
Chairman
ECCMA

Source: http://www.unspsc.com/AdminFolder/documents/Joint_ann_signed.rtf

soon this year).

320

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

21

How popular is UNSPSC as a global
standard?
UNSPSC has emerged as the leading product and services
classification standard across the world. Global 500
companies like GE, Motorola, Microsoft etc. have adopted
UNSPSC, as have verticals like Healthcare (CheS has
selected UNSPSC – after modifying it – as the product andservices classification standard). While UNSPSC adoption
is strongest in US, Asia and Australia, it is also gaining
significant traction in Europe.
UNSPSC schema is available in multiple languages, leading
to increases in widespread distribution and implementation
throughout the world.

UNSPSC schema is available
in multiple languages

Across industries/verticals, leading organizations have adopted UNSPSC
ABB
Abbott Laboratories
Air Liquide Welding
American Express
American Petroleum InstituteAristomed
Audio Graphic Systems
Baxter International
Bosch Braking Systems
BP Amoco
Chevron Corporation
Cisco Systems Inc.
CitiGroup
Commerce One, Inc.
CompuCom Systems, Inc.
Conoco, Inc.
Covisint
DaimlerChrysler
Dana Corporation
Dow Chemical Company
ExxonMobil Corporation
Fisher Scientific
General Electric Company
General Motors
General Services Administration
Halliburton Energy Services
Healthcare EDI Coalition
HealthNexis
Kaiser Permanente
Lockheed Martin Corporation
Marsh Industries
McGraw-Hill Children’s Publishing
Microsoft
Motion Industries
Motorola, Inc.
National-Oilwell
Neoforma.com, Inc.
NSSEA
Omnicell.com
Owen Healthcare, Inc.
PricewaterhouseCoopers
Sabre Inc.
Schlumberger, Limited
SciQuest
Tektronix, Inc.
The Australian Procurement
and Construction Council (APCC)
THINQ Learning Solutions, Inc.
Washington Office ofState Procurement
Weatherford International, Inc.
WESCO Distribution Inc.
Whirlpool Corporation
WW Grainger, Inc.

Power/ Automation
Healthcare
Industrial products
Financial
Industry Body / Petroleum
Healthcare solutions
Electronics
Healthcare
Automotive
Oil & Gas/Petroleum
EnergyComputer Hardware
Financial
Computer Software
SoftwareOil & Gas/Petroleum
Automotive/E-commerce exchange
Automotive
Industrial products
Industrial products
EnergyIndustrial products
Industrial products
Automotive
USA Federal Government
EnergyNon profit Organization
Healthcare
Healthcare
Aerospace and Defence
Manufacturing
Print/Publishing
Computer Software
Industrial products
Semiconductor / Telecom
Automation/Manufactring
Healthcare solutions
Education
Healthcare
Healthcare
Consulting
Travel/Tourism
Software/Technology
Software
Hi-Tech and Electronics
Government
Education/Software
Government
Oil & Gas/Petroleum
Electrical/MRO
Consumer Electronics
Industrial products
Note: This is only a partial list

324

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

25How popular is UNSPSC as a global
standard?
UNSPSC has emerged as the leading product and services
classification standard across the world. Global 500
companies like GE, Motorola, Microsoft etc. have adopted
UNSPSC, as have verticals like Healthcare (CheS has
selected UNSPSC – after modifying it – as the product andservices classification standard). While UNSPSC adoption
is strongest in US, Asia and Australia, it is also gaining
significant traction in Europe.
UNSPSC schema is available in multiple languages, leading
to increases in widespread distribution and implementation
throughout the world.

UNSPSC schema is available
in multiple languages

Across industries/verticals, leading organizations have adopted UNSPSC
ABB
Abbott Laboratories
Air Liquide Welding
American Express
American Petroleum InstituteAristomed
Audio Graphic Systems
Baxter International
Bosch Braking Systems
BP Amoco
Chevron Corporation
Cisco Systems Inc.
CitiGroup
Commerce One, Inc.
CompuCom Systems, Inc.
Conoco, Inc.
Covisint
DaimlerChrysler
Dana Corporation
Dow Chemical Company
ExxonMobil Corporation
Fisher Scientific
General Electric Company
General Motors
General Services Administration
Halliburton Energy Services
Healthcare EDI Coalition
HealthNexis
Kaiser Permanente
Lockheed Martin Corporation
Marsh Industries
McGraw-Hill Children’s Publishing
Microsoft
Motion Industries
Motorola, Inc.
National-Oilwell
Neoforma.com, Inc.
NSSEA
Omnicell.com
Owen Healthcare, Inc.
PricewaterhouseCoopers
Sabre Inc.
Schlumberger, Limited
SciQuest
Tektronix, Inc.
The Australian Procurement
and Construction Council (APCC)
THINQ Learning Solutions, Inc.
Washington Office ofState Procurement
Weatherford International, Inc.
WESCO Distribution Inc.
Whirlpool Corporation
WW Grainger, Inc.

