The Lowly UNSPSC Is Moving up in the Supply Chain World!

January 27, 2012 mpotepa

The inauspicious UNSPSC (United Nations) code began as a historical marriage between the UN code set and a code set with a commercial concern (Dunn & Bradstreet). The focus initially was to begin to drive some standardization in the way that products were coded, and overcome the challenges with the many different proprietary coding systems that existed. As I’ve mentioned in prior posts, conducting a proper spend analysis is difficult when items are coded using any number of different elements. At the time that the UNSPSC started, most of the major consulting firms had proprietary codes simply because the UN code was too weak. It had major gaps in it.

Over the years, some of these gaps were closed as people began to nominate new codes. About 4 years ago GS1, a non-profit focused on industry coding book over the code, and there was a flurry of activity. The major systems providers (SAP, Oracle, Lawson, McKesson, and others) started putting placeholders into their systems for the code. And between GS1 and MMIS systems, there was an exponential growth in the use of the code in areas such as healthcare, to the point where it has now become the defacto standard. Even the gray haired guys at consulting companies are abandoning their proprietary codes, as they are okay with the new UNSPSC code. The code is also continuing to grow, as hundreds of materials professionals who are members of the UNSPSC are updating and nominating new codes, and a new issue of the code system comes out every month. The system has essentially become a community-owned code that is self-generating.

The system is also expanding. Something called the UN Global marketplace has emerged, which is a supplier syndicate and identification system for 80,000 entities that sell to any UN entity or program. All 80,000 will have to code to the UNSPSC as well.

In December 2011, the International Trade Data System Product Identification Committee also announced the result of three pilot studies to validate the business case for using e-commerce information to improve product visibility with three different product sets. The results of the pilot studies show that the use of global product identification, global classification codes, and industry-standard e-commerce product catalogs in the United States (US) has obvious mission benefits for participating government agencies (and thus US consumers), as well as definitive cost savings for the government and the private sector.

For example, the use of global trade item numbers (GTINs) can reduce the volume of consumer toy products subject to examination by the Consumer Product Safety Commission (CPSC) by 75 percent or more!

When global product classification codes are used in combination with GTINs, CPSC can expect the volume of products subject to examination to be reduced by another 5 percent, for a total reduction of 80 percent. The resulting decrease in number of toy product examinations could create an estimated $16.8 million in savings for toy importers and $775,000 in cost savings for CPSC over five years.

This represents real money to the Customs and Border Protection folks. The government is not yet telling people to use UNSPSC, but anyone who can read the tea leaves know that they will definitely get in front of it and begin to champion it soon. In essence, they may well send out a message that if you choose to use the UNSPSC and G10 we will put you in pile A…and it is option, but if you don’t use it – you will enter Pile B. And guess what – we won’t get ot pile B until we go through Pile A….

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