STANDARDISATION – PRODUCT & SERVICES RELATED

ACRONYMS AND DEFINITIONS

AN ITEM OF PRODUCTION

An item of production consisting of a part, piece, object, equipment or material produced by

manufacturer, grouped within the manufacturer‟s identifying number, and conforms to the same

engineering drawing, standard, specification and inspection.

AN ITEM OF SUPPLY

An item of supply may be:

- A Single item of production.

- Two or more items of production that are functionally interchangeable or that may

be substituted for the same purpose comparable in terms of use.

- More meticulous (a selection of closer tolerance, specific characteristics, finer

quality) than the normal item of productions.

- A modification (accomplished by the user or at the request of the user) of a normal

item of production

An item of supply is to be named, described, and classified in such a manner as to ensure that each

item is uniquely identified.

INTRODUCTION

Aristotle opens his theses on Categories with the following statement “Things are said to be named

‘equivocally’ when, though they have a common name, the definition corresponding with the name differs

for each.”

WHAT IS ITEM IDENTIFICATION?

Item identification is the expression and determination of a concept, which incorporates adequate

information to directly or indirectly describe the physical and performance characteristics of an

item:

- Physical Characteristics. Consisting of everything that enters into the make up of the item,

such as its material content, chemical composition, electrical data, dimensions and the formation

or arrangement of its parts, the principles of operation and the like.

- Performance Characteristics. Consisting of the special or peculiar kind of action or service

provided by and expected of the item by virtue of its physical characteristics.

WHAT IS CODIFICATION?

Codification is the process by which all items of supply are identified, classified and uniquely

numbered in a uniform manner:

- Give the item its unique character;

- Differentiate the item from any other item of supply.

NOTE:

The complete description of the physical and performance characteristics is given

whenever necessary and possible.

As foundation, this codification action is based on a predetermined pattern /

methodology usually called a format or standard. This format will normally determine to

what “depth” the item will be codified. Codification normally entails the allocation of a

standard description in a specific format, with attributes / characteristics coupled to

each defined description.

Codification can (depends on the standard) also entail the allocation of identification

codes, e.g. barcodes.

Identification codes are used to make an unambiguous identification of a thing. The

one-to-one correspondence between the code and the thing is very useful for recording

and linking records of items and actions taken on the items (such as point-of-sale

transactions, inventory management, and record keeping).

WHAT IS CATALOGUING

Cataloguing is the naming and describing of items in an uniform manner, and is synonymously

used with the term Codification.

Cataloguing is an extension of codification, and describes the process of adding functional data to

a catalogued item, which the data do not have an effect on the unique identification of an item of

supply. Functional data cannot always be distinctly defined as certain codification standards also

include functional data as attributes. This functional data could be price, packing, handling storage

data, base units of measure etc. The rule of application is that this functional / commercial data do

not affect the unique identification of an item within a specific “Item of supply” concept.

Figure 1: The familiarity between Cataloguing, Codification and Item Identification.

WHAT IS CLASSIFICATION?

CLASSIFICATION SYSTEMS / STANDARDS

Classification Systems are always controversial, as it is very difficult to address all the needs of

users (the focus / intent of the classification standard).

Many economic classification systems exist. Some classification systems group individual

transactions while other classification systems group or aggregate producing units into industries.

In principle, such groupings could provide an exhaustive list of the commodities and services

produced in the economy, though in practice, even the most detailed codes must combine

commodities that differ to an extent.

The underlying objective of a classification system must therefore be understood before applying

it within a company. Different standardised classification systems corresponding to different uses

of economic data may be needed to fulfil a company‟s needs.

A specific statistical Company purpose or objective therefore need to be set before deciding which

classification system would be the most suitable and effective.

CLASSIFICATION

Classification is the process of hierarchically grouping products or services items into classes to

meet specific needs. These needs can vary greatly, which results in various classification schemes

e.g. industry type, usage, NATO classification, financial classification etc. Classification schemes /

standards as norm have codes associated with the hierarchical classes.