Power/ Automation
Healthcare
Industrial products
Financial
Industry Body / Petroleum
Healthcare solutions
Electronics
Healthcare
Automotive
Oil & Gas/Petroleum
EnergyComputer Hardware
Financial
Computer Software
SoftwareOil & Gas/Petroleum
Automotive/E-commerce exchange
Automotive
Industrial products
Industrial products
EnergyIndustrial products
Industrial products
Automotive
USA Federal Government
EnergyNon profit Organization
Healthcare
Healthcare
Aerospace and Defence
Manufacturing
Print/Publishing
Computer Software
Industrial products
Semiconductor / Telecom
Automation/Manufactring
Healthcare solutions
Education
Healthcare
Healthcare
Consulting
Travel/Tourism
Software/Technology
Software
Hi-Tech and Electronics
Government
Education/Software
Government
Oil & Gas/Petroleum
Electrical/MRO
Consumer Electronics
Industrial products
Note: This is only a partial list

324

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

25

Initiating the change“We have invested years in building our proprietary corporateclassification code. Each of our business units have their own

the ways to do this is to use, real time classification tools toautomate the UNSPSC code assignment process. Your people(requisitioners/buyers) can continue to use the existing codes– but your ERP/e-Procurement systems, as well as purchasing
analysts, can reap the benefits associated with using UNSPSC.
For example, a requisitioner can use the existing corporate

proprietary code. Though we feel we should migrate to acode (which he has memorized), but a spend analyst can use

global standard like UNSPSC, how do we manage this? Our people

UNSPSC to get strategic and tactical insight into spend. If you

are used to the corporate/ BU specific code – how do we getconsider going for automated classification solutions to takejust want to start with UNSPSC based historical spend analysis,
care of the data bottleneck. You will not have to initiatethem to use UNSPSC?”

change management unless your organization is ready for it,or you can get top management buy-in.

Enterprise adoption needs push from top management
Let's face it - enterprisewide adoption of any standard needs aclear mandate from the top management. In GE, for example,
the CIO & SVP, Gary Reiner, was instrumental in ensuring UNSPSC
rollout across the enterprise.

UNSPSC change management tips
! Start with a schema audit – first find out whereEnterprisewide adoption vs. Partial adoption
While the maximum benefits of UNSPSC are realized through

UNSPSC will be useful, and how. Get expert help if
required.

enterprisewide adoption across business units and functional! Keep in mind that best practices companies likeareas, you can also consider using UNSPSC for specific purposes

GE have adopted UNSPSC across the enterprise and- and adopting it in a phased manner. You may start with using

are using real-time classification tools for spend

UNSPSC for analyzing your spend, or for that matter, for coding

visibility and control. But you might want to do

and analyzing your indirect spend (and continuing to use yourthis in a phased manner.

proprietary code for direct materials procurement)
Continuing to use proprietary codes while reaping thebenefits from UNSPSC
A global rollout will require some change management effort.
But you can minimize this by adopting UNSPSC in a phased! Automate processes as far as possible- manualclassification is time consuming, error prone, anda waste of productive employee time.

! Consider using pilots to build a business case andget top management buy-in.

manner, and making the process easy for your people. One of

326

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

27

Initiating the change“We have invested years in building our proprietary corporateclassification code. Each of our business units have their own

the ways to do this is to use, real time classification tools toautomate the UNSPSC code assignment process. Your people(requisitioners/buyers) can continue to use the existing codes– but your ERP/e-Procurement systems, as well as purchasing
analysts, can reap the benefits associated with using UNSPSC.
For example, a requisitioner can use the existing corporate

proprietary code. Though we feel we should migrate to acode (which he has memorized), but a spend analyst can use

global standard like UNSPSC, how do we manage this? Our people

UNSPSC to get strategic and tactical insight into spend. If you

are used to the corporate/ BU specific code – how do we getconsider going for automated classification solutions to takejust want to start with UNSPSC based historical spend analysis,
care of the data bottleneck. You will not have to initiatethem to use UNSPSC?”

change management unless your organization is ready for it,or you can get top management buy-in.

Enterprise adoption needs push from top management
Let's face it - enterprisewide adoption of any standard needs aclear mandate from the top management. In GE, for example,
the CIO & SVP, Gary Reiner, was instrumental in ensuring UNSPSC
rollout across the enterprise.

