Product Classification & Taxonomy

Classification is a form of cataloging (or identifying) things and can be defined as a process of grouping things into categories based on an understanding of the essential properties and relationships between them. Product classification, or product taxonomy, is a type of economic taxonomy which organizes products for a variety of purposes. It is also an important part of Product Master Data Management (MDM) and Product Information Management (PIM). Globally there are different systems of product classification. The concept consists of dividing products according to specific characteristics to form a structured portfolio. Within your organization you can use your own internal classification (product grouping and hierarchy management) or you can use one or more external classification standards.

In every continent there are different systems of product classification for dividing products according to specific characteristics. In general, manufacturers use an informal product classification system but there are also many standardized methods devised by various industry organizations. A single universal coding convention acts as a cost-effective link in the supply chain, even if companies customize it for specific purposes. Classification codes are necessary for effective searching of products and services, for identifying where expenditures are made, and for promoting products to potential buyers. Global Data Synchronisation (GDS) is dependent on trading partners using the same global standard product classification schema to enable product search, subscriptions, and publication activities.

While this is not an exhaustive list, here is a comparison of some of the most prominent international product classifications systems;

GS1 Global Product Classification (GPC)

Started in 2000 as a collaboration between Voluntary Inter-industry Commerce Solutions (VICS), the Uniform Code Council (UCC), the United Nations Standard Products and Services Code (UNSPSC), and the Electronic Commerce Code Management Association (ECCMA) Board. It is an open, global, multi-sector standard for classifying products and services. It is a requirement when using GS1’s Global Data Synchronization (GDS) and/or GS1’s Cloud Services.
Publication Frequency:  Twice per Year
Development: Managed by GS1 Global Office
Languages: Approximately 22
Applications Fast Moving Consumer Goods as well as Horticulture, Crops, and some services.
Access: Files are downloaded from their website, has an online browser
Cost: Free

United Nations Standard Product and Service Code (UNSPSC)

Started in 1998 as a merger between the United Nations Common Coding System and the Dun and Bradstreet’s Standard Product and Services Code System. The code is the intellectual property of the United Nations Development Program (UNDP). In 2003, UNDP contracted with GS1 US to be the code manager of the UNSPSC. It is an open, global, multi-sector standard for classification of products and services. This standard is often used in public tenders and at some marketplaces. It covers all types of market segments from raw products to semi-finished goods, and services.
Publication Frequency:  Random, based on the amount of changes
Development: Managed by GS1 US and the United Nations Development Program (UNDP)
Languages: Approximately 14
Applications: Strong in Raw Materials and Healthcare
Access: Files are downloaded from their website, has an online browser
Cost: Price based on company membership size

Common Procurement Vocabulary (CPV)

Used in public procurement in the European Union. It consists of 9,454 codes structured in a five-level tree hierarchy. Each code is made up of 8-digits and a wording that describes the type of works, supplies or services forming the subject of a contract. It is the mandatory classification system used for EU public procurement notices. Other classification systems may be used in the descriptive parts of public procurement notices or in the tender documentation.
Publication Frequency: Approximately every 3 or 4 years
Development: no formal experts review, follows the EU procedures for amending regulations
Languages: Approximately 22
Applications: EU public procurement notices
Access: Files are downloaded from their website, no online browser
Cost: Free

eCl@ss

Used primarily for parts, assemblies, machine, and plant systems. It is used and promoted by many German origin companies in several sectors like automotive, chemical industries, and healthcare (users and management board are 80% German companies). Financing comes from the European community, the German government, and its users. eCl@ss an ISO/IEC compliant industry standard.
Publication Frequency: Once per year
Development: Managed by Product experts through User Change Requests
Languages: Approximately 16
Applications: Engineering & Construction
Access: Files are downloaded from their website, has an online browser
Cost: Price based on company membership size

Harmonized Commodity Description and Coding System (HS)

Used primarily to determine customs duties, import and export rules/restrictions. The HS is developed and maintained by the World Customs Organization (WCO). Many national statistical bureaus require HS codes from businesses doing foreign trade. The HS is organized logically by economic activity or component material.
Publication Frequency: Approximately every 5 or 6 years
Development: Managed by the Harmonized System Committee (representing the Contracting Parties to the HS Convention)
Languages: None from the WCO
Applications: Customs and Transport tariffs
Access: Files are downloaded from their website, has an online browser
Cost: Price based on length of WCO membership (available for free on several other websites)

In 2012, initiated by Infoterm and TermNet, a Workshop was set up by the European Standards Commission (CEN) with the support of the European Commission. It supported the work effort to analyze how different product classification systems could be aligned with each other, to gain knowledge about the possibility of mapping (aligning) these different systems with each other. It resulted in a study published on Multilingual electronic cataloguing and classification in eBusiness.

The basis requirement was to have product data classified in one product classification system classified manually, semi-automatically or automatically in another product classification system. Such mapping or alignment would facilitate business processes, such as electronic procurement or tendering, even if different classification systems are used enterprise-wide.

Four main product classification systems were assessed: CPV, eCl@ss, GPC and UNSPSC. A trial mapping was undertaken for six domains (Cloths, Food Beverage & Tobacco, Furniture, Electronics, Laboratory, and Energy) to analyze differences and similarities between the product classification systems in order to extract basic rules for alignment or mapping.

The conclusions of the study were that each of the classification systems was driven by different users and aim at different purposes. Therefore, their distinct maintenance is not comparable. Even within one single classification organization, the maintenance is difficult organizational work and the final result can only be seen on the day of publication, not at some defined synchronization point before even publishing. In addition, the cost and effort of maintaining different business models to finance and create the mapping platform outweighed the need for mapping.

A single universal coding convention acts as a cost-effective link in the supply chain, even if companies customize it for specific purposes. Classification codes are necessary for effective searching of products and services, for identifying where expenditures are made, and for promoting products to potential buyers. Global Data Synchronisation is dependent on trading partners using the same global standard product classification schema to enable product search, view and subscription, and publication activities.

A key for the future is to produce a flexible, globally adaptable classification, whose users are aware of its dimensions, and which explicitly retains traces of its construction. In the best of all possible worlds, at any given moment, the only good classification is a living classification.

No classification system is inherently ‘better’ than another. The only measure of the success of a classification system is its value. Different people have different needs, so what works for one individual or company may not work for another. Yet, this lack of universality doesn’t dissuade each of us from working out a system that is right for our purposes. It is for this reason that there is not an immediate desire from trading partners to drive to one classification system.

With regards to mapping classification systems, the conclusions of the CEN Workshop study and the UNSPSC Mapping effort indicates that the different classification systems are driven by different users and aim at different purposes. Therefore, their distinct maintenance is not comparable. However, even though these findings show that mapping is not always feasible, it is still worth exploring mapping opportunities to drive further adoption.

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