Classification codes are used to group similar things into common categories. With classification,

similar things are members of a class. Similar classes are members of yet a more general class or

family, and so on. The relationship among things and the relationship of a thing to its class are

information signals that are necessary for item discovery, spend analysis, and product awareness.

In other words, classification codes are necessary for effectively searching and finding appropriate

products and services, for identifying where expenditures are being made, and for promoting ones

products to real buying prospects.

Table 1: The differences of some of the most popular commercial codes are outlined in Table 1

Various Classification Codes for the Item “Battery”

Scheme Name Code Instance Chief Characteristics

SIC/NAICS

3-35-9-11

Manufacturing

Elect. Equip

Other

Battery

Identifies broad industry, product, and service

categories

Too high level for effective spend analysis.

Unable to drill down to contractible groups.

UCC/EAN

0-39800-08252-7

Type

Manufacturer

Item

Check

Product identification code, not classification

code (see section above)

Identifies branded merchandise by manufacturer

No item hierarchy; strictly used for identification

NIGP 11223344556

Used by local government purchasing agencies

Maintains hierarchy

Proprietary code (fee-based usage)

NATO

61 - 40

Class - Group

Elect Power - Battery

99 Groups permitted under the numbering

system

Each Class covers a relatively homogeneous area

of commodities

UNSPSC

26-11-17-09

Segment

Family

Class

Commodity

Identifies product and service by category

High specificity

Multiple hierarchies allow aggregation/

disaggregation to any relevant level of analysis

WHAT DOES CLASSIFICATION ACHIEVE

Classification of products and services with a common coding scheme facilitates commerce

between buyers and sellers and is becoming mandatory in the new era of electronic commerce.

Large companies are beginning to code purchases in order to analyse their spending and aid their

strategic procurement initiatives. Other reasons are:

- For Finding and Purchasing

A product and service coding convention brings many benefits to the purchasing

function of a company. These benefits are listed in the Table below.

Table 2: Classifying products and services supports procurement activities

Pros Cons

Enables buyers to find all suppliers of a given category Requires up-front effort to apply codes (can be done by third party)

Enables purchasing managers to analyse 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 purchase transactional data.

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 authorised commodities by individuals and departments.

A standardised, already devised code is easy to implement and saves the company time and expense in developing its own.

Source: Carter, Phillip and Karen Spitler. The Use and Characteristics of Commodity Code Systems in U.S. Companies. Center for Advanced Purchasing

Studies. Tempe, AZ

- Product discovery.

A common naming convention allows computer systems to automatically list similar

products under a single category. When a person is searching for the category, he or

she finds precisely the things being discovered and nothing else. The same principle

applies to pre-tagging product information records with a pre-set vocabulary of terms

that has been developed by industry participants.

- Facilitates expenditure analysis.

When every purchase transaction of an enterprise is tagged with a common set of

product identifiers, purchasing managers are able to analyse enterprise expenditures.

With identifiers that are part of a hierarchical taxonomy, individual purchases can be

rolled up into more generic categories (e.g. “safety glasses” can be rolled up into “shop

supplies” or “industrial supplies”).

Consolidate suppliers to simplify and build strategic relationships. A handful of suppliers

to fulfil most of the company‟s operational needs leads to efficiencies and

improvements in deliveries, service, and settlement.

Save 15% to 20% on total spending through volume purchasing agreements. By

guaranteeing high volumes to a select group of suppliers, purchasing departments can

obtain up to 20% discounts on prices. This equates to annual reductions of a company‟s

overall spend by 20%.

- Control and uniformity across the company (Standardisation).

Classification Codes bring a single, uniform view of all expenditures in a company. It ties

together all departments and divisions, including business functions such as purchasing

and settlement. It can be integrated with procurement card programs. Codes, because

they can be used in information systems, are the essential component for streamlined

control of the list of authorised items and vendors, approval workflows, and allocated

dollars for expenditure.

