Why the Code?
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The NIGP Commodity/Services Code is the solution that, when coupled with your procurement software package, will bring the highest levels of order and efficiency to your overall procurement program. The Code offers you an unparalleled coding structure for standardizing purchasing.
In 1983, a purchasing automation survey of cities, counties, provinces, school districts, colleges, and universities conducted by the National Institute of Governmental Purchasing (NIGP) found 83% of respondents expressing a strong interest in a standard commodity/service code. NIGP responded by developing the NIGP Commodity/Services Code to bring efficiency to automated purchasing, and the Code has since been adopted by more than 1,400 government users. The Code continues to expand, due largely to ongoing user input.
Learn more now about how the NIGP Code is a powerful tool for supplier management, requisition, sourcing, PO/contract management, spend analysis, inventory and content management.
- Supplier Management
- PO/Contract Management
- Spend Analysis
- Content Management
- Structure and Sample
The NIGP Code can help you organize and manage:
- The suppliers you do business with
- The process of finding available suppliers for various products and services
- The evaluation of suppliers in each product or service area to ensure adequate competition
- MBE/WBE outreach efforts in terms of drawing a diverse supplier pool across the spend areas of your agency
Benefits of using the NIGP Code for supplier management:
- Access unparalleled depth and breadth for the identification of suppliers’ products and services
- Track spending to measure against diversity goals, when used in conjunction with MBE/WBE certification
- Reduce overall procurement risk by identifying spend areas where competition is weak and supplier recruitment is needed
The NIGP Code provides:
- A mechanism to group similar requisitions together for buyer action
- A product/service grouping function for ordering from blankets and contracts
- A process for facilitating workflow based on commodity
- A standardization tool for product/service descriptions on the requisition
Benefits of using the NIGP Code for requisition:
- Group and consolidate requisitions
- Facilitate workflow based on commodity
- Assign buyers based on commodity grouping
- Validate account codes against commodity (depending on system in use)
The NIGP Code works to:
- Identify suppliers for your bidder list
- Standardize commodity/service descriptions
- Facilitate spend rollup at the item level, leading to more competitive bidding
- Cross-reference suppliers/commodities to identify areas for supplier recruitment
Benefits of using the NIGP Code for sourcing:
- Reference standardized descriptions for a consistent sourcing event
- Get a better picture of actual demand and drive better pricing from suppliers using demand aggregation via spend analysis
The NIGP Code can be used to:
- Consolidate purchase orders by commodity group
- Provide a standard description at the item detail level
- Access contracts via commodity code
- Group commodity codes for improved workflow
Benefits of using the NIGP Code for PO/Contract Management:
- Consolidate POs for volume discounts
- Eliminate unnecessary spending through a commodity-based workflow
- Control purchasing through accessing contracts by commodity code
The NIGP Code allows you to:
- Automatically track spending by commodity code grouping
- Cross-index spend data against vendor categories or MBE/WBE classifications
- Employ risk-based procurement strategies to organize spend areas for evaluation
- Track green spending through NIGP “Green” Commodity Codes
Benefits of using the NIGP Code for spend analysis:
- Realize savings up to 20% through the combination of effective spend analysis and strategic sourcing
- Drive savings by analyzing suppliers to increase competition and identify areas for vendor recruitment
The NIGP Code serves to:
- Eliminate duplicate items throughout inventory locations with uniform product numbering across suppliers
- Standardize descriptions for stock items
- Separate the commodity from the supplier part number by using supplier-independent item numbers
Benefits of using the NIGP Code for inventory:
- Eliminate wasteful product duplication in inventory
- Standardize item identification through consistent descriptions
- Facilitate spend analysis by commodity
The NIGP Code is able to:
- Group products and services in online catalogs for easier searching
- Standardize product/service descriptions for use within catalogs
- With crosswalk tables, standardize catalog content created with UNSPSC and NAICS taxonomies
Benefits of using the NIGP Code for content management:
- Make searches easier and more effective
- Simplify product/service comparisons across catalogs
Structure and Sample
3-Digit Class Code
The 3-Digit Class Code has a brief general description. This level contains 209 Commodity (Product) Classes and 55 Service Classes, totalling 264 Classes. The 3-Digit Code is primarily used to generate periodic expenditure history by department for fiscal planning, budget execution and accounting.
5-Digit Class-Item Code
The 5-Digit Class-Item Code is an expanded version of the 3-Digit Class Code. Currently, it contains more than 8,400 descriptions. This level categorizes vendors by class-item to allow your procurement software to automate bidder selection and to produce no-bid response reports, vendor performance reports, and minority business and HUB reports by Code. Purchase history can be captured at this level as well.
7-Digit Class-Item-Group Code
The 7-Digit Class-Item-Group Code provides an additional level of purchase description. It contains more than 25,000 descriptions. It can be used to develop a specification file and is used with the 11-Digit Code to create a comprehensive purchase description.
11-Digit Class-Item-Group-Detail Code
The 11-Digit Class-Item-Group-Detail Code is generally used to create, manage and maintain line-item term contracts. It is also used to identify stock items in your inventory. This level of the Code currently contains more than 450,000 descriptions, giving you a great amount of flexibility when creating your contracts and stock items. The 11-Digit Code is also used with your procurement software to capture purchase history from your term contracts. This history can then be used to create periodic management reports stating how much was spent during the period, for what, for whom and from whom. The NIGP Code is the tool to make this possible. It is only limited by the capability of the procurement software utilized.
The NIGP Code has been implemented by 33 states and utilized by thousands of local users, including:
- State of Texas
- State of Washington
- State of Tennessee
- Fort Lauderdale, Florida
- Alexandria, Virginia
- Rockland County, New York
Case Study: City of Houston
In order to improve its overall inventory management system, the City of Houston chose to implement the NIGP 11-Digit Code. One issue the City wanted to address was the lack of visibility to duplicate and inactive inventory items across the City’s various inventory locations.
By assigning an 11-digit NIGP Code to the inventory items, the City was provided a standardized commodity structure for the items for spend analysis as well as a useful reference of standard descriptions for the products.
As a result of the project, the City was able to reduce its material master codes inventory from 88,000 to roughly 20,000. This reduction in duplicated items and the added visibility of consistent product numbers and descriptions has helped reduced carrying costs andincreased productivity city-wide.
"The NIGP Coding system allows us to improve our inventory process,” said Calvin Wells, Purchasing Agent for the City of Houston, “and that is a critical compone nt to materials management."
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