A Supplier Classification Taxonomy
We understand the importance of using the most appropriate taxonomy for the analysis being undertaken. For a supplier spend analysis, the supplier record is enhanced by appending a vCode classification which describes the supplier’s main trade activity. It is derived by matching the supplier name and address details to our supplier universe, third party data sources and web research by our database operations team.
Spend analysis tools which automatically classify spend by matching finance codes and product descriptions that are derived from an organisation’s internal finance codes to a common classification taxonomy, such as UNSPSC, have emerged in recent years. This can be a very cost-effective approach to solving the problem, provided that there is a high level of confidence that the finance codes and product descriptions allocated by buyers have a high level of accuracy and completeness. If not, the hidden cost of inaccurate analysis or the manual effort required to correct the classifications can be significant.
That’s why we start with a supplier classification that provides a reliable proxy for the area of spend with Observatory report functionality and then provides functionality that allows users to drill through to the line level detail as it appears in the original data provided for more information. This means that where the underlying data is complete and accurate, such as that which has been derived from catalogue based purchases within an eProcurement system, the detail is available. Where it is not, the vCode supplier classification provides a reliable proxy for the area of spend.
We created the 3 level vCode taxonomy to describe the primary business activities of suppliers. Its development was based on over eight years of classifying suppliers, input from procurement category specialists and a review of all other available taxonomies. As we own and manage vCode, it will continue to evolve over time as the spending habits of our customer’s change and new requirements are established.
To assist with this new taxonomy, a vCode Wiki has been developed to provide definitions of each vCode category and to help you to decide which categories are most relevant for your analysis.
We have experience of working with many other taxonomies and have created cross-walks between vCode and many other sector and industry standard classification taxonomies. Reports based on these taxonomies are available within the Observatory to make it easy to produce annual statutory reports.