July 16, 2013

A Screen Door on a Submarine?

Sounds illogical, but so is Supplier Information Management without Master Data Governance.

The goal of Supplier Information Management is to gather, maintain, and disseminate supplier information regardless of source or system. Sounds simple, but there are a lot of moving parts. For example, in order to know what to gather, how to maintain, or where to disseminate this information, “intelligence” (a.k.a. workflow) must be an integral part of any Supplier Information Management platform; therefore, it cannot simply be a forms-based registration-type system. Further, integration needs to completely surround all capabilities in order to maintain an ability to gather, and/or disseminate, content.

Why the inclusion of Master Data Management and Data Governance?

One doesn’t have to look deep into any ERP system to see how quickly massive amounts of data can become inconsistent, inaccessible, and unreliable. A repository for the sole sake of having a repository (e.g., “single source of truth”) is not strategic – and the full value of the potential will, invariably, go unrealized and business performance will suffer.

Supplier content and structure(s) traditionally fall into five categories:

  • Domain, or Hierarchical, Data: The data utilized to organize the content so that a logical progression can be made between the “supplier” view, the “internal organization” view, and the “system” (a.k.a. ERP) view(s).
  • Master Supplier Data: The core supplier data, which includes information such as supplier name, address, banking information, etc.
    • Master Relationship Data: The relationship data, which is often a one-to-many relationship with the “supplier”, as it includes information on products, locations, contacts, etc.
      • Metadata: All of the content necessary to further manage the supplier and/or supplier relationship, such as contracts, diversity status, performance scorecards, additional contacts, etc.
      • Transactional Data: The events that occur over time, such as payments.

Though the volume of transactional data grows in size, the content within doesn’t change. Master supplier data rarely changes, except in the case of mergers, acquisitions, etc. As well, unless there is internal reorg, M&A activity, system consolidation, etc., the domain data is stable.

The meat, however, the supplier relationship data, and the corresponding metadata, is highly fluid and constantly changing. This is often where 50 records of IBM get duplicated within the ERP systems, with little insight as to why or how. Even worse… when the supplier relationship data is confused with supplier master data. Not to be left out of the confusion, the corresponding metadata is often a patchwork of content sources, with no distinct base record to rely on, or ability to leverage effectively.

Master Data Management

Invariably, the data will change, whether at the master supplier level, or at the relationship and/or metadata level. Therefore, a strong foundation for identifying potential conflicts, cleaning data, consolidating data, etc. becomes core to managing the large, and complex, volume of content needed at the relationship level.

The goal of MDM is to ensure that the organization does not use inconsistent versions of the same data across different parts of the organization – and, whether during the initial onboarding of a supplier, or anytime throughout the supplier lifecycle, matching algorithms, based on data type and use, is core in keeping this data harmonized.

Supplier Information Management platforms must extend this functionality to include:

  • Normalizing formats: postal codes, phone numbers, etc.
  • Standardizing data elements: same currency, etc.
  • Merging/replacing content: replace “IBM” with “International Business Machines”, combine supplier #1001 with supplier #3742, etc.
  • Enriching records: DUNS number, zip code lookup, etc.

Data Governance

Who decides when to add a record, merge a record, or other? Utilized properly, a centralized data governance approach seeks to ensure speedy decision-making, high data quality and appropriate execution of these data tasks across the organization. The building blocks for data governance, within any Supplier Information Management solution, should include:

  • Governance Structure: ownership structure representing your organization’s matrix dimensions (e.g., data governance board, business unit data managers, local/regional data stewards, etc.), as well as empowering data stewards to make timely decisions.
  • Business Rules: both what content is needed, and from whom, as well as processes, responsibilities, and escalation paths for co-ownership of supplier data (procurement, finance, supply chain, diversity, etc.).
  • Service Level Agreements: supplier master related tasks, with associated measurement capabilities, to ensure and monitor data quality.
  • Job Descriptions: governance and maintenance functions.
  • Data Maintenance Organization: function where, by job description, all related data governance tasks could be executed against agreed-upon service levels.

Without a data ownership structure, backed by workflow, MDM efforts are destined to fail – and without employing a complete Master Data Governance strategy within the Supplier Information Management solution, the hype associated with “a single source of truth” can never, ever become reality.

Peek inside your ERP vendor “master”, survey the quality of the data, and ask whether Supplier Information Management should simply be a survey tool on steroids, or whether Master Data Governance should be the foundation to its very existence.

by Grant Watling

Chief Customer Officer

Grant has 11 years management consulting experience specialising in supplier data and analytics advisory services. Grant holds a Master’s Degree (MSc) in International Business, is a Prince2 practitioner and holds certificates from the Institute of Financial Services and the Chartered Insurance Institute.
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