Daily Archives: April 21, 2017

UNSuitable Procurement Spend Classification!

Brian Seipel of Source One Management Services recently shared his Pros and Cons of using UNSPSC for spend classification, indicating that the best taxonomy for you, including UNSPSC, was determined by your primary goal.

According to Brian, if your goal was to hit the ground running fast and base analysis on a tried-and-true standard, then UNSPSC was a great start because, as a standard, it is:

  • pre-developed and ready-to-use,
  • capable of expressing a good degree of granularity, and
  • widely available from vendors and a significant number of data enrichment options exist.

And this sounds great, but, any services vendor with a spend analysis offering (Insight Sourcing Group – SpendHQ, Spendency, Sievo, etc.)

  • has one more standard taxonomies designed for Procurement that it has been using for years and years (that has been refined across dozens, if not hundreds, of clients) and that it regularly achieves great results with
  • and these taxonomies are highly granular, usually to at least four levels of detail, and sometimes more and
  • can be enriched from dozens of sources using pre-defined mappings that the expert spend services group has ready-to-go

And when you look at it this way, there are really no benefits. (Well, there is one benefit to UNSPSC, and that is easy H(T)S code mapping, but that’s a Finance/AP benefit, not a Procurement one!)

However, the benefits of a custom Procurement taxonomy:

  • alignment to organizational Procurement/Sourcing needs
  • flexibility and capability to be re-organized on the fly
  • ability to support different levels of granularity in different categories (so that drill down is only available where it makes sense)

can not be found in UNSPSC. It’s one rigid unaligned structure. It can’t be remapped and re-organized as needed to support changing spend responsibility (such as department-specific IT services being taken out of IT spending and mapped to the appropriate departments). And the granularity cannot be altered. Allowing spend to be analyzed in some cases down to nonsensical levels.

So while it may be standard and universally supported (and even useful from a Finance/AP point of view), it really is an UNSuitable Procurement Spend Classification. So, when it comes time to do spend analysis, do NOT use it. (Select a system that supports multi-classification and finance can have their UNSPSC pound-cake and you can have your feathery souffle.) Are we clear?

(And yes, if asked, even consultants who do not like UNSPSC will say it’s a reasonable option because they are told to never directly contradict a client who signs the cheque, and if the CFO who signed the PO wants it, for whatever half-baked reason, guess what is all of a sudden a viable option … )