What is Attribute-Based Procurement?

Attribute-based procurement leverages detailed product attributes for more precise, strategic purchasing decisions. This approach allows companies to navigate procurement with precision, offering substantial operational advantages.

Key Benefits of Attribute-Based Buying

  • Cost Management: Enables businesses to significantly lower expenses by facilitating competitive pricing and alternative sourcing strategies.
  • Efficiency Gains: Streamlines procurement operations, reducing the time and labor traditionally required in procurement cycles.

Implementation Challanges

Modern competitive landscapes demand that enterprises not just adapt but innovate. As such, evolving toward integrated, forward-thinking business processes that involve every stakeholder in the supply chain is no longer optional but critical. This transformation requires robust IT platforms designed to seamlessly integrate business processes across networks. A vital element in this integrated supply chain is the strategic electronic exchange of information about procured products — from initial product design to eventual decommissioning — leveraging standardized metadata and data formats. The objective? To catalyze significant efficiencies across procurement activities.

By implementing attribute-based buying, enterprises can not only anticipate substantial cost savings through smarter spending and reduced process overhead but also position themselves at the forefront of procurement innovation, setting the stage for a new era of supply chain management. This approach does not just adjust to market conditions—it anticipates and capitalizes on them, inviting readers to explore how such strategies can be systematically applied within their operations.

Table 1. Impacts of Attribute-Based Procurement

Define product requirements using attributes (parameters) and identify suitable alternatives.Potential cost-savings depend on differences in pricing policies between manufacturers and suppliers within a category. When alternatives for replacing components or consumables from global brands are available, savings can reach up to 90%.
Share detailed procurement plans for products and materials with suppliers using category-specific templates.This approach, designed for enhanced searchability by item specifics, allows you to receive more competitive bids from suppliers. It facilitates alternative sourcing strategies, and the effectiveness of this method can vary depending on the availability of alternate suppliers. This variation tends to increase with geographic expansion, highlighting the importance of providing information in multiple languages to accommodate diverse supplier bases.
Consolidate purchases across the industry and region.Consolidation yields volume discounts and further savings through integrated logistics.
Exchange catalogs and other documents electronically with suppliers.This initiative reduces labor costs and minimizes the risk of errors in data entry, enhancing operational efficiency.
Decentralize procurement functions to business units with methodological, procedural, and informational support.Accelerates the procurement process, reduces procurement risks due to non-conforming product characteristics, and leverages the capabilities of an expert platform for

Navigating the Complexities of Information Requirements in Modern Supply Chains

Supply chain participants each impose distinct requirements on product information, encompassing a diverse array of attributes for every product class. The financial, professional, and temporal resources of each participant are limited, yet the volume of information continually expands with new product categories emerging, novel characteristics appearing within existing categories, and fresh manufacturers introducing alternatives to existing products. The procurement item classifiers of major corporations encompass thousands of product categories and hundreds of thousands of procurement items, with large companies annually investing tens of millions to ensure the quality of data about procured products.

The data landscape for procured products, equipment, spare parts, technologies, materials, and services is intricately complex—each class (category) of products is characterized by a unique set of attributes. Today, the vast majority of companies are dissatisfied with the quality of procurement data; their information systems often contain incomplete or redundant data. This diminishes the effectiveness of business processes, particularly in procurement, planning, and innovation development. Without high-quality data that offers comparable parameters and properties, companies struggle to make decisions based on objective criteria, hindering their ability to select the best products and utilize analytical tools effectively.

This scenario underscores the critical importance of adopting advanced procurement strategies such as attribute-based buying. By leveraging structured, high-quality data, companies can enhance decision-making, optimize procurement efficiency, and foster innovation across their supply chains, setting a new standard for competitive advantage in an increasingly complex market landscape.

Challenges in Transitioning to Attribute-Based Procurement:

  • Complexity and Labor Intensity in Product Description: Each product category requires a unique set of attributes, making the process of defining these specifications both complex and labor-intensive.
  • Diverse Technical Standards and Classifiers: Adoption is hindered by varying national and industry-specific technical standards that regulate parameter values, as well as national and industry-specific classifiers.
  • Emergence of New Products and Categories: The constant introduction of new products and categories adds layers of complexity to procurement processes.
  • Variety in Products and Categories: The extensive diversity of products and product categories further complicates standardization efforts.
  • Lack of Effective Technical Solutions and Information Infrastructure: There is a significant gap in technical solutions and information infrastructure necessary for effective data exchange about products.
  • Expertise Requirement: Tens of thousands of different categories are purchased, each requiring its own set of characteristics. This necessitates the involvement of experts who possess deep knowledge of specific product categories and an understanding of template formation methodologies.
  • Investment in Templates as Assets: Having invested substantial resources in templates, companies begin to view these as valuable assets, access to which must be restricted. Companies do not provide electronic access to these templates to suppliers; instead, information is collected via survey forms.
  • Costly Data Quality Maintenance: Maintaining the quality, completeness, and currency of attribute-based product directories proves to be extremely costly, leading to rapid degradation of these directories. The market cost of developing a single template can range from 100 to 1000 USD. Therefore, to transition fully to attribute-based descriptions in procurement catalogs, companies would need to spend tens of millions of rubles just on template development, even considering cost reductions due to scale.
  • Seeking Enhanced Procurement Efficiency: Today, large corporations and government organizations are exploring ways to enhance the efficiency of procurement and supply by improving the quality of data about consumed materials and equipment. This improvement is facilitated by transitioning to an attribute-based (catalog) description, using standardized formats for describing these resources.

