A few weeks ago, I delivered a webinar on Master Data Management  The webinar which was sponsored by Zynapse, a division of Zycus, has been archived and can be accessed by clicking here (registration required).

An argument I make in this webinar is that Master Data Management (MDM) is important to procurement and worth consideration. Before making that case, I’ll define Master Data.

Master Data Defined

A team at Microsoft once described Master Data as the critical or proper nouns of a business which fall generally into the following four groupings:

• Person – employee, customer, supplier, etc.
• Place  – plant, office, region, etc.
• Thing – products, parts, assets, etc.
• Concept – contracts, licenses, warranties

From that larger list, supplier and material information are most relevant to supply management professionals. Master Data are information that is key to the operation of business  and typically lists of data that are shared and used by several of the applications that make up an enterprise’s software system. For example, a typical ERP system as a minimum will have a Customer Master, an Item Master, and an Account Master.

The challenges with Master Data emanate from inherent flaws of ERP systems which are not designed to maintain an integrated, de-duplicated, accurate view of data. These flaws can result in

• Lack of standards
• Poor visibility
• Poor integration
• Poor usability

Additionally there may be too many source systems – either ERP instances or the different applications that support business functions (like procurement & accounts payable).

OK, but why is MDM important to procurement?

Poor Master data can limit potential savings, it can increase risk, and it can erode cash positions. This should make any procurement leader’s ears perk up and take interest. Frankly these issues hit the CFO’s office dramatically as well.

• Poor MDM’s negative impact on working capital can arise when systems fail to identify similar inventory which can result in onsite duplicates or excess inventory.
• Poor MDM’s negative impact on savings can arise when from the same problem above – when systems fail to identify similar inventory this can result in a failure to aggregate spend, standardize specifications, and/or rationalize suppliers.
• Poor MDM’s negative impact on risk can arise when systems fail to provide sufficient part detail or attributes and poor decisions that impact the business are made.

If you’re interested in a fuller discussion on MDM, I recommend checking out the archived webinar (registration required). In an upcoming profile, one of the Chief Procurement Officers on the Rise in 2011 will discuss his MDM project and its results and show another reason why MDM is worthy of some consideration by procurement.

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