Crank up the volume with NIGP codes
Johnson County, Kan., is a growing and active community of more than 500,000 people who are engaged in a wide and diverse array of activities. The county’s per-capita income is high, and its residents are highly educated. This does not mean that we are without our share of problems; the county has to cope with criminal activity, mental health issues, developmentally challenged individuals, public health issues and every other type of challenge common to large population centers.
As a county government, we operate 40 different departments or agencies, including a large award-winning library system, a proactive public health department, an outstanding sheriff’s department, a history museum, a medical emergency response department and many other services such as property appraisal, community emergency management, emergency communications, facilities, parks and recreation and others. We truly are a full-service county government that is responsive to our taxpayers’ needs.
What does this mean with regard to NIGP commodity codes? As a hybrid centralized purchasing division, we service the procurement needs of all of the aforementioned departments. We do that with a staff of seven full-time purchasing professionals. We monitor the procurement activity for an entire county government that is comprised of more than 4,000 employees. We purchase goods and services and are responsible for the procurement of construction services such as new buildings, infrastructure projects and remodeling and repair of more than 70 facility locations.
Because of the diversity of our users and because of the wide variety of products and services used by our departments, in the past we frequently operated more like 40 independent entities, all purchasing goods and services based on individual departmental volumes. We were not able to take full advantage of our mutual interests and product volumes because we were working so autonomously. Central purchasing was not able to fully take advantage of similarities of needs without the benefits of the NIGP commodity codes.
County chose the 5-digit codes
Our entire organization went live with Oracle financials in 2002. When implementing the Oracle procurement modules that year, we were challenged with the need and the desire to better monitor and report on supplier volumes by commodity in order to take full advantage of the power of the new system.
We had the option of creating our own numbering system or using one of several established commodity-numbering systems. We were familiar with the NIGP codes from our previous antiquated system. We had used the codes in the old system but never were able to take full strategic advantage of them due to system limitations. Because the Oracle core purchasing module and the Internet procurement module that we implemented were so powerful and thorough, we were able to implement NIGP codes to their full advantage in the new system.
Those of us on the implementation team debated for some time whether to implement the three-digit codes, the five-digit codes or the seven-digit codes. We felt that the three-digit codes did not offer the depth of information that we needed to gather and analyze sufficient data about our countywide purchasing habits. The seven-digit codes offered more depth of detail than we felt we needed and more choices than we thought our departmental users would accept.
We finally came to a consensus that the five-digit codes offered us the best depth of information without being too ponderous in number. We still felt there were more five-digit codes available than we would need, and before implementation we pared down the full list of 7,000-plus codes to a more manageable number of 4,500. We went live with that number, and made the selection of a commodity code mandatory for entering a requisition in our new system. When entering a requisition, a department user would receive an error message and would be prevented from entering the requisition unless he or she first selected a five-digit commodity code from the NIGP codes loaded in the system.
Codes enable volume purchasing
Initially, there was some departmental pushback to this requirement, as it now meant that a user would be forced to become familiar with the codes and would be required to select the code that best fit the purchase that he or she wished to make. However, users soon became accustomed to this requirement and became very familiar with the codes. They began to understand the value of these codes to purchasing, and they began to see how the information gathered from supplier volume reports could be very beneficial to our strategic buying goals.
As an example, we had three departments and agencies buying similar medical supply items. These departments identified needs for the same products. Because our county has a delegated purchasing authority for departments for individual purchases up to $10,000, these three departments were making individual buys of the same items from the same supplier in some cases. By using our Oracle supplier volume reports and searching on the NIGP commodity codes, we could easily identify all of the purchases of those similar medical supply items and then identify the suppliers used and the departments making the purchases. Compiling the needed data hinged on the NIGP commodity codes and the ability to isolate items and groups of items by code. From that point, it became the purchasing department’s responsibility to combine the requirements and conduct invitations for bid.
Now we are able to identify and combine requirements for like commodities and, through the formal competitive process, take full advantage of the total county volume and award term contracts based on volume and best price. Being able to strategically source our combined countywide needs has represented not only an efficiency factor for us but also a significant cost-savings factor.
Combining the capabilities of our robust financial system with the detailed information-gathering capability derived from the NIGP codes has helped make us a much more efficient purchasing department. Our customers appreciate the availability of the term contracts derived from our current process that now takes full advantage of the NIGP codes.
Meet the author … and a new department
John Mahin’s essay is the winner of the second annual NIGP code essay contest. Mahin, who is the purchasing manager for Johnson County, Kan., wrote the essay in response to the following question: “How has the NIGP code enhanced your organization’s efforts for strategic sourcing?” The essay was edited to meet Go Pro‘s style guidelines.
Mahin’s essay kicks off a new Go Pro department called “Commodity Coding,” which will discuss ways that public-sector procurement professionals can benefit from using the NIGP codes, as well as other topics related to commodity coding.