First Things First: Master Data is Essential for Procurement Optimization Success
April 30, 2014
My colleagues at Shelby have addressed a wide range of Procurement Optimization challenges with clients that are strategic in nature. For my turn at bat, I’d like to address something more fundamental: the challenges and implications of poor, incomplete, or inaccurate Master Data.
I know that for many this is a painful subject. But wait. Before you reach for the aspirin bottle–or worse, leave the page–allow me to ask a few basic questions.
Does your spend analysis system provide you with quality data? Are you certain your company is paying a vendor only once for a product or service? Can you easily and effectively share data from your ERP system across functions? Are the reports your system produces, and the conclusions derived from them, trusted by stakeholders?
If you answered no to any of these questions, your company may have inconsistent and inaccurate Master Data. Master Data refers to the common information components used by an organization. A few examples of Master Data components include: Vendor, Customer, Material, Chart of Accounts, Contracts, and Bill of Material.
Effective Master Data Management is a fundamental enabler for the success of all Procurement initiatives, from routine to strategic. However, Master Data problems are ominously prevalent across all types and sizes of organizations.
Overcoming Master Data Challenges Requires Commitment and Collaboration
There are plenty of challenges in addressing inconsistent and inaccurate Master Data.
If your company leadership doesn’t view information as a strategic asset, then getting traction to develop strategies to deal with your Master Data may be difficult. Education of the issues and implications related to inconsistent and inaccurate Master Data is paramount.
Business and Master Data processes are complex; Challenges exist for both Business and Information Technology groups. Ownership of the data must be assigned, either through a stewardship, custodial, or cooperative model, with Business and Information Technology groups working together.
Disparate information systems and lack of clear guidelines for language requirements create additional challenges for addressing poor data.
Implications: Lack of Master Data may be Costing Your Company
If your ERP system has multiple names for the same vendor, your AP group could be making duplicate payments for the same product or service. If your spend data quality is poor, your Procurement group may not be able to easily and quickly find cost savings opportunities.
In addition, your company may have recurring data cleanup costs and there could be legal & regulatory compliance issues if your company cannot provide information consistently.
Addressing the Problem
So, what can your company do to address Master Data issues? Start by developing a Master Data Management strategic framework with the following components as considerations:
A. Governance & Organization: Information viewed as a Strategic Asset, Senior Leader Sponsorship, Assigned Data Ownership
B. Processes & Quality: Common Processes, Quality Metrics, Change Management
C. Data Architecture: One source of the truth, Data Classification, Data Standards
D. Technology: Centrally-stored Master Data, Workflow, Common Tool, Interface
If your organization is dealing with Master Data Management challenges, Shelby can help. To learn how, contact us at firstname.lastname@example.org.
Manager, Procurement Optimization
The Shelby Group