UNSPSC change management tips
! Start with a schema audit – first find out whereEnterprisewide adoption vs. Partial adoption
While the maximum benefits of UNSPSC are realized through

UNSPSC will be useful, and how. Get expert help if
required.

enterprisewide adoption across business units and functional! Keep in mind that best practices companies likeareas, you can also consider using UNSPSC for specific purposes

GE have adopted UNSPSC across the enterprise and- and adopting it in a phased manner. You may start with using

are using real-time classification tools for spend

UNSPSC for analyzing your spend, or for that matter, for coding

visibility and control. But you might want to do

and analyzing your indirect spend (and continuing to use yourthis in a phased manner.

proprietary code for direct materials procurement)
Continuing to use proprietary codes while reaping thebenefits from UNSPSC
A global rollout will require some change management effort.
But you can minimize this by adopting UNSPSC in a phased! Automate processes as far as possible- manualclassification is time consuming, error prone, anda waste of productive employee time.

! Consider using pilots to build a business case andget top management buy-in.

manner, and making the process easy for your people. One of

326

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

27

Benefits of
Adopting UNSPSC

budget. UNSPSC can also be integrated with purchasingcard (P-Card) programs.

!

Integrate the entire procurement process flow – from RFXs,
to requisition and ordering, to invoice and receipt, toAs mentioned earlier, UNSPSC is designed to serve threeaccounts payable, to general ledger. UNSPSC can be usedprimary functions:in multiple enterprise application systems e.g. ERP, e-• Spend analysis

Procurement, e-Sourcing etc. UNSPSC can also help to close

Its coding system brings a single, uniform detailed

the loop between product design and sourcing.

view of all spend across the enterprise,thus
allowing

purchasing

managers

toanalyzeenterprise expenditures.

!

Align its supply chain and increase value chain efficiency.
Using UNSPSC through the value chain ensures greater• Finding and purchasing

accuracy and productivity in communications and

The product and services coding convention allows

transactions with channel partners. Typical benefits thatfor the easy identification of relevant suppliers

can be accrued are minimized returns, better inventoryof a certain product or service.

management and forecasting, and collection of market• Product awareness and discovery

share information.

The uniform codes allow computer systems toautomatically list similar products and services
under a single category, thus ensuring precise!

Increase e-Procurement efficiency and effectiveness byusing controllable search engines and catalogs, andsearches.

directing employees to make purchases from preferredsuppliers automatically. Enable buyers and employee-!

Using UNSPSC codes an organization can:requisitioners to find all suppliers of a given category.

Get detailed, comprehensive insight into its spend

Avoid the expense of maintaining a proprietarylandscape, thus paving the way for effective strategic

classification code, and reduce the cost for all other players

sourcing. Analyze purchasing data available in multiple

in the supply chain.

languages and nomenclature, and optimize spend acrossgeographies and across business units.

!

Communicate about its products by leveraging the global
interconnected electronic infrastructure (through EDI,!

328

Increase control and uniformity across the organization.

Internet, Web, using XML, web services etc.). Compete

By using UNSPSC as a glue cum fluid which ties and links

globally by marketing its products and services more

together business units, divisions, departments, as wellefficiently. Send precoded catalog files to meet customer

as business functions like purchasing and settlement,

needs. Increase sales through desktop procurementcompanies can gain increased visibility and control ofapplications. Capture clean, consistent data from sales

authorized items and vendors, approval workflows, andchannels.

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

29Benefits of
Adopting UNSPSC

budget. UNSPSC can also be integrated with purchasingcard (P-Card) programs.

!

Integrate the entire procurement process flow – from RFXs,
to requisition and ordering, to invoice and receipt, toAs mentioned earlier, UNSPSC is designed to serve threeaccounts payable, to general ledger. UNSPSC can be usedprimary functions:in multiple enterprise application systems e.g. ERP, e-• Spend analysis

Procurement, e-Sourcing etc. UNSPSC can also help to close

Its coding system brings a single, uniform detailed

the loop between product design and sourcing.

view of all spend across the enterprise,thus
allowing

purchasing

managers

toanalyzeenterprise expenditures.

!

Align its supply chain and increase value chain efficiency.
Using UNSPSC through the value chain ensures greater• Finding and purchasing

accuracy and productivity in communications and

The product and services coding convention allows

transactions with channel partners. Typical benefits thatfor the easy identification of relevant suppliers

can be accrued are minimized returns, better inventoryof a certain product or service.

management and forecasting, and collection of market• Product awareness and discovery

share information.

The uniform codes allow computer systems toautomatically list similar products and services
under a single category, thus ensuring precise!

Increase e-Procurement efficiency and effectiveness byusing controllable search engines and catalogs, andsearches.

directing employees to make purchases from preferredsuppliers automatically. Enable buyers and employee-!

Using UNSPSC codes an organization can:requisitioners to find all suppliers of a given category.

Get detailed, comprehensive insight into its spend

Avoid the expense of maintaining a proprietarylandscape, thus paving the way for effective strategic

classification code, and reduce the cost for all other players

sourcing. Analyze purchasing data available in multiple

in the supply chain.

languages and nomenclature, and optimize spend acrossgeographies and across business units.