WHAT IS THE DIFFERENCE BETWEEN IDENTIFICATION AND CLASSIFICATION

CODES?

To illustrate the difference between identification versus classification codes, consider a bar code

that identifies a Dell laptop computer. This identification code cannot be “rolled up” into a more

generic category such as “computer equipment” and has no logical connection with codes

designating Compaq, IBM, Toshiba, or any other brand of laptop computer. Identification codes,

therefore, do not allow for any categorisation of purchases into higher and more generic

categories nor do they allow comparisons among different manufacturers. Refer to the Table

below.

Table 3: The differences between classification and identification codes

Classification Code Identification Code

Cognitive Principle Indicates relation of item to other items, similar and dissimilar

Unambiguously identifies item.

Key Code Characteristic

Hierarchical Uniqueness

Digits of the code…

Show classes and sub-classes in which item is member

Create a one-to-one correspondence between the symbol and item. (Digits have no other meaning.)

Business Function Finding goods and services.

Analysis of activities for further improvements.

Tracking and record keeping

Identification codes are different from classification codes and will not serve the purpose of

product discovery, spend analysis, and product awareness. The table below depicts typical

identification codes.

Table 4 : Common Identification Codes

Code Things Identified

Social Security Numbers People

UCC/EAN (“bar”) codes Products

Duns Numbers Companies

Figure 2

Identification codes are used to make an unambiguous identification of a thing. The one-to-one

correspondence between the code and the thing is very useful for recording and linking records of

items and actions taken on the items (such as point-of-sale transactions, inventory management,

record keeping).

Classification codes are used to group similar things into common categories. With classification,

similar things are members of a class. Similar classes are members of yet a more general class or

family, and so on. The relationship among things and the relationship of a thing to its class are

information signals that are necessary for item discovery, spend analysis, and product awareness.

In other words, classification codes are necessary for effectively searching and finding appropriate

products and services, for identifying where expenditures are being made, and for promoting ones

products to real buying prospects.

For Classification a Hierarchical Structure is necessary. Only a hierarchical taxonomy of names and

categories can provide “roll up,” “drill-down,” and comparability analysis and evaluation. A

taxonomy organizes all the available goods and services into logical categories. It is critical that the

taxonomy have several intermediary categories between the specific items and most generic

classes.

HOW IS CODIFICATION & CLASSIFICATION JOINTLY APPLIED?

Classification and Cataloguing / Codification fulfil two very distinct and different needs. To

successfully apply Classification and Cataloguing, one need to understand these difference for

application within an organisation‟s business processes. The differences can be summarised as

follows:

- The sole purpose of Codification / Cataloguing is for IDENTIFICATION. This

identification is again within a specific Item of Supply Concept. That is, within an organisation,

or cross organisational boundaries, an item will be considered the same without ambiguity.

(fit form and function will be considered the same.)

- Classification Structures is hierarchical of nature and enables the user to:

To drill down or explore within the given classification structure. Classification structures

gives the capability to quickly get to a lower level item eg to drill down from: Electronic

Equipment>Household Electronic Equipment>TV’s etc.

Roll up classified data for Analysis. The most commonly used Analysis is “Spent Data

Analysis”. Roll up analysis can for instance be carried out to determine how much of an

item has been used by a specific Business Unit, or how much an organisation spent on

Consultancy Services.

The diagrammatic below graphically depicts these difference in purpose and application.

13

Lessons Learnt & Principles

Use Classification for Roll up analysis (spent) and drill down exploration.

Use Codification for unique Identification

Drill Down

Explore

Find

Roll up

Analyse

Different Views

Identification

CLASSIFICATION (UNSPSC)

CODIFICATION (EOTD)

Many Classification

views

to one item

One item linked to

Many views

Figure 3: Classification vs Codification / Cataloguing

The illustration above indicates that one can put various different Classification views on an item

eg:

- Product classification to determine to what product group the item belongs

- Industry classification to determine to what industry the item belong

- Expenditure Classification to determine to what expenditure group the item

belongs.

