Building a procurement taxonomy that actually works.
A free masterclass with Mithra co-founder Rasa Raoufi on the proven practices for building and improving procurement taxonomy, a unified language for your internal and external stakeholders, and the DNA of the procurement organization.
Rasa RaoufiCo-founder, Mithra · Procurement practitioner~12 minTaxonomy is the DNA of procurement.
Spend taxonomy is the lens category owners use to face the outside world, and the language they use to communicate effectively with stakeholders inside the business.
Take a simple example: a category called "boxes" vs. "corrugated boxes". The second tells you far more about the product and its specifications: a better naming convention for both internal and external stakeholders. Get it wrong, and you can't even benchmark, no matter how much external market data you have.
- Inaccurate, poor spend visibility, and decisions made on it
- Being corrected in front of leadership because the numbers don't hold
- Decisions made by consensus or shortcut, not by data
- No meaningful benchmarking, even with market data in hand
- Trapped value, inefficiency and frustration across the team
Four marks of a best-practice taxonomy.
Market-specific, supply-sourced
Built around what you buy and the supply market not your internal process or finance cost structure. The biggest pitfall is letting accounting ledgers pollute the spend hierarchy.
MECE
Mutually exclusive and collectively exhaustive. Overlaps and inconsistent granularity are the enemies of any taxonomy and the second-hardest thing to get right.
Stakeholder-aligned
Internal stakeholders must fully comprehend it. Orchestrating and educating them is a focus area and no one bridges the internal and external world better than a category owner.
Documented & governed
Definitions and scope live in living documents with clear ownership. Taxonomy is a live being think how 3D printing simply didn't exist in any taxonomy ten years ago.
"Spend taxonomy is the DNA of the procurement organization, the lens of the category owners toward the outside world, and the language to communicate effectively with stakeholders internally."
A three-step approach to craft or improve any category.
Work through a selected group of categories or subcategories within a single repeatable framework, building and completing one level before moving to the next to keep granularity consistent and avoid overlap.
Define & redefine
Define each category and its scope, and keep every definition, scope and example together as one source of truth even a versioned Word document will do. Share with key stakeholders, gain full alignment, and reflect every accepted change into the repository. This is change management.
One source of truthTest with real data
Where the rubber meets the road: test the refined taxonomy against a sample of real transactional spend, together with the stakeholder group. Can they actually allocate spend to it? Establish the governance, cadence, and lead times for collecting and embedding feedback across source systems.
Test on transactionsGovern & keep it alive
Ensure clear ownership across categories and identify the data owners, the people raising POs, and the suppliers issuing invoices. Set a cadence with stakeholders to review and collect feedback, and make sure every update is documented, communicated, and executed across all teams, sources, and reporting systems.
Ownership & cadenceThree rules for making taxonomy stick.
Communicate on a fixed cadence
Keep every stakeholder, internal or external, involved and informed about changes, and give them a way to provide feedback and use the taxonomy in their own processes.
One and only one source of truth
A single repository with a control mechanism for feedback and changes. Multiple repositories only create confusion, complexity and disengagement.
Automate the tedious work
Maintenance can be tedious and looks low-value at first, but it significantly impacts your team's performance. Automate as much of it as you can.
Taught by Rasa Raoufi.
"I hope you learned something new and can use it to become the go-to person in your organization when we're talking about this topic."
Rasa RaoufiCo-founder, Mithra · Procurement practitionerWant your own taxonomy benchmarked?
Book a one-on-one session, and we'll help you benchmark your current taxonomy and map the next steps, or keep exploring the resource library.