!

Communicate about its products by leveraging the global
interconnected electronic infrastructure (through EDI,!

328

Increase control and uniformity across the organization.

Internet, Web, using XML, web services etc.). Compete

By using UNSPSC as a glue cum fluid which ties and links

globally by marketing its products and services more

together business units, divisions, departments, as wellefficiently. Send precoded catalog files to meet customer

as business functions like purchasing and settlement,

needs. Increase sales through desktop procurementcompanies can gain increased visibility and control ofapplications. Capture clean, consistent data from sales

authorized items and vendors, approval workflows, andchannels.

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

29

Accounts Payable, General Ledger, Invoices, P-Cards etc.), andManaging theclassification bottleneck1slow, expensive semi-manual spend data classification methods
existing today which are difficult to scale up and repeat. Also,
to maximize the returns from strategic sourcing, companies
need to do spend analysis on an ongoing basis. But if a company

There are three main methods to classify your products andspends months in consolidating spend data from disparate

services data to UNSPSC:

systems across the enterprise – which typically involves
aggregating, cleaning up and then coding data to supplier andPopulate your IT systems with UNSPSC codes - for increased

product code standards, then the entire process gets delayed –efficiency and control.

and companies lose out on millions of dollars of potential savings

Typical example would be assigning UNSPSC codes to yourbefore they can even start optimizing their spend.

consolidated item master, or to your electronic catalogs. This is

An automated UNSPSC classification solution is the best way ofpractical when you have standardized on your processes anddealing with thousands of suppliers and millions of records, whichyour enterprise applications.

is the typical case for Fortune 1000 companies. AutomatedThis is typically a big one time effort followed by periodic updates

UNSPSC classification solutions accelerate the savings- but not so painful as classifying your historical spend in detail,opportunity discovery process and ensure that spend analysis iswhich can involve classifying millions of records.

not a one time effort, but an integral, ongoing part of the spend

This requires high classification accuracy - so while manual

rationalization process.

classification could suffice if the volumes are low, automatedclassification along with quality assurance checks, is the best
way to handle high classification volumes. Check with yourclassification vendors if they guarantee 95% or 98% classification
accuracy, and whether you have some control over the entire
process.

3

Real-time UNSPSC classification
This is a best practices approach (adopted by companies likeGE) which ensures spend visibility and control at source. Example- by automatically classifying purchase requisitions at source,
you can remove the burden of assigning UNSPSC codes from therequisitioners, while also ensuring data integrity at source. You2

can also enforce real-time control by setting up approval
Do 'ex post facto' classification - usually for historical spend

workflows and ensuring that people buy preferred items andanalysis, or rationalizing your item master.

from preferred suppliers. This is especially useful if you haveClassifying millions of transaction records is a daunting task.

implemented e-procurement throughout the organization, but

Effective spend analysis is one of the most important components

are struggling with large volumes of free text requisitions andof a successful strategic sourcing initiative, but is typicallycontinuing maverick purchases.

plagued by many problems like fragmented data originatingfrom multiple legacy systems and from multiple sources (like330

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

31

Accounts Payable, General Ledger, Invoices, P-Cards etc.), andManaging theclassification bottleneck1slow, expensive semi-manual spend data classification methods
existing today which are difficult to scale up and repeat. Also,
to maximize the returns from strategic sourcing, companies
need to do spend analysis on an ongoing basis. But if a company

There are three main methods to classify your products andspends months in consolidating spend data from disparate

services data to UNSPSC:

systems across the enterprise – which typically involves
aggregating, cleaning up and then coding data to supplier andPopulate your IT systems with UNSPSC codes - for increased

product code standards, then the entire process gets delayed –efficiency and control.

and companies lose out on millions of dollars of potential savings

Typical example would be assigning UNSPSC codes to yourbefore they can even start optimizing their spend.

consolidated item master, or to your electronic catalogs. This is

An automated UNSPSC classification solution is the best way ofpractical when you have standardized on your processes anddealing with thousands of suppliers and millions of records, whichyour enterprise applications.

is the typical case for Fortune 1000 companies. AutomatedThis is typically a big one time effort followed by periodic updates

UNSPSC classification solutions accelerate the savings- but not so painful as classifying your historical spend in detail,opportunity discovery process and ensure that spend analysis iswhich can involve classifying millions of records.

not a one time effort, but an integral, ongoing part of the spend

This requires high classification accuracy - so while manual

rationalization process.

classification could suffice if the volumes are low, automatedclassification along with quality assurance checks, is the best
way to handle high classification volumes. Check with yourclassification vendors if they guarantee 95% or 98% classification
accuracy, and whether you have some control over the entire
process.