The Catalogued / Codified item is therefore not changed to accommodate a view, but various

classification schemas put on top of the item to obtain the required views. The illustration below

demonstrates this concept.

15

Lessons Learnt & Principles

Obtain Different Viewpoints on same Item

Engineering / Maintenance

Identification

Alternative Item

Standardisation

Specifications

Logistic Footprint

Log Support Analysis

Stock #

Stores

Identification

PHS&T

Alternative bins

Stockholding

Operational User

Correct Item -Identification

Alternative item

Alternative Supplier

What is the Stock #

PHS&T

Lead times

Procurement

Identification

Alternative item

Alternative Supplier

Bulk Contract / JIT

Management

Financial Analysis

Operational Analysis

Statutory Analysis

Roll-Up

Analysis

Statutory Requirements

•Laws Treaties

•Statistical Reporting

•SCOA

•HAZMAT

Etc

Finances

How much spent?

Strategic Sourcing

Budgeting

Drill Down

Exploration

Finding

Figure 4: Different Views on Codified Item

HOW IS A TYPICAL DESCRIPTIVE PATTERN STRUCTURED?

General

Descriptive Patterns are also called Formats and sometimes Schemes / Schemas in industry. The

word Schemes / Schemas is however not commonly used anymore due to the conflict with the use

of the term XML Schema. A Descriptive pattern / “format” can be based on e.g. an XML Schema

but should not be equated as the same.

Descriptive Patterns normally consist of the following elements (Examples are shown further on in

this document):

- An Item Name – also called a Noun (NATO), Class (ISO 22745), Object (OTHER) etc.

- Additional Description – Modifier (NATO), Class (ISO 22745), Qualifier (OTHER)

etc

- Item Identifying Attributes that uniquely distinguish an item in a Name pair –

Characteristics (NATO), Properties (ISO 22745), Attributes (OTHER) etc.

These descriptive elements should also have definitions as to their meaning and application. Good

Descriptive Standards usually also have “set replies” to use in the answering of the attributes e.g.

“black”, “Steel” etc. Technically most good standards also uniquely identify the descriptive

elements with codes to enhance machine working as well as for multilingual application.

In the following paragraphs use will be made of the NATO application of descriptive patterns as an

example, as it is a global recognised standard, and can be considered as best practice.

What is an Item Name?

An Item name is either a basic noun word or a basic noun phrase. Used as an item name only

when it establishes a single concept of an item or as the first word or group of words in an item

name, followed in inverted sequence by the least number of modifiers necessary to establish a

single concept of an item.

An Item Name is normally broken up into two parts normally called:

- Nouns or Objects and,

- Modifiers or Qualifiers.

What is a Noun?

Only a noun word or a noun phrase which conveys the most specific basic concept of an item shall

be used as a basic name (noun).

Acceptable Non acceptable

CHAIR FURNITURE

SHOES FOOTWEAR

INK WRITING FLUID

The basic name is normally be written in singular form, with the following exceptions:

- Where the only form of the name is plural.

Examples: SCISSORS ,TONGS, TROUSERS etc

- Where the nature of the item requires the plural form.

Examples: CLIMBERS (pair), BEANS WITH PORK, SHOES (pair)

What is a Modifier?

Modifiers are used to establish a single concept of basic name. Use the modifiers to the following

preferences:

- Modifiers indicating what an item is (its shape, structure, or form).

- Modifiers indicating what an item does (its function).

- Modifiers indicating the application of an item (what is it used for).

- Modifiers indicating the location of an item (where is it used)? (e.g., AIRCRAFT,

AUTOMOTIVE, etc).

The first modifier is used to narrow the area established by a basic name concept. All such first

modifiers express the same type of characteristic in that position for the same basic name concept.

For a multi-concept basic name, the type of characteristic expressed by the first modifier may vary

for the different concepts.

