Choosing the right classification for Enterprise-level standardisation

Why spend classification matters more than the taxonomy itself

Most organisations don’t struggle because they chose the wrong taxonomy. They struggle because their spend data isn’t structured consistently enough to be used under pressure.

Whether you are preparing a tender, negotiating supplier contracts, or reporting cost exposure to the CFO, classification is what determines whether data becomes insight — or admin.

The real question is not “UNSPSC or custom?”

It’s “What decision do we need this data to support?”

What is UNSPSC?

UNSPSC is a global, standardised classification system for products and services.

It provides a shared language that allows organisations to compare spend across suppliers, locations, projects, and entities.

UNSPSC is particularly strong when:

• You need comparability across business units
• You want a neutral structure that doesn’t depend on internal jargon
• You want procurement and finance to speak the same language
• You need consistency across tenders and supplier inputs
  

Used well, UNSPSC creates visibility and negotiation leverage. Used poorly, it becomes an ignored reporting layer.

What is a custom taxonomy?

A custom taxonomy is a classification structure designed around how your organisation actually operates.

Instead of forcing spend into an external standard, categories reflect:

• Internal cost drivers
• Asset or service groupings that matter commercially
• How procurement and operations make decisions in practice
• How bids are priced and risk is assessed

Custom taxonomies are particularly useful when:

• Operational nuance matters more than benchmarking
• Asset types or services are highly specific
• Procurement decisions are closely tied to delivery risk
• You need fast insight during tenders and repricing

The risk is not customisation — the risk is inconsistency if governance is weak.

UNSPSC vs Custom Taxonomies — a practical comparison

Comparability and standardisation

UNSPSC

Strong cross-entity and cross-supplier comparability

Best when alignment and consistency matter most

Custom taxonomy

Comparable only if governance is strong

Better reflects internal reality, but harder to standardise

Speed during tenders and bids

UNSPSC

Works well when data is already mapped

Struggles if inputs are messy and time is limited

Custom taxonomy

Can be optimised for tender logic and pricing assumptions

Often faster for bid teams when designed correctly

Procurement negotiations

UNSPSC

Excellent for supplier consolidation and framework agreements

Makes price variance visible across suppliers

Custom taxonomy

Strong for negotiations tied to delivery models and asset behaviour

Supports risk-based pricing discussions

CFO and finance reporting

UNSPSC

Clear, defensible reporting structure

Easy to roll up cost exposure

Custom taxonomy

Powerful if aligned to financial models

Requires more explanation outside procurement‍

Long-term flexibility

UNSPSC

Stable and widely understood

Less flexible for organisation-specific questions

Custom taxonomy

Highly flexible

Requires discipline to remain usable over time

The real reason UNSPSC initiatives fail

Most UNSPSC initiatives fail for the same reason: they are treated as a one-off clean-up instead of a living system.

Common failure points:

• Classification done at too high a level
• Line-item reality ignored
• No feedback loop to improve accuracy
• Manual effort that doesn’t scale
• No link to actual procurement decisions
  

When this happens, teams stop trusting the output — and revert to spreadsheets.

When UNSPSC is the right choice

UNSPSC is usually the right choice when:

• You want a shared language across teams and entities
• Spend visibility and consolidation are the main goals
• Data needs to feed finance and leadership
• You want a neutral, defensible structure
  

Especially powerful in:

• Large organisations
• Multi-entity procurement
• Supplier framework negotiations
• CFO-level cost visibility

When a custom taxonomy is the better choice

A custom taxonomy is often better when:

• Tender pricing and margin risk are critical
• Asset behaviour directly drives cost
• Procurement supports complex delivery models
• Internal decision logic matters more than benchmarks
  

Especially useful for:

• Asset-heavy services
• Technical and multi-service contracts
• Bid-driven organisations
• Risk-sensitive pricing

The approach that works best in practice: hybrid

In reality, most high-performing organisations don’t choose one.They use both.

A common and effective setup:

• UNSPSC for standardised spend visibility and reporting
• Custom taxonomy layered on top for operational and commercial decisions
  

The key is that both are applied consistently at line-item level, with:

• Automation to handle volume
• Validation where ambiguity matters
• Feedback loops to improve accuracy over time
  

This is what allows accuracy to reach ~95% on recurring datasets — without manual rework.

How Pearstop supports both approaches

We don’t force organisations into a taxonomy.

We start with the decision you need to make.

From there we:

• Help define the right classification lens
• Structure messy procurement data at scale
• Apply UNSPSC, custom taxonomies, or both
• Improve accuracy through use, not rework
• Create outputs that feed procurement, finance, and bids
  

The result is not just cleaner data —

it’s lower margin risk, faster decisions, and procurement that negotiates from clarity.

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