3

Real-time UNSPSC classification
This is a best practices approach (adopted by companies likeGE) which ensures spend visibility and control at source. Example- by automatically classifying purchase requisitions at source,
you can remove the burden of assigning UNSPSC codes from therequisitioners, while also ensuring data integrity at source. You2

can also enforce real-time control by setting up approval
Do 'ex post facto' classification - usually for historical spend

workflows and ensuring that people buy preferred items andanalysis, or rationalizing your item master.

from preferred suppliers. This is especially useful if you haveClassifying millions of transaction records is a daunting task.

implemented e-procurement throughout the organization, but

Effective spend analysis is one of the most important components

are struggling with large volumes of free text requisitions andof a successful strategic sourcing initiative, but is typicallycontinuing maverick purchases.

plagued by many problems like fragmented data originatingfrom multiple legacy systems and from multiple sources (like330

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

31

CASE STUDY: Healthcare Industry adopts UNSPSC

4 The efficiencies and benefits were not fully achieved without
the data standardization obstacles by healthcare providers.

The Coalition for Healthcare e-Standards (CHeS) is comprised

5 There was a real need to spread the adoption of open andof some of the largest group purchasing organizations incommon standards with industry wide support and active

health care industry, which have joined forces to adopt andparticipation.

promote uniform industry data standards for supply chaintransactions over the Internet. Leading members include

CHeS chose to endorse the UNSPSC after evaluating several otherPremier, Novation, Neoforma, Medibuy, Global Healthcare

options.

Exchange (GHX), Consorta, AmeriNet, MedCenterDirect etc,
who together make more than $ 80 billion worth of contract“Industry adoption of UNSPSC is going to be absolutely critical topurchases for the nation's healthcare providers.

helping e-commerce deliver supply chain efficiencies,”
CHeS Chairperson Joe Pleasant.

According to the Efficient Healthcare Consumer Response
industry report, billions of dollars are wasted each year
in the health care supply chain due to the fact thatdata standards are either lacking entirely or are not as“A global taxonomy is a critical step to helping hospitals andwidely used or well developed as in various othersuppliers manage their supply chains. Today, the wide differencesindustries.

in product description by multiple forms are the reason which causes
substantial inefficiencies and costs for all healthcare constituents.

Some common industry problems they were facing before

UNSPSC creates a framework for standardization identification

adopting UNSPSC were:-

which fixes that problem and reduces costs as a result,”

1 Identifying and utilizing those information components

Mark McDougall, executive director of CHeS.

that have already been declared standards (e.g. HIN
and UPN), that have become standards throughCHeS has contributed to the development of certain healthcare

common practice and usage.

segments in UNSPSC through a year long effort. The UNSPSC is the2 Data inconsistency i.e. it was difficult to ensure thatfirst product taxonomy available to the healthcare industry that isdata the parties pass to distributors, suppliers andnot a part of a proprietary, commercial product or service. It isproviders is in a consistent format.

available free of charge to anyone who wants to use it.

3 To reduce overall cost across the entire supply chain.
(Adopted from CheS' press release on UNSPSC adoption)

332

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

33

CASE STUDY: Healthcare Industry adopts UNSPSC

4 The efficiencies and benefits were not fully achieved without
the data standardization obstacles by healthcare providers.

The Coalition for Healthcare e-Standards (CHeS) is comprised

5 There was a real need to spread the adoption of open andof some of the largest group purchasing organizations incommon standards with industry wide support and active

health care industry, which have joined forces to adopt andparticipation.

promote uniform industry data standards for supply chaintransactions over the Internet. Leading members include

CHeS chose to endorse the UNSPSC after evaluating several otherPremier, Novation, Neoforma, Medibuy, Global Healthcare

options.

Exchange (GHX), Consorta, AmeriNet, MedCenterDirect etc,
who together make more than $ 80 billion worth of contract“Industry adoption of UNSPSC is going to be absolutely critical topurchases for the nation's healthcare providers.

helping e-commerce deliver supply chain efficiencies,”
CHeS Chairperson Joe Pleasant.

According to the Efficient Healthcare Consumer Response
industry report, billions of dollars are wasted each year
in the health care supply chain due to the fact thatdata standards are either lacking entirely or are not as“A global taxonomy is a critical step to helping hospitals andwidely used or well developed as in various othersuppliers manage their supply chains. Today, the wide differencesindustries.

in product description by multiple forms are the reason which causes
substantial inefficiencies and costs for all healthcare constituents.

Some common industry problems they were facing before

UNSPSC creates a framework for standardization identification

adopting UNSPSC were:-

which fixes that problem and reduces costs as a result,”

1 Identifying and utilizing those information components

Mark McDougall, executive director of CHeS.

that have already been declared standards (e.g. HIN
and UPN), that have become standards throughCHeS has contributed to the development of certain healthcare

common practice and usage.

segments in UNSPSC through a year long effort. The UNSPSC is the2 Data inconsistency i.e. it was difficult to ensure thatfirst product taxonomy available to the healthcare industry that isdata the parties pass to distributors, suppliers andnot a part of a proprietary, commercial product or service. It isproviders is in a consistent format.

available free of charge to anyone who wants to use it.

