July 19, 2018

ERP Supplier Master Data Management (SMDM): About as useful as a Chocolate Teapot

The goal of Supplier Master Data 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 Master Data Management platform; therefore, it cannot simply be a forms-based registration-type system. Furthermore, integration needs to completely surround all capabilities in order to maintain an ability to gather, and/or disseminate, content.

When it comes to ERP systems, you don’t have to look very far 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 unrealised.

Supplier content traditionally falls into five categories:

  • Domain, or Hierarchical, Data: The data utilised to organise the content so that a logical progression can be made between the “supplier” view, the “internal organisation” view, and the “system” (a.k.a. ERP) view(s).
  • Core Supplier Master 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.

You can take care of the core master data fairly easily with a good, centralised, onboarding process. The supplier relationship data, and the corresponding metadata however, 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 core 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.

Why Supplier Master Data Management?

As discussed, inevitably, 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 SMDM 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 Master Data 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.

ERPs cannot do this.

Why is Data Governance crucial?

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

  • Governance Structure: ownership structure representing your organisation’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 Organisation: 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, SMDM efforts are destined to fail – and without employing a complete Master Data Governance strategy within the Supplier Master Data 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 Master Data Management should simply be a survey tool on steroids, or whether Master Data Governance should be the foundation to its very existence.

Times are changing and data is the very bedrock of future technological opportunities.

 

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