Introduction
This paper explores the origins of the Universal Standard Products and Services Classification (UNSPSC) codes, their benefits in UK procurement and bidding, and provides examples of how they are used. Potential challenges and limitations associated with UNSPSC codes are addressed and tips for implementation are provided.
What are UNSPSC Codes?
Procurement and bid professionals across both private and public are constantly looking for ways to streamline the procurement process while maintaining high levels of transparency and accountability. UNSPSC has gained popularity in recent years due to the level it can differentiate products and services over traditional coding systems like CPV (Common Procurement Vocabulary) codes. Simply described UNSPSC codes are like CPV codes, though used in both the private and public sector, whereas CPV codes are predominant just in the public sector
UNSPSC was jointly developed by the United Nations Development Programme (UNDP) and Dun & Bradstreet in 1998 and was designed to classify products and services across different industries and countries. It is currently managed by GS1 US, which is responsible for overseeing code change requests, revising the codes, issuing regularly scheduled updates to the code, and managing special projects and initiatives.
The system is based on a hierarchical structure, with four levels of classification (an optional 5th level exists but is not commonly used). The first two levels are the most general and are used to categorise products and services broadly, while the third and fourth levels provide more specific classifications. The latest release (14th February 2023) of the code set is 25.0901, totalling over 157,000 items. The four primary levels of the UNSPSC code hierarchy are:
- Segment
- Family
- Class
- Commodity
Each level is coded in two decimal digits, with ’00’ treated specially to give segments, families, and classes their own eight-digit codes. For example, the code for ‘Cats’ is 10101501, ‘Dogs’ is 10101502, and ‘Cattle’ is 10101516. The class of ‘Livestock’ is 10101500; the family of ‘Live animals’ is 10100000, and all are in the segment 10000000 of ‘Live Plant and Animal Material and Accessories and Supplies’. Optionally, a further two digits can be added to represent the business function, such as ‘retail’ or ‘wholesale’.
UNSPSC competes with several other product and commodity coding schemes, including the European Union’s CPV, ECLASS, and GS1’s Global Product Classification (GPC).
Examples of UNSPSC Codes in Bidding and UK Procurement
UNSPSC codes are used in a variety of procurement activities, including sourcing, contracting, and supplier management. For example, in the UK, the Crown Commercial Service (CCS) uses UNSPSC codes to classify products and services in its procurement activities. The CCS also requires suppliers to provide UNSPSC codes when bidding for government contracts. This ensures that suppliers are bidding on the correct products and services and that their bids can be easily compared to those of other suppliers.
Another example of UNSPSC codes in action is in the healthcare industry. The National Health Service (NHS) in the UK uses UNSPSC codes to classify medical products and services, making it easier to manage and analyse spending across different healthcare providers.
Challenges and Limitations
Despite the advantages of UNSPSC codes, there are some challenges to consider:
- The need to keep UNSPSC codes updated and relevant to evolving market needs and requirements.
- The competition with other coding schemes, such as the European Union’s CPV, ECLASS, and GS1’s GPC.
- The potential for confusion and errors in applying UNSPSC codes, particularly if not used correctly or consistently.
- The requirement for organisations to invest in training and systems to effectively implement and use UNSPSC codes.
Benefits of Using UNSPSC Codes
There are benefits to using UNSPSC codes in bidding and UK procurement including:
- The use of standardised codes simplifies the procurement process by providing a common language for buyers and suppliers. This can help to reduce the time and resources required to source products and services.
- UNSPSC codes provide greater visibility and transparency in procurement. Buyers (and suppliers) can easily track spending by category, identify areas of overspending, and monitor supplier performance.
- The use of UNSPSC codes enhances data analysis. Buyers (and suppliers) can analyse spending patterns over time, identify cost-saving opportunities, and make more informed purchasing decisions.
- Better communication and collaboration among trading partners due to engaging on specific bids that are relevant to both parties.
Conclusion
UNSPSC codes are a valuable tool for simplifying the procurement process, providing greater visibility and transparency, and enhancing data analysis. While there may be some challenges and limitations associated with their use, these can be mitigated with proper implementation and training. As procurement continues to evolve, the use of standardized classification systems like UNSPSC codes will become increasingly important in ensuring efficiency and transparency in procurement activities.
Procurement and bid professionals are encouraged to understand the UNSPSC coding system and ensure that they use this in combination with the more traditional CPV codes to ensure greater visibility of opportunity and market data.
The Contracts Advance software now has the functionality to search and report by CPV and UNSPSC codes and provides a competitive advantage to those organisations who use it to find and win public sector contracts. The combination of UNSPSC codes and CPV codes increases the chances of finding all relevant opportunities for bidders and buyers and decreases ‘white noise’. Additionally, as UNSPSC coding is used across both private and public sector procurement, organisations that bid and work in both sectors can have unanimity and uniformity by using UNSPSC coding.
To find out more regarding UNSPSC please either contact your dedicated Customer Success Manager at Contracts Advance, or contact the Contracts Advance Sales team on Tel; 07525 810 902, or email tim@contractsadvance.co.uk