So far as practicable, all second modifiers applying to a particular basic name plus a first modifier

expresses the same type of characteristic used following the same basic name and first modifier

combination. Second modifiers expresses a different type of characteristic from that expressed by

the first modifier.

- Examples:

SAW, HAND, CROSSCUT

SAW, HAND, RIP

RESISTOR, FIXED, COMPOSITION

RESISTOR, FIXED, FILM

Example

Noun Modifier Delimitation / Definition

DISC RUPTURE An item, usually thin, circular, metallic or non-metallic with a flat or pre-bulged cross-section shape designed to rupture at a predetermined pressure to safeguard or protect a process vessel or system against overpressure with zero leakage.

Item Identification Guideline

If description contains the words rupture or burst or bursting, classify as the qualifier RUPTURE.

Characteristic

Code (MRC)

Characteristic

Definition

Characteristic Definition

ATYP TYPE Enter the specific piece of equipment that the item is used on.

ASIZ SIZE The physical diameter of the disc.

ABUP BURST PRESSURE

A predetermined pressure rating when the disc will rupture and release pressure. I.e. 250 PSI @ 35 DEG C

MATT MATERIAL The surface treatment followed by the predominate base material and material grades and /or specifications when available.

STAN STANDARD The specification, standard or manufacturers reference that identifies the material.

CATALOGUING – THE STRATEGIC FIT

WHAT IS THE MAIN PURPOSE OF A CATALOGUING

SYSTEM?

A Cataloguing System is sometimes erroneously considered to be only a software application

through which codification is achieved. This is a dangerous fallacy as many organisations in

industry have experienced at great cost. Codification Applications have been implemented at great

cost; Codification (standardisation) initiatives of Master Data implemented at great cost within

achieving the required ROI, adequately curbing spend and achieving standardisation objectives.

A Cataloguing System is not only an application but also contains a sound and globally accepted

Codification Standard combined with content management business rules integrated into, and in

support of company business processes. The best to illustrate this is to have a look at what a

Cataloguing System Must Not be VS what it Must be as well as what it must achieve.

What it Must Not Be

A Cataloguing System Must Not be:

- Standalone

- Considered a Discipline totally on its own

- Governed by the lower echelons in a company, where they can apply changes to the

standard / business rules without taking cognisance of the effect on content management as

a whole in the company

- Considered just the standardisation of names and allocation of codes, but be

recognised as the DNA of Business Processes

What it Must Be

A Cataloguing System Must Be:

- Integrated with ERP and Legacy Systems within an Organisations

- Standards Based

- The “Single Source of Truth” of Item Identification of Data in an organisation,

whilst ERP /Legacy Systems are the “Single Source of Truth” of Transactional Data. Specific

emphasis must be placed on the configuration control of Identification data within the

Cataloguing System and NOT in the ERP or Legacy System.

- Collaborative of nature. Item / Services Identification Content must be available to

all users and stakeholders. This content must be integrated and in support of business

processes (Create Once use Many Times.)

- Able to Control the Configuration of Data throughout the Organisation and over all

the business processes.

- Able to manage the data through the total Content Life Cycle.

- Adaptive to Business needs and Business processes

- Able to supply Business Intelligence with regards to the content itself and the

transactional usage of the content in business processes

What it Must Achieve

A Cataloguing System must achieve many things. What it must achieve is also greatly dependent

on how it is deployed in an organisation e.g. if it is only deployed as a codification tool, many of

the content management and standardisation responsibilities will reside in other parts of the

organisation.

With regards to standardisation, the main purpose of a Cataloguing System is to define each item

of supply as a concept which will meet the requirement of the greatest possible number of users,

independently of the equipment of which the item may form a part.

The system must achieve maximum effectiveness in logistic support, facilitate data management in

the area of materiel through the content life cycle must be able to identify items that appear to be

different but meet the same requirement. It thereby becomes possible to reduce supplies

(equipment, assemblies, components and spare parts) and to keep the required quantity of stocks

under control.

