Take Control of Your Supply Chain With Master Data Management
This is the second article in a quarterly blog series by Spiceworks on the value of Master Data Management for various Lines of Business, including Marketing & Sales, Supply Chain, Procurement, Operations and Finance. This article is also featured on Spiceworks and written by Brad Rudisail, IT Specialist (see bio below).
Centralized master data management (MDM) solutions offer companies high levels of flexibility and customization.
Pretend for a moment that an automobile manufacturer is responsible for producing all the parts that go into making its vehicles. Doing so would give them complete transparency over their immediate supply chains and eliminate the complexity of juggling relationships with multiple partners who often reside in different geographic areas.
It would allow them to take full advantage of price fluctuations, optimize ordering procedures, and provide greater control over supplier data domain to reduce costs. Of course, those suppliers then have a supply chain themselves, so there is no escaping supply chain challenges. A key purpose of a supply chain is to reduce the risk that a single supplier produces. The question is — how do you reduce the complexity that multiple vendors introduce to the process?
Master Data Management and Supply Chain
The key is to obtain a proper balance. On the one hand, you want to leverage the expertise of your supply chain partners and the flexibility of multiple vendors to alter your supply chains in response to changing economic conditions. On the other hand, you also want to retain the transparency and control that internal sourcing would provide. So how do you attain the best of both worlds?
The answer is visibility, and a centralized Master Data Management (MDM) o solution provides the lens you need to see both the big picture and the granular fluctuations that occur daily. Data is what gives you visibility, and MDM is designed to give you the complete data picture of your supply chain to obtain the needed visibility to reduce costs, shrink lead times and improve relationships with your suppliers.
Whatever your business, centralized MDM solutions offer companies high levels of flexibility and customization for today’s complex hybrid models. In the case of a supply chain, this complexity includes multiple vendors and partners, all of which have data strung out across both on-prem environments and the cloud. MDM provides a way to collaborate and streamline the related master data to ensure that everyone in the chain has the same consistent data to drive conclusions from.
It ensures that master data is kept accurate and updated, avoids duplication and redundancy, and maintains consistency across an organization. This combination of consistent data standards and collaboration helps streamline operations and accelerates decision-making through optimized decision intelligence.
Supply Chain Master Data
MDM works to standardize and consolidate master data from various source systems. In the case of supply chains, these data sets include:
- Supplier master data that includes information about your suppliers, such as contact information, contract terms, and performance metrics
- Material master data with attributes such as units of measure, classification and description
- Inventory master data that includes data related to inventory levels and stock movement
- Logistics master data, such as the physical locations of warehouses, manufacturing sites and distribution centers throughout your supply chains
By consolidating all the relevant master data of your supply chain and replicating that data across your system landscape, you create a single source of truth that can help you retain better pricing, improve inventory management, and facilitate better decision-making.
Data is what drives decision-making. When you have all the relevant data and actionable metrics at hand, it doesn’t matter whether you have ten suppliers or a thousand. MDM gives you a 360-degree view of each link in the chain to help ensure data accuracy and completeness from raw materials to the finished product.
Poor Data Results in Supply Chain Problems
Inaccurate data results in inaccurate costs within your supply chain and your business. For instance, while ensuring accurate pricing is imperative, something as inconspicuous as a material description can distort size dimensions and weight, thus affecting not only the cost of shipping but the under- or over-utilization of shipping trucks.
At worst, a receiving company such as a retailer may return a shipment of items whose description and other attributes don’t match the information in their own systems. MDM can synchronize the data between manufacturers and their vendors to ensure accurate information is in the hands of all decision-makers.
The bottom line is that poor data leads to poor results for your supply chain. Other examples include the following:
- Customer frustration from stockouts and delayed deliveries lead to brand degradation.
- Supplier relationships can suffer over time due to recurring instances of inaccurate orders, late payments and missed communications.
- Poor data can hold companies back from meeting the growing complexity of regulatory compliance they may be responsible for, thus resulting in fines, penalties, and possible regulatory intervention.
Whether it is sports or business, a team cannot work effectively unless everyone is on the same page. MDM integrates data from different vendors, departments and systems to establish a unified version of truth that reduces the risks of errors and information gaps.
It provides a governance framework that implements rules, multiple checks and validations so that all supply chain members have the same accurate, real-time data. Any changes made to the existing data must be approved. At this point, new data values are then transferred to the active master data repository, which is then synchronized to all players.
Added Costs and Lost Opportunities
Every company wants to eliminate excessive or unnecessary costs. For instance, the practice of overstocking and carrying surplus inventory leads directly to increased costs. However, understocking can mean lost opportunities, which is an indirect cost factor.
It is a fine line to find that perfect medium, which is why accurate forecasting is so imperative. While the obvious instance of outdated or incorrect pricing can increase costs, the failure to take advantage of volume pricing or promotional pricing opportunities imposes unnecessary costs as well.
MDM ensures that everyone has access to synchronized data that is both accurate, transparent, and complete. While having the most accurate, up-to-date unit price of a product is critical, it may not portray the full picture. Management decisions are rarely made on price alone.
A modernized MDM solution allows you to determine your best suppliers according to the service-level agreement metrics you define. You also gain access to intelligence-driven root cause analysis that enables you to drill down and find additional sources of inefficiencies and hidden costs.
Why a Single Pane of Glass
Software management systems always love to promote single pane of glass solutions. And there is a good reason why. You can’t solve ongoing issues at large without complete visibility into your environment and access to all the proper information. Coverage gaps are created when support teams are forced to rotate between management tools and interfaces.
A single pane of glass solution gives you a unified view of all operations across the board. When everyone is looking through the same lens, it reduces discrepancies and conflicts that arise when disparate data is interpreted on an individual basis. A unified view leads to better collective insights that can contribute to optimizing supply chain operations.
Leveraging Your Supply Chain
In today’s hyper-competitive global environment, companies use optimized supply chains as a competitive advantage. Examples include obtained cost savings, faster time-to-market, and increased innovation.
An MDM solution such as SAP® Master Data Governance can maximize the effectiveness of your supply chain, identify lost opportunities, and achieve greater collaboration among your partners.
That greater collaboration and insight leads to the real-time execution of better decision-making that can help you achieve business goals and propel your business ahead of competitors that still rely on legacy data management solutions.
Supply chains can be expansive and complex. Like a large industrial complex, they have a lot of moving parts. Not only is every supply chain different, but so is every customer.
SAP® Master Data Governance and equivalent MDM solutions give you a holistic, 360-degree view of all the inclusive data points across your chains, ensuring their accuracy and timeliness so that you can accelerate your business process and decrease your supplier spend.
Learn more about SAP Master Data Governance at Master Data Governance | MDM Software and Solutions | SAP. Also, check out Mastering Supplier Data for Your Intelligent Enterprise.
Brad Rudisail, IT Specialist at Spiceworks
Brad Rudisail is a technical writer and a former IT manager specializing in delivering today’s complex technical subjects in a palatable format to tech-savvy business leaders. Brad has spent 20 years in the IT field as a network engineer, IT manager, instructor and technical writer. His portfolio includes a long assortment of white papers, articles and learning curriculum. He is an accomplished pianist and composer as well as the author of two inspirational books.