When I was planning out this week's content, covering Master Data Management as our Wiki-Wednesday topic seemed like such a good idea. We were already looking at the subject through Philip Gunn's presentation from eWorld and I didn't know as much about it as I would have liked. Then Tuesday came and I found myself less jazzed about the idea than I had been. The irony of that feeling is that many of you probably feel the same way when it comes to tackling your own master data challenges. But you can't escape the fact that if you don't have a solid foundation of clean, current data, you can't be effective or accurate. So the mutual attitude adjustment starts... NOW.
A primary obstacle in dealing with Master Data Management is that it sounds very technical - very "back end" in terms of the systems involved. But if you have ever been involved in a spend analysis implementation, you have already survived an up close and personal interaction with your company's master data. It is the raw data from your company's systems (and there may be many) that are brought together to feed whatever spend analysis solution you have. To be fair, procurement does not interact with all of a company's master data, but we still need to be comfortable with what it is because we are affected by it.
I found a good white paper by CapGemini called Procurement Master Data - The Bedrock of Success that describes the challenges procurement often faces with master data in language that should be familiar. The following quote is from page 3 and I think makes an undeniable case that whether we realize it or not, master data management is part of our every day responsibilities:
World class procurement is built on the availability of information to drive visibility, control and effectiveness. Information provides the ability to optimize leverage, pursue informed buying decisions and ensure alignment of internal behaviors to procurement strategy. Despite how crucial this clearly is, information and visibility relating to third party expenditure remains an on-going problem for many organizations.
CapGemini outlines some of the primary challenges with master data (in a procurement context) and I am certain you have faced them:
- Suppliers or vendors may be listed in the system under slightly different names, making them appear to be different organizations when they are not. The classic example I remember is: IBM, I.B.M., and International Business Machines. For the top 10 such 'groupings' of supplier organizations/names, check out The Top Ten Supplier Groupings for Successful Spend Analysis by Spend Radar. It should be obvious to human eyes that these are all the same company (particularly as you are looking to leverage overall spend) but to a system they are three completely different organizations until the cleanup work is done.
- Your company's master data may be assembled from the systems of multiple business units, and one part or SKU may be labeled differently in each system. This is particularly true if those business units were acquisitions rather than just divisions. Either a person or a system needs to reconcile the data to roll quantity and spend together based on some kind of translation key between the systems.
- Categorization (also called taxonomies or hierarchies) may be inconsistent, or data may simply be uncategorized. Again, I call back to my experiences with spend analysis implementations. Everyone has faced the "Uncategorized" bucket of spend - even once the rest of the hierarchy is solid and well structured so spend aligns with corporate responsibilities.
The key to understanding procurement's relationship with master data starts with spend, but extends into everything we do. We can perform as much analysis as we like, but if it is based on faulty, incomplete, unworkable data, the decisions we make as a result will be flawed. If we can't accurately state how much (both quantity and dollar value) we are buying from who, when, we can't manage our current suppliers and contracts or effectively put new ones in place.
If you are looking for additional information and reading on Master Data (and its Management) as pertains to procurement, the CapGemini white paper I linked to above is a good place to start. Here are some other resources that you may want to check out.
ISM Archived Webinar: Master Data Management: Programming your Organization for Cost Reduction and Avoidance (recorded on September 27, 2011)
CPO Rising Blog Post: Master Data Mastery (January 20, 2011)
Spend Zen (by Spend Radar) Blog Post: Supplier Normalization & Grouping-Often Overlooked in Spend Analysis (December 9, 2010)
Smart Procurement Blog Post: Master Data Management Crucial for Commodity Management (March 2, 2011)