Posted by Gary Klein, Management & Economics Librarian, Hatfield Library, Willamette University, on July 8, 1998

The problem with SIC (Standard Industrial Classification) codes is that they were never designed to describe a company's type of business. Instead, SIC codes were designed to describe the PROCESSES that are used by a company. SIC codes tend to be configured more by similar manufacturing processes, rather than aggregating things that are competitive products, or competing for similar human resources.

For example, a food processing operation gets a different code depending on whether it grows fresh fruits & vegetables (a farmer), handles fresh perishable fruits & vegetables (such as Chiquita transporting & marketing fresh bananas), freezes fruits & vegetables (such as Birds Eye that only produces frozen foods), or cans/bottles fruits & vegetables (such as the S&W brand). And if a company is a wholly integrated producer of those products, then it can either lay claim to all of those specific SIC codes, or it can use a broader SIC code (in light of the hierarchial system used in the design of SIC codes).

Likewise, a company involved in aerospace engineering will get a different SIC code if it is involved primarily in electrical/electronic components, as compared with mechanical components (such as a firm that only makes jet engines). Companies that primarily provide talent & design elements (such as consulting firms, modeling software, or logistical control systems to smooth production flow) are going to have different SIC codes, because these vendors are providing more intellectual capital, rather than producing physical items.

SIC codes really start falling apart when you are looking at service intensive industries (software, accounting, independent testing labs). Thus, if a firm is competing in the logistical systems arena (by specializing only in manufacturing of aerospace equipment) it might have the same SIC code as a logistical systems firm specializing in manufacturing computers or food processing. Worst of all, each company chooses its own SIC codes with little assistance by the Federal employees who devised the system!

The official book published by the United States Government that defines SIC codes is:

Title: STANDARD INDUSTRIAL CLASSIFICATION MANUAL;

Year: 1987

Author: United States / Executive Office of the President / Office of Management and Budget / Technical Committee on Industrial Classification.

Publisher: NTIS (National Technical Information Service)

Some library reference sources go beyond the 4 digit SIC codes designed by the US agencies, but those systems are not necessarily compatible with one another (such as Predicast and also Dun & Bradstreet). A conglomerate such as General Electric that is involved in the aerospace industry further complicates the picture, because most reference resources only list a handful of major SIC codes, rather than listing all of General Electric's SIC codes. If one reference compiler chooses the "principal" SIC code based on sales statistics, and another one determines the "principal" SIC code based on assets, or employees, then it is possible for three different reference sources to each describe GE in totally different ways, because it is so much more than just a manufacturer of aerospace equipment.

With classification systems such as SIC codes, it is no wonder that librarians also have to resort to brand name research and free text searching, in order to compile data on a company.