3 To reduce overall cost across the entire supply chain.
(Adopted from CheS' press release on UNSPSC adoption)

332

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

33

UNSPSC
driven Spend
Analysis

The Importance of Classification
The success of a spend analysis effort will be closely tied to theclassification scheme employed. Granular, hierarchicalclassification of data is essential, not only to ensure successful
standardization across the procurement environment but also
to aid search precision and permit aggregation and drill-down
to any level of analysis.
With a common set of product identifiers that are part of a

See your Spend like never before!

hierarchical taxonomy, individual purchases can be identified
by highly specific descriptors (“safety glasses”) or rolled up into
more generic categories (“shop supplies” or “industrial
supplies”). This allows users to evaluate expenditures at exactly
the level most useful to their business or their purpose — including
the identification of families of products that can be combined
into contractible groups to negotiate a single source of supply

In today’s precarious economy, spend analysis is gaining increasing respect

and volume discounts.

as a potent weapon in the battle to squeeze new savings out of corporate procurement
processes. Companies that are implementing strategic sourcing programs — as over
90% of Fortune 100 companies are — use spend analysis to determine precisely what
they pay for materials, products and services, when, and with whom. Islands of spending
data must be extracted and aggregated from multiple enterprise sys-tems, then used to

UNSPSC has emerged as the de-facto standard for spendclassification. The UNSPSC system arranges the entire universeof products and services into more than 18,000 hierarchicalexpenditures

categories according to a five-level numbering system. Thisthat can identify cost-cutting opportunities as well as reveal critical differences among

hierarchical structure and depth of detail make it possible tosuppliers.

achieve the level of specificity required to effectively pinpoint

Some organizations that have adopted spend management initiatives are reaping

a given product set as well as to create meaningful productimpressive savings.One consumer products company has reported slashing certain bids

groupings.

generateasingleuniformviewofenterprise-wide

by as much as 90% after consolidating and analyzing over $30 billion worth of purchasesfrom 50 different A/P systems. Manufacturer of cutting tools saved over $1 million on

Under the antenna category, for example, the UNSPSC assigns$800 million in “quick hit” negotiations by applying the lessons learned after merging

unique codes to communications, radio, automotive, satellite,

A/P, PO and PCard data. A cabinetry manufacturer lowered the costs of purchasedmaterials, with a projected year-over-year savings of 2% to 4%, by consolidating spend
data across five divisions.

334

aircraft, broadcast, microwave, television and radar antennae,
enabling users to zero in on the precise product of interest. All
antenna types share the same segment, family and class codes,

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

35

UNSPSC
driven Spend
Analysis

The Importance of Classification
The success of a spend analysis effort will be closely tied to theclassification scheme employed. Granular, hierarchicalclassification of data is essential, not only to ensure successful
standardization across the procurement environment but also
to aid search precision and permit aggregation and drill-down
to any level of analysis.
With a common set of product identifiers that are part of a

See your Spend like never before!

hierarchical taxonomy, individual purchases can be identified
by highly specific descriptors (“safety glasses”) or rolled up into
more generic categories (“shop supplies” or “industrial
supplies”). This allows users to evaluate expenditures at exactly
the level most useful to their business or their purpose — including
the identification of families of products that can be combined
into contractible groups to negotiate a single source of supply

In today’s precarious economy, spend analysis is gaining increasing respect

and volume discounts.

as a potent weapon in the battle to squeeze new savings out of corporate procurement
processes. Companies that are implementing strategic sourcing programs — as over
90% of Fortune 100 companies are — use spend analysis to determine precisely what
they pay for materials, products and services, when, and with whom. Islands of spending
data must be extracted and aggregated from multiple enterprise sys-tems, then used to

UNSPSC has emerged as the de-facto standard for spendclassification. The UNSPSC system arranges the entire universeof products and services into more than 18,000 hierarchicalexpenditures

categories according to a five-level numbering system. Thisthat can identify cost-cutting opportunities as well as reveal critical differences among

hierarchical structure and depth of detail make it possible tosuppliers.

achieve the level of specificity required to effectively pinpoint

Some organizations that have adopted spend management initiatives are reaping

a given product set as well as to create meaningful productimpressive savings.One consumer products company has reported slashing certain bids

groupings.

generateasingleuniformviewofenterprise-wide

by as much as 90% after consolidating and analyzing over $30 billion worth of purchasesfrom 50 different A/P systems. Manufacturer of cutting tools saved over $1 million on

Under the antenna category, for example, the UNSPSC assigns$800 million in “quick hit” negotiations by applying the lessons learned after merging

unique codes to communications, radio, automotive, satellite,

A/P, PO and PCard data. A cabinetry manufacturer lowered the costs of purchasedmaterials, with a projected year-over-year savings of 2% to 4%, by consolidating spend
data across five divisions.

