In a world where new product compliance needs and regulatory requirements are introduced at a rapid rate, what are the best practices around managing and maintaining data associated with properly classifying product? Is this a dynamic PIM solution, or typically outsourced to 3rd parties?

Great question! You’ve rightly pointed out the challenge. Product classification spans changing regulations (trade, ESG, digital product passports, safety), technical product data (materials, components, software), and multi-market differences (rules that vary by country or state). Since these factors change constantly and can carry high risk when wrong, product classification must be treated as a dynamic, governed capability rather than as a static data exercise.

The recommended approach is hybrid, ie internal systems for managing core product data and classification accountability, while outsourcing to third party specific functions such as regulatory intelligence and interpretation, edge-case determinations, and periodic audits. A useful rule of thumb is: If classification affects legal exposure, it cannot be fully outsourced. If classification depends on fast-changing regulations, it cannot be fully internal.

Key best practices include:
1/ Data governance : clear roles and responsibilities for who owns the classification data, who approves it, and how changes are managed.
2/ Data management : a central system of record (often PIM) integrated with PLM/ERP and workflow to store attributes, classifications, evidence, and effective dates.
3/ Data re-classification : re-classify when something changes (design, supplier, geography, regulation), not only on a periodic cadence.

In an environment where product compliance and regulatory requirements evolve rapidly, product classification can no longer be managed as static reference data. Regulations change by market, product use, and composition, and misclassification creates real business risk: delayed launches, blocked shipments, fines, or recalls. As a result, managing classification data requires systems and practices designed for ongoing change and accountability.

Best practice is to treat product classification and compliance as a core product data capability, not an afterthought. Classification attributes, such as regulatory codes, hazard flags, certifications, and regional restrictions should be modeled as structured, versioned data rather than maintained in documents or spreadsheets. This enables traceability, audit readiness, and consistent reuse across teams.

Most organizations rely on a dynamic Product Information Management (PIM) or Master Data Management (MDM) solution as the system of record. Compared to ERP systems, PIM platforms are better suited for handling complex, evolving product metadata. They support multiple taxonomies, regional attribute sets, approval workflows, and historical tracking, while serving as a single source of truth for downstream systems such as ERP, e-commerce, and compliance reporting.

A key design principle is to separate product facts from regulatory logic. Product data (materials, ingredients, components, usage) should live in PIM, while compliance and classification rules are managed through configurable rule engines or services. This allows products to be re-evaluated automatically when regulations change, reducing manual effort and error.

Automation and monitoring are critical at scale. Mature organizations integrate regulatory data feeds, track rule changes, and trigger impact analysis to identify affected products. Dashboards and alerts help teams proactively manage compliance risk instead of reacting after issues occur.

While third-party providers are often used for regulatory intelligence and expert interpretation, especially in highly regulated or global markets, they are rarely effective as the primary system of record. The most successful approach is a hybrid model: internal ownership of product classification data through a dynamic PIM, augmented by external regulatory expertise and updates.

In short, organizations should own and govern product classification internally, while leveraging third parties to stay current in an increasingly complex regulatory landscape.