A Cataloguing System can be a powerful ROI multiplier if properly deployed .It can / will:

Reduce / Prevent:

- Duplicate items / stock

- Obsolescence due to visibility and management throughout the content life cycle

- Direct purchase requisitions / elimination of free text purchases – through a more

effective search and comprehensive catalogue available to all users

- Purchasing costs (items that are ordered more than once should be entered in the

catalog)

- Carrying costs (helps to maximize vendor owned stack, provide JIT service to smaller

warehouses from centralized location, identify substitute stock codes etc.)

- Lead Times due to correct identification and collaboration of data within the supply

chain.

- Time required to complete strategic sourcing activities as a result of better reporting

and analysis

Assist / Enhance

- Strategic Sourcing due to easier identification of contract spend categories and

patterns

- Rationalization of supplier base and number of codified items through better

understanding of requirements and hence who can supply what as well as alternative

sourcing

- Spent Analysis

- Better reporting of “on-contract” versus “off-contract” spend

- Collaboration of Item / Services Identification Content throughout the Organisation,

as well as with important stakeholders

- Business Intelligence due to improved reporting, performance measurement and

analysis

- Utilisation of Standard Based Content in all Business Processes

Enable,

- Ease of language translation from one geographic region to another

- Item of supply standardization in the capital procurement process

- Data Exchange locally and internationally due to utilization of Standards

BEST PRACTICES / TIPS

The following can be considered:

Codification / Cataloguing:

- When cataloguing, use the principles of item identification and do not try and use

distinctions like Brand Name etc

- Ensure clear business and standardisation rules before commencement of

Cataloguing

- Rather use more characteristics which would enhance search capability than

concatenated values e.g. length, height, thickness etc rather than size 20mmX3mmX40mm.

Concatenated views can be obtained by Short Item Description Patterns.

- Catalogue in full and avoid abbreviations etc so that the data can be re-used later.

Where abbreviations must be used, ensure that they form part of the standard‟s

standardisation rules.

- Create Short Item Descriptions Patterns to store with e.g. the item master for use by

e.g. ERP systems. Use the sequencing of characteristics to obtain meaningful Short Item

Description Patterns

- Do not try and “force” data into item identification attribute fields just because it is

there. Unnecessary data will lead to misinterpretation which will cause duplication of records

due to perceived uniqueness. It could further negate the capability to effectively identify

duplicates / similar items.

- Use the concept of mandatory characteristics sparingly. It could lead to an

unnecessary cataloguing level of effort. It could also not always be practical to implement as

under the same descriptive pattern the characteristic can or cannot be applicable e.g. the

characteristic “size” could be applicable to standard sizes, but length and width would be

applicable to non standard sizes.

Implementations:

- Beware of the „Big Bang” approach – it can be costly and might not give the

required ROI. Implementations must be based on sound business analysis with specific

business objectives. The following can be used as planning guides:

Base Standardisation (Codification) priorities on analysis. This could be Spend Analysis,

ABC Analysis etc

Determine the Item of Supply concepts and the standardisation rules upfront before

commencing with standardisation (codification).

Determine the metrics for measurement (Business Intelligence)

Set an objective to “Create at Source”. Collaboration with and adoption of

Manufacturers, Suppliers and Vendors in the content management process could save a

lot of money. Attempt to have these stakeholders supply the data in the required

format utilised by the company. The ideal would be for the MVS stakeholders to supply

this information online and directly into the Cataloguing System

Ensure all Procurement / Acquisition Contracts have a Codification clause enforcing the

supply of data in the company required standard

- Do not underestimate the company culture in standardisation initiatives

- Give Collaboration and Integration capabilities Top Priority. This will firstly ensure

that people are connected and involved from the outset; and secondly will give management

information from the start to effectively direct the initiative. This is usually where the Small /

Immediate Wins materialise which can be used as substantiation for the standardisation

intitiave.

- Align Content Management Processes with other Business Processes and Objectives

Sources:

Some of the content referenced in this document courtesy of whitepapers from the ECCMA and

UNSPSC.