August 21, 2014

Why Supplier Master Data Governance, part 2 of 2

In part 1 of this series (see part 1 of 2 here), we introduced Supplier Master Data Governance, why a problem exists within supplier data, the different types of supplier data, and the “views” associated with supplier data. Here we want to dig deeper into why Supplier MDM is needed, the Data Governance building blocks, and the Requirements for Success.

Enjoy.

SUPPLIER MASTER DATA MANAGEMENT: WHY IS IT NEEDED?

Data management needs to vary by the type of supplier content. Transactional data volume continually grows in size; however, the type of content within doesn’t change. Master supplier data rarely changes, except in the case of mergers, acquisitions, etc. Similarly, the domain data is stable, unless in the case of internal reorganization, M&A activity, system consolidation, etc.

In contrast, however, supplier relationship data, and the corresponding metadata, is highly fluid and constantly changing. And this is where poor data management and governance can quickly and easily lead to poor data. Envision multiple duplicated instances of a supplier within the ERP systems, with little insight as to why or how. Additionally, the corresponding metadata is often a patchwork of content sources, with no distinct base record to rely on, or an ability to leverage effectively. And finally, supplier relationship data is commonly confused with supplier master data. All of these result in differing views of the same core data across different uses – resulting in less effective, and potentially inaccurate, business decisions which harm organizational performance.

Supplier data will change – at all levels (master supplier level, relationship level, metadata level, and most definitely, transactional level.) Therefore, a strong foundation for (a) identifying these changes, (b) aggregating them, (c) identifying impacted users and systems, and (d) then disseminating the changes to them is key.

Integrating data changes requires tools and processes to: aggregate data changes; identify and resolve potential conflicts; cleanse and standardize data; and, consolidate data across different systems and processes.

As stated previously, the goal of Supplier Master Data Management is to ensure that the organization uses consistent versions of the same data across different parts of the organization – from the initial onboarding of the supplier and through their lifecycle. Data management and governance tools, processes, and organizational best practices are core in keeping data harmonized across the organizational ecosystem.

SUPPLIER MASTER DATA MANAGEMENT: DATA GOVERNANCE

But who decides when to add new supplier or content, use an existing supplier, or merge multiple suppliers into one? Who is responsible for the quality of the data? Who owns’ it, and is there one owner for all data, or is that split across functions? If there are duplicates, whose record will we keep, and which one will get retired? What is the correct standard for a particular field?

Data Governance helps answer all of these questions – and, ultimately, establishes the framework, from strategy to operations, for ownership and management of data and information. Utilized properly, data governance ensures speedy decision-making, high quality data, and appropriate execution of these data tasks across the organization.

The building blocks for data governance, within any Master Data Management program, should include five core elements (Figure 4).

Figure 4

Without these building blocks (a data ownership structure, backed by workflow, compliance tracking, and appropriate staffing), MDM efforts are destined to fail. And, without employing a holistic Master Data Governance strategy within the SIM program, the hype associated with “a single source of truth” can never become reality.

Peek inside your ERP vendor “master”, survey the quality of the data, and ask whether your SIM program is simply a survey tool on steroids, or whether you have harmonized your processes, standardized your data, and centralized your governance. Where are you on the maturity spectrum (Figure 5)?

Figure 5

In any case, before you get started having a clear understanding of your end state is vital to ensure a successful MDM deployment.

SUPPLIER MASTER DATA MANAGEMENT: REQUIREMENTS FOR SUCCESS

At HICX Solutions, we believe that to have a successful S-MDM strategy, the following pillars of MDM must be in place (Figure 6):

Figure 6

  1. Vision: Different corporations have varying needs for S-MDM. Whatever the needs, the vision and objectives for the S-MDM program must be clearly defined and communicated across the organization. As necessary for any major cross-functional undertaking, the S-MDM initiative must be backed by Executive level sponsorship since it is likely to require collaboration between multiple divisions and groups. S-MDM initiatives that are executed without a well-defined vision backed by strong executive sponsorship may get off the ground, but are unlikely to achieve the desired and full potential.
  2. Governance: A governance structure helps define the data ownership, data consolidation rules, roles and responsibilities for data maintenance and metrics to track the data quality and progress towards objectives. As discussed in this paper, an S-MDM strategy without a governance structure is not likely to be an effective strategy towards achieving the goals of the initiative.
  3. Process: The guidelines and standards defined by the data governance board must be codified into organizational processes that help achieve the desired objectives. For example, defining standard operating procedures for data cleansing between different systems, consolidating supplier data, creation of new data, and maintenance of existing data. These processes help implement the day-to-day operations required to maintain and manage supplier data according to the determined guidelines.
  4. System: Finally, an S-MDM strategy must be supported by robust systems that can help implement the data extraction, data consolidation, approval workflows, and data syndication requirements of the strategy.
  5. Execution Sequence: Just as important, if not more important than the M-MDM strategy, is the execution plan. The tasks involved in the rollout of the strategy need to be executed in the appropriate sequence to lay the groundwork for each subsequent stage. Fast tracking, or avoiding certain steps, may lead to short-term savings, but will invariably exact a significant cost in the long-term.

CONCLUSION

In this 2-part posting, we introduced the basic importance of Data Governance in Supplier MDM, and HICX’s fundamental beliefs regarding a successful program. We also discussed the need to understand the different types of supplier content, and the need to manage the resulting data in different ways. Furthermore, we touched upon the need for organisational cooperation to harmonize tools, and processes while recognising departmental differences. In the near future, we will further explore our, HICX Solutions’, methodologies and tactical approaches in order to ensure a successful Supplier Master Data Governance initiative.

However, if you lack the patience, as I do, for the big conclusion, please feel free to contact us directly, as we would welcome sharing our experiences and approaches.

 

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