Businesses are in the middle of a "data explosion." From January to December 2012, companies saw their data grow 56 percent, which means the amount of data stored doubles every 18 months, according to the Aberdeen Group report Master Data Management in 2013.
As the volume of data grows at an unparalleled pace, it becomes increasingly difficult to keep that data clean, accurate, and readily available to those in an organization who need it. Many companies store data in siloed systems that don't interact with each other, such as content management systems (CMS), customer relationship management (CRM), enterprise resource management (ERP), and financial and accounting programs. This causes data bottlenecks to occur with increasing frequency.
These bottlenecks create redundant record-keeping, force needless spending on unnecessary parts that sit in inventory, and lead to decision-making with outdated or incorrect information. Too often, current data management practices lack the governance necessary to ensure quality and efficiency in the handling of huge volumes of information.
Responding to these shortcomings, master data management (MDM) programs provide a single record-keeping and governance platform for a company's data. MDM is a comprehensive software tool that allows organizations to achieve significant improvements in the quality of their data as well as in their product quality and reliability, while simultaneously decreasing costs and improving overall operational performance.
By centralizing and storing disparate data as a single set of master data, MDM allows groups throughout an organization, including engineering, R&D, supply chain, marketing, and sales, to access the same information related to part numbers, descriptions, standard operating procedures (SOPs), corporate messaging, etc.
How MDM Works
Solutions are available as either single- or multi-domain. Single-domain platforms are often off-the-shelf packages that focus on centralizing data for an individual software program. Custom, multi-domain solutions incorporate multiple programs into one platform that is flexible and scalable. MDM functionality can also be fully embedded into many existing software programs, allowing an individual to create or update a master data record in a familiar application.
MDM Benefits to Manufacturers
Efficiency. Employees spend less time searching for information and fixing errors and more time working on critical tasks. Best-in-class users of MDM, according to the report, spend 1.5 hours on average looking for information. Non-MDM users spend 10.3 hours. Those with MDM also spend less time fixing errors -- just 1.5 hours versus 55 hours.
Quality. Organization-wide access to correct, current product data is essential to delivering quality products. The availability of a single set of material specifications, current manufacturing processes, SOPs, and standards leads to much lower incidences of customer support tickets, as well as a reduction in the number of units requiring rework, the number of audit items not being completed on time, and the number of product recalls, according to a separate Aberdeen Group report, From Database to Shop Floor (See Table 1).
Return on Investment. Average overall inventory carrying costs account for 6.3 percent of an organization's annual sales revenue, according to Aberdeen Group. In a hypothetical example, an organization with $150 million in revenue could experience a 15 percent reduction in carrying costs, which converts to an annual savings of more than $1.4 million.
Other benefits, such as improvements in employee productivity, also translate into significant savings, as more of an employee's time is devoted to revenue-generating tasks. Implementing MDM can deliver savings of up to 250 hours per year, per employee (assuming a standard 40-hour work week for 50 weeks per year), according to the same report.
Five Things to Consider
Nathaniel Rowe, a research analyst for enterprise data management at Aberdeen Group, told IMT that "an MDM implementation can be difficult and lengthy." But he made the following suggestions to help ensure successful results:
Table 1: Data Quality and Product Quality. Credit: Aberdeen Group, April 2013.
Gartner Research estimates that revenue generated from MDM software was $1.9 billion in 2012. Access to a reliable, accurate, complete and easy-to-access data "master" is the necessary foundation for all critical business processes and decisions. "The volume of information is expanding exponentially," said Rowe. "Companies need an automated system in place to manage this, and the sky is the limit."
- Identify one or more measurable business processes to improve. "Just improving data," he said, "isn't measurable."
- Ensure executive buy-in. "Forty-five percent of executives don't understand the importance of data," he noted. It's critical they see, from the beginning, the need for "intelligent reporting and clean data."
- Get buy-in from throughout the organization. MDM affects all levels of a company, and Rowe said that departments can have difficulty relinquishing control of their data. Organizational buy-in can be achieved by including appropriate training and messaging, early and often.
- Have an incremental approach. Focus small and roll out slowly, he advised, to keep down costs and quickly see measureable results.
- Keep an eye to the future. "Data is the new oil," he said, explaining that businesses are seeing "domains of data [that] didn't exist or weren't implemented just five years ago," such as social media.