The standards ISO 8000 Data Quality and ISO/TS 22745 Open Technical Dictionaries govern the electronic exchange of product data and attribute-based procurement processes.

Standards regulate the structure and format of data, specify requirements for managing the Open Technical Dictionary, and provide formats for electronic catalog exchange. A key condition for applying these standards is the existence of an organization that maintains the Open Technical Dictionary.

To reduce the costs associated with maintaining product directories, it is advisable to shift some of the burden of product description to suppliers. This is supported by best practices in product information management during the procurement process:

  • Suppliers provide product information using a predefined description format and classification structure. This format specifies a set of mandatory parameters and characteristics (attributes) for each product category, along with the types of characteristics and their possible values.
  • Buyers specify the procurement item using the classifier and catalog, utilizing the characteristics defined for each category.
  • The product directory is organized using a unified approach to classification and attribute formulation.

To effectively implement best practices, it’s crucial to provide suppliers with unrestricted access to standardized electronic formats for product descriptions. Additionally, to achieve cost reductions, collaboration among various market participants is essential for the development of effective templates. This approach ensures operational efficiency and promotes consistency across the industry.

One notable example of successful collaborative template development is the eCl@ss, initiated by twelve major German companies including Siemens, BASF, AUDI/VW, SAP, and Bayer. The eCl@ss classification includes over 44,000 product classes and 18,000 unique attributes. These attributes adhere to DIN/EU standards, and updates to the system are released no more than once a year, ensuring both consistency and quality in the classifications.

The ECCMA (Electronic Commerce Code Management Association) offers services related to the maintenance of the Open Technical Dictionary (eOTD), where members can contribute their terms. This platform facilitates the exchange of templates among participants. However, it should be noted that while it supports the sharing of templates, it does not guarantee the uniqueness, completeness, or consistency of the terms within the shared templates. This approach encourages standardization across industries but requires careful management to ensure data integrity and utility.

To effectively transition to attribute-based procurement, a comprehensive approach is required, encompassing methodological, organizational, and technical solutions.

Actualog Social PIM platform supports Attribute-Based Procurement

Actualog offers a solution designed to enhance the information interaction among market participants by creating a unified space of standard product description formats, attribute guides, and product catalogs. The platform’s core principle is to provide open and free access to product description templates and attribute guides. It operates on a partnership model, allowing major companies and organizations to support the development of dictionaries, templates, and guides within selected industry communities or geographical regions.

Actualog is a cloud-based platform for managing and exchanging information about products. It serves as an open classifier and directory, and also facilitates data integration across supply chains.

The Actualog expert community brings together specialists in complex technical products, including employees from manufacturing companies, engineers, marketers, research institute professionals, procurement organization members, and industry standards experts.

The platform ensures a unified methodology for creating templates and provides a shared space, including the use of terms from the Actualog Open Technical Dictionary. It supports a moderated process, including the workflow for creating and editing templates. The platform conducts audits of expert actions, assesses the contributions of each expert to the community, and allows for the evaluation of the number and quality of edits made during template creation. Each expert’s rating is calculated automatically based on the volume and quality of their work.

Actualog enables the creation of:

  • Elements of the Open Technical Dictionary (classes, attributes, companies, measures, units of measurement, and attribute values).
  • Item Identification Guides (IIGs), which serve as the foundation for standardized product descriptions.
  • Product cards using IIGs, ensuring detailed and standardized product information.
  • Product catalogs (marketing catalogs, procurement catalogs, and sales catalogs), which utilize these IIGs to maintain consistency and accuracy across all product listings.

This description uses precise and professional language appropriate for an international business audience, emphasizing the platform’s capabilities and the collaborative opportunities it offers.

Ready to Transform Your Procurement Process?

Embrace the future of procurement with Actualog. Our innovative platform offers you the tools to streamline your procurement operations, enhance data accuracy, and foster collaboration across the supply chain. Leverage the power of our Open Technical Dictionary, Item Identification Guides, and comprehensive product catalogs to make informed decisions and stay ahead in a competitive market.

Join the Actualog community today and take the first step towards optimizing your procurement strategy. Unlock the potential of attribute-based buying and experience unparalleled efficiency and precision in your supply chain management.

For more information on how Actualog can revolutionize your procurement processes, visit our website or contact our support team. Don’t miss out on the opportunity to elevate your procurement practices and drive business success.

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