Codification vs Classification: Which is More Effective?

In an increasingly complex industrial world, inventory management has become a critical aspect in maintaining operational efficiency. One of the biggest challenges is how to systematically compile and organize material data so that it is easy to access, manage and analyze. Here comes the concept codification And classification play an important role.

However, there is often confusion regarding when to use a coding system and when classification is more relevant. This article will discuss in depth the differences between the two, their advantages and disadvantages, and how companies can utilize the best strategies according to their operational needs.

Understand the concepts of Codification and Classification

Codification: Orderly Structure in Material Identification

Codification is the process of assigning a unique code to each item in inventory. This code usually consists of a combination of numbers, letters, or symbols that contain specific information about the material. The main objectives of codification are:

• Speed ​​up material identification with a uniform numbering system.
• Reduce errors in recording due to duplication or variations in material naming.
• Increase efficiency in procurement by making it easier to match demand and available stock.

For example, in the manufacturing industry, a company can use a coding-based system ISO 8000 to ensure global standards in material data management.

However, the main disadvantages of codification are:

• Requires a disciplined and consistent system, because each material must be given a unique code that is easy to remember and apply.
• Requires training for operational teams so that they understand the meaning of the code used.

Classification: Hierarchical Structure for Material Categorization

Meanwhile, classification focuses on grouping materials based on their attributes or characteristics. This allows organizations to:

• Manage data more systematically, especially on a large scale.
• Makes it easier to search for materials by category, such as material type, application, or criticality level.
• Improve data analysis efficiency, for example in planning requirements or forecasting procurement.

For example, system UNSPSC (United Nations Standard Products and Services Code) often used to classify products and services in global supply chains.

The disadvantages of classification are:

• Less specific than codification, because it relies more on categories than unique codes.
• Can cause inconsistencies if classification standards are not implemented properly.

When to Use Codification and When to Use Classification?

Choosing between codification and classification depends on business needs and the company's operational scale. Here are some scenarios where each method is more effective:

Use Codification If:

1. Companies need fast and accurate material identification.
2. Procurement and stock management systems rely on unique codes to prevent duplication.
3. Strict control of the materials used in production is required.

Case in point: A manufacturing company with thousands of parts needs to ensure that each component has a unique code containing information about its type, size, and compatibility.

Use Classification If:

1. The company has a large amount of inventory and need to group materials based on certain categories.
2. Comprehensive data analysis is required for strategic planning and supply chain optimization.
3. Businesses operate in a multinational environment, where standard classification systems such as UNSPSC can help simplify cross-border data management.

Case example: Mining companies that have thousands of types of tools and equipment will find it easier to manage their inventory with a classification system that allows quick searches based on the type of equipment and function of use.

Integration of Codification and Classification for Maximum Efficiency

In practice, many companies adopt this approach hybrid by combining these two systems to achieve maximum efficiency. For example:

• Using codification for materials that are unique and require strict control.
• Use classification for materials that are more general and need to be managed in large categories.

This implementation can be strengthened by the system Enterprise Resource Planning (ERP) which integrates material data into one digital platform.

Conclusion

Good codification nor classification has an important role in inventory management. Codification is more effective for identifying specific items and reducing recording errors, while classification makes it easier to search and analyze data on a large scale.

For companies that want to optimize their material data management strategy, a combination approach can be the best solution. With the help of technological solutions such as The opinion, companies can implement an integrated codification and classification system to improve operational efficiency and data-based decision making.

Does your company have an appropriate material data management strategy? If not, now is the time to make a transformation!