334

aircraft, broadcast, microwave, television and radar antennae,
enabling users to zero in on the precise product of interest. All
antenna types share the same segment, family and class codes,

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

35

facilitating search analysis and roll-up. The fifth level of theConsolidated commodity spend break-up

UNSPSC coding system allows for customi-zation within theorganization, tailoring the categorization hierarchy to user
requirements.
Another advantage of the UNSPSC’s numbering system is that itallows for unambiguous translation of a particular item’s
description into any language. This is a key benefit for
multinational companies that want to analyze spending on aworldwide basis. While a given commodity will have different
names in different languages, the UNSPSC system unites them
all under a single unique number. Other coding systems lack
this ability as well as UNSPSC’s hierarchical organization andgranular categorization.
Some custom reports on the pages ahead will illustrate theadvantages of UNSPSC for powering effective spend analysis

Consolidated category spend break-up

336

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

37

facilitating search analysis and roll-up. The fifth level of theConsolidated commodity spend break-up

UNSPSC coding system allows for customi-zation within theorganization, tailoring the categorization hierarchy to user
requirements.
Another advantage of the UNSPSC’s numbering system is that itallows for unambiguous translation of a particular item’s
description into any language. This is a key benefit for
multinational companies that want to analyze spending on aworldwide basis. While a given commodity will have different
names in different languages, the UNSPSC system unites them
all under a single unique number. Other coding systems lack
this ability as well as UNSPSC’s hierarchical organization andgranular categorization.
Some custom reports on the pages ahead will illustrate theadvantages of UNSPSC for powering effective spend analysis

Consolidated category spend break-up

336

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

37

Price / Product Name Anomaly Report

In a nutshell
UNSPSC is not only the first truly hierarchical, globalclassification standard, but also is much more detailed
than other schemas. It allows commodities and products
to be properly and uniquely classified, so that companies
can track purchasing patterns more efficiently. Its
hierarchical structure enables upward roll-up anddownward drilling, which is integral for tactical spend
analysis which lead to strategic decision making. By
providing optimum granular level classification, UNSPSC
helps companies get a detailed view of their spend, whichhelps in better decision making. UNSPSC also allows rollingup, and/or mapping to higher, contractible groups.

Major Suppler Report

338

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

39

Price / Product Name Anomaly Report

In a nutshell
UNSPSC is not only the first truly hierarchical, globalclassification standard, but also is much more detailed
than other schemas. It allows commodities and products
to be properly and uniquely classified, so that companies
can track purchasing patterns more efficiently. Its
hierarchical structure enables upward roll-up anddownward drilling, which is integral for tactical spend
analysis which lead to strategic decision making. By
providing optimum granular level classification, UNSPSC
helps companies get a detailed view of their spend, whichhelps in better decision making. UNSPSC also allows rollingup, and/or mapping to higher, contractible groups.

Major Suppler Report

338

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

39

ANNEXUREUNSPSC Best Practices in
Supply Management

340

Spend Control at source
through real-time
UNSPSC classification

BENEFITSBENEFITS

Removes spend classification bottleneck and saves

Data integrity at source - users don't need to know UNSPSC

time, cost and waste of resources

inside-out

Makes spend analysis an ongoing process

Accurate spend classification

Accelerates savings discovery when doing

Spend control and compliance at source rather thanhistorical spend analysis involving huge

'ex post facto' control - reduces maverick spendingtransaction volumes

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

41

ANNEXUREUNSPSC Best Practices in
Supply Management

340

Spend Control at source
through real-time
UNSPSC classification

BENEFITSBENEFITS

Removes spend classification bottleneck and saves

Data integrity at source - users don't need to know UNSPSC

time, cost and waste of resources

inside-out

Makes spend analysis an ongoing process

Accurate spend classification

Accelerates savings discovery when doing

Spend control and compliance at source rather thanhistorical spend analysis involving huge

'ex post facto' control - reduces maverick spendingtransaction volumes

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

41

Item Master Rationalization
using UNSPSCUNSPSC driven Search
For e-Procurement Catalogs and ERP Material Masters
BENEFITSUNSPSC driven catalog search for
e-procurement
Helps user find the right product/
services in a catalog, thus driving
compliance and user buy-in for eprocurement.
Efficient and effective searching,leading to reduction in searching time

UNSPSC driven Material MasterSearchHelps user find the right part/item/

BENEFITS

product in an Item Master, leading

Increased usage of preferred parts andsuppliers

to reduction in part number
proliferation and increased use of

Reduction in COGS

preferred parts and suppliers

Global (enterprisewide) optimization
instead of local (restricted to abusiness unit or plant) optimization

