Step 1:  Setting up your commodities

Step 1.1: Log in to the Supplier Management System. On the dashboard, go to the 6^th card, namely “User and Account Settings”, and click on “Commodity Classifications”:

Step 1.2: This will take you to the following screen, where you should click on “New commodity classification”:

Firstly, decide on the different commodities according to which you would like to classify your spend. You can also have “main commodities”, under which you can have further “Sub-commodities”, as follows:

In this example, I have selected “Telecommunications” as my commodity. This will be my main commodity and so I will leave the “Parent” field blank and click on “Save commodity classification”, which will give you the following screen:

Now, I am going to add a “sub-commodity”.  Go back to Step 1.2 and click on “New Commodity Classification”. I am adding “Telephone” and selecting “Telecommunications” which I created in the previous step as the Parent. This means Telecommunications is the main commodity and telephone is set as a sub-commodity.

You can carry on repeating the above steps until you have all the applicable sub-commodities saved under your main commodity. Your commodities will then be listed as follows:

Here is an example of what multiple commodities with sub-commodities would look like:

Step 2: Commodity Classification Rules

The purpose of Commodity Classification Rules is to set rules for classification of spend under different commodities.  Some spend items might fall under more than one classification and setting rules will determine under which specific commodity these spend items are classified.   In order to apply rules to your commodity classification, click on the “Rules” option under the Commodity Classification screen:

Then click on, “New Rule”:

In the example, I am going to create a rule for the classification of transport spend as either “Uber” or “Taxi” (under the main commodities of “Entertainment” and “Transport”). Once I click on “New rule”, I enter the details as follows:

Then click on “Next”, which will take you to this screen:

In this example I have created a rule to classify as “Uber”, if the Vendor Code starts with 565.

There are various options for the rule, and classification can happen according to vendor code, expense code etc. The condition can be that the code “starts with” a certain number, “contains” a certain number, etc.

I am now going to add another criteria to this rule, namely that the “Expense Code 1” must be 100:

I have now created a rule that the system should classify a spend item as “Uber” when both these criteria are present. The usefulness of the rule will become apparent when we create our next rule for when a spend item needs to be classified as “taxi”:

According to the above rule, spend should be classified as “Taxi”, if the “Vendor code” starts with 565, and the “Expense code 1” is 200.

Thus, it is possible to have two items with vendor codes starting with the same numbers (in this example 565), but to create a rule that should the expense code be 100, it is classified as “Uber”, and should the expense code be 200, it is classified as “Taxi”. In practice this is something which could happen quite often.

Notice that “Rules will be applied in the order in which they are listed”:

This means that the “Uber” related rule will be applied first, before the “Taxi” rule will be applied. So where the Vendor code starts with 565, the system will firstly check whether the Expense code is 100 and classify as “Uber”, before it applies the rule for classifying as “Taxi”.

Step 3: Using Commodity Classification

Step 3.1: Upload suppliers: On the Supplier Database card on the dashboard, click on “upload suppliers” (this can be done either manually, ie one supplier at a time, or via a bulk upload using an excel spreadsheet):

Step 3.2: When adding the relevant supplier, under “Commodity Classification”, enter the commodity you would like to allocate the spend with that supplier to:

Step 3.3: When you create a new procurement scorecard, your spend will not be classified according to the commodities which you have set up:

If you click on a commodity, for example “Transport”, it will show you which sub-commodities the spend was on:

Step 4: Analysing your commodity spend

Once you have classified all your spend according to specific commodities, you can now pull reports on these commodities and effectively analyse your spend per commodity:

Step 4.1: On the “Procurement Scorecards” card on the dashboard, click on the scorecard which you would like to analyse:

 Then, click on “Reports”:

You can now go ahead and create a report using a specific commodity.  Click on “New Report”:

Ensure that the “Commodity classification” field is entered. Using the other fields, you can narrow down your report as much as you need.

Commodity Classification seems complex but is a very useful tool once implemented.