When it comes to implementing a Master Data Management (MDM) program, the first and most crucial aspect you need to define is your MDM strategy.
Broadly speaking, you could pick one of two routes: Operational MDM or Analytical MDM.
What’s the difference between Operational MDM and Analytical MDM?
Operational MDM means a ‘golden thread’ of the top-level Master Data is created first. The data is maintained at the top level and pushed to downstream systems. This means all downstream systems share the same data.
In the case of Analytical MDM, the data is created as a downstream process. It can then be aggregated from different transactional systems in the master database.
Each MDM strategy supports different needs. As Operational MDM is initially created at the top level, the data will be consistent across the organisation. Analytical MDM however brings data together from different systems, creating a ‘single view’ that can be used to support reporting requirements.
On the face of it Operational MDM may seem complicated, as it requires investment in technology and the implementation of processes to manage the creation of data. This investment is worthwhile however, as your organisation can yield rewards such as cost savings and intangible yet valuable benefits, such as more consistent and accurate data.
For Operational MDM to be successful, your organisation needs to embrace active governance. Having good Supplier Data Governance processes in place is critical if your organisation wants to make sure the quality of supplier data is high and that you maximise the value of your programs.
What are the problems with supplier data?
Ultimately, the goal of Supplier Master Data Management / Supplier Information Management is to gather, maintain and communicate supplier details regardless of the source or system.
Suppliers’ information can change at any time, meaning there are lots of variables and moving parts to keep track of. For example, a supplier’s details could quickly become outdated or inaccessible or even be unreliable.
You only need to check how many duplicate records there are in an enterprise resource planning (ERP) system to see this. Not to mention the fact that important information can easily be lost in drawers or spread across departments.
Even when the correct data is available, it can be stored in different systems or disconnected, making it hard to compile and draw results from it.
A true supplier repository vs. short-term fixes
While some companies attempt to perform data cleansing to correct the data, often this only provides a short-term fix and addresses specific needs, such as compliance reporting. Without a ‘true’ supplier repository, the result is each procurement function creating silos of data that only meet their requirements. And therefore, as you can probably guess, this leads to supplier data discrepancies across different functions.
Therefore, organisations should focus on building a true supplier repository, or ‘single source of truth’, which provides consistent and accurate information across all functions. Simply put, it’s easier to realise the full potential of supplier information with a repository in place.
What types of supplier data do you have?
Supplier information tends to fall into four categories:
- Master data: core supplier data, such as name, address, banking details, etc.
- Transactional data: business transactions that occur over the lifetime of the relationship with the supplier, such as order, payments, returns, etc.
- Informational data: information that may not be necessary for business transactions but is helpful when developing a better relationship with the supplier, such as news stories and product features.
- Documents: documents will be collected throughout the course of the supplier relationship that are necessary for regulatory and compliance requirements, such as contracts, insurance certificates, W9/W8 forms, etc.
The difference between data views
There are three categories of data view:
Supplier: this shows the supplier master data – data that is provided and maintained by the supplier.
Internal organisation: the business unit’s view of the data. Whereas the supplier master data doesn’t change, each business unit’s view may vary based on the relationship they have with the supplier.
System (ERP) view: Transactional systems, including ERP systems, have their own unique views that drive relevant business processes.
Why is Supplier Master Data Management (SMDM) essential?
Given what’s been said above regarding different types of supplier data and data views, it’s clear why the way data is managed varies depending on the type of supplier information provided.
For data types such as transactional, master and domain, the content rarely changes. The same cannot be said for supplier relationship data, which changes much more often. Therefore, if it is not managed well, this can quickly lead to incomplete or inaccurate data.
You could easily end up in a situation whereby you have duplicated supplier information in ERP systems without knowing why. The result of this confusion is clear – less effective and potentially inaccurate business decisions that damage your performance.
Therefore, it’s important to have a solid foundation in place that enables you to identify and aggregate data changes, identify users who’ve been affected, and quickly communicate changes.
How can you ensure Supplier Master Data Management success?
Here at HICX Solutions, we believe that defining and building a successful MDM strategy requires you to do the following.
Have a vision: every organisation’s MDM needs are different, but regardless of what they are, it’s crucial to define them and communicate them clearly.
Put governance in place: as described above, building your governance structure allows you to define who is responsible for what data, who’s responsible for data maintenance and how its quality is going to be tracked over time.
Create processes: once the vision and governance structure has been approved, they must then be turned into working processes. Examples of such processes could be defining how data cleansing will work between different systems, creating new data and maintaining the quality of existing supplier data.
Use systems: for your Supplier MDM strategy to be successful, it needs to be supported by systems that can help with key aspects such as extracting and consolidating data and approving workflows.
Execute your strategy effectively: as well as working out what your strategy is, you also need to make sure you execute it correctly and stick to it. Each part of the process lays the foundations for the next stage, so they need to be carried out in order.