Helps designers reduce COGS,
increase quality and cut-down ontime to market by using prequalified (or standardized) partsand suppliers
Links design to sourcing

342

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

43

Item Master Rationalization
using UNSPSCUNSPSC driven Search
For e-Procurement Catalogs and ERP Material Masters
BENEFITSUNSPSC driven catalog search for
e-procurement
Helps user find the right product/
services in a catalog, thus driving
compliance and user buy-in for eprocurement.
Efficient and effective searching,leading to reduction in searching time

UNSPSC driven Material MasterSearchHelps user find the right part/item/

BENEFITS

product in an Item Master, leading

Increased usage of preferred parts andsuppliers

to reduction in part number
proliferation and increased use of

Reduction in COGS

preferred parts and suppliers

Global (enterprisewide) optimization
instead of local (restricted to abusiness unit or plant) optimization

Helps designers reduce COGS,
increase quality and cut-down ontime to market by using prequalified (or standardized) partsand suppliers
Links design to sourcing

342

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

43

References
1. UNSPSC White paper Granada Research
2. Product Codification and Classification Standards Review Accenture
3. www.eccma.org
4. www.unspsc.org
5. UNSPSC Implementation Guide, ECCMA Technical Secretariat
6. RIM to have Classification, OASIS/ebXML/Registry N01-001
7. An Analysis of Integration Problems of XML-Based Catalogs for B2B Electronic
Commerce B. OMELAYENKO, D. FENSEL Division of Mathematics and Computer
Science, Vrije Universiteit, De Boelelaan 1081a,
8. Using Standards to Drive Ambiguity out of Commercial Exchanges.
Mr. Peter R. Benson Founder and Chief Technical Officer of the Electronic
Commerce Code Management Association (ECCMA)
9.State of the Art in Content Standards
Authors: Martin Dörr, Nicola Guarino, Mariano Fernández López, Ellen Schulten
10. RosettaNet
http://www.rosettanet.org
11. OBI, Open Buying on the Internet
http://www.openbuy.org
12. OCF, Online Catalog Format
http://www.martsoft.com/ocp

About Zycus

13. XCBL, XML Common Business Library,
http://www.commerceone.com/xml/cbl/index.html

Zycus is the leading provider of Spend Data Management solutions. Zycus’ UNSPSC
based automated solutions combine cutting edge, patent pending artificial
intelligence technology and domain expertise to discover, enrich and manage
enterprise spend and master data for better visibility and greater compliance.
Zycus increases e-Procurement, Strategic Sourcing and SRM effectiveness, andcomplements existing enterprise applications to deliver increased ROI.

For more information on ‘UNSPSC for better Spend Analysis’email us at : information@zycus.com
www.zycus.com

344

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

45

References
1. UNSPSC White paper Granada Research
2. Product Codification and Classification Standards Review Accenture
3. www.eccma.org
4. www.unspsc.org
5. UNSPSC Implementation Guide, ECCMA Technical Secretariat
6. RIM to have Classification, OASIS/ebXML/Registry N01-001
7. An Analysis of Integration Problems of XML-Based Catalogs for B2B Electronic
Commerce B. OMELAYENKO, D. FENSEL Division of Mathematics and Computer
Science, Vrije Universiteit, De Boelelaan 1081a,
8. Using Standards to Drive Ambiguity out of Commercial Exchanges.
Mr. Peter R. Benson Founder and Chief Technical Officer of the Electronic
Commerce Code Management Association (ECCMA)
9.State of the Art in Content Standards
Authors: Martin Dörr, Nicola Guarino, Mariano Fernández López, Ellen Schulten
10. RosettaNet
http://www.rosettanet.org
11. OBI, Open Buying on the Internet
http://www.openbuy.org
12. OCF, Online Catalog Format
http://www.martsoft.com/ocp

About Zycus

13. XCBL, XML Common Business Library,
http://www.commerceone.com/xml/cbl/index.html

Zycus is the leading provider of Spend Data Management solutions. Zycus’ UNSPSC
based automated solutions combine cutting edge, patent pending artificial
intelligence technology and domain expertise to discover, enrich and manage
enterprise spend and master data for better visibility and greater compliance.
Zycus increases e-Procurement, Strategic Sourcing and SRM effectiveness, andcomplements existing enterprise applications to deliver increased ROI.

For more information on ‘UNSPSC for better Spend Analysis’email us at : information@zycus.com
www.zycus.com

344

UNSPSC for better Spend Analysis

UNSPSC for better Spend Analysis

45

Adopting

UNSPSC
From vision to reality

w w w. z y c u s . c o m
For more information: information@zycus.com

w w w. z y c u s . c o m