The world of procurement is always complex and confusing, with various systems and codes used to codify the products, services, and businesses. Most of these are run based on the requirements of the user and organization working style.

Two of the most widely used Codification/classification systems in Supply chain are the United Nations Standard Products and Services Code (UNSPSC) and Standard Industrial Classification (SIC) (Similar to NAICS)

UNSPSC is a classification system that provides a Systemized and hierarchical way of identifying products and services in procurement. Currently it has about 150k+ codes in use. The codes are managed by managed by GS1 US® for the UN Development Programme (UNDP), is an open, global, multi-sector standard for efficient, accurate classification of products and services. and are recognized internationally.

UNSPSC is an efficient, accurate and flexible classification system for achieving company-wide visibility of spend analysis, as well as, enabling procurement to deliver on cost-effectiveness demands and allowing full exploitation of electronic commerce capabilities. They are used to classify products and services based on their characteristics, features, and functions. The codes are structured hierarchically and cover a broad range of categories, including Oil and Gas, Healthcare, goods, services, and construction.

Standard Industrial Classification (SIC) codes, on the other hand, classify businesses according to their industry. SIC codes are four-digit numerical codes assigned by the U.S. government that categorize the industries to which companies belong, while also organizing industries by their business activities. The SIC codes were created by the U.S. government in 1937 to classify and analyse economic activity across various industries and government agencies, and to promote uniformity in the presentation of statistical data collected by various government agencies SIC codes have also been adopted in places outside the U.S., including in the U.K

Every company has a primary SIC code that indicates its main line of business. The first two digits of the SIC code identify the major industry group, the third digit identifies the industry group, and the fourth digit identifies the specific industry.

Despite having been other systems like NAICS, companies still use the SIC standardized codes today for classifying the industry that companies belong to by matching their business activity with like companies.

Both UNSPSC and SIC codes provide a standardized way of classifying products, services, and businesses, making procurement processes more efficient and effective. By utilizing these codes, organizations can improve the accuracy of Supply chain analysis and improve supply chain management.

Procure-to-Pay (P2P) systems use the UNSPSC codes to classify products and services, making it easier for buyers to find the items they need and for suppliers to list their offerings.

Some commonly used P2P systems that incorporate the UNSPSC codes include Oracle, SAP Ariba, Jaggaer, and Coupa.

In addition to improving procurement processes, the use of UNSPSC and SIC codes helps to enhance consistency and visibility in supply chain management. By providing a common hierarchical approach for classification, these systems make it easier for buyers and suppliers to communicate effectively and for organizations to gain a more complete understanding of their supply chains.

In conclusion, understanding the UNSPSC and SIC is essential for effective supply chain processes. These systems provide a standardized way of classifying products, services, and businesses, making it easier for organizations to manage their supply chain activities more efficiently and effectively.

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