For companies attempting to build that end-to-end integrated supply chain, master data management (MDM) has grown in importance. So what's the state of MDM in consumer products (CP)? To answer that question, we'll first define MDM and share why it's growing in importance. Then we'll analyze three areas of customer master data, manufacturing master data, and data synchronization. We'll close with insights for customers working on a MDM roadmap using our recent survey of CP companies, an extensive global AMR Research survey of planned CP manufacturing investments, and three surveys jointly tendered by AMR Research with Consumer Goods Technology (CGT). The bottom line? A quarter of CP companies are increasing their budgets in 2008 to address MDM.
What is MDM? MDM means different things to different people, but there are still common elements with which to define its basic principles. AMR Research defined MDM in 2005 as follows:
A system of business processes and technology components that ensures information about business objects, such as materials, products, employees, customers, suppliers, and assets, is current, consistent, and accurate wherever they are used inside or exchanged outside the enterprise.
Think of the journey to an integrated end-to-end supply chain as exercise for your company. The end state is improved health, a thinner and leaner organization, and improved sense of well being. But like exercise programs, we often lack discipline, grit, and determination to stick with it. Neither will happen overnight, and each requires training, a commitment to a long-term change in behavior, and the need to keep pushing for a goal that seems elusive.
The starting point is defining what an integrated end-to-end supply chain strategy means. While there are nine basic definitions, they fall within three groupings: horizontal integration, vertical integration, and functional integration.
The three vary in scope according to what end to end means. Companies need to be clear on the starting point (end) to the ending point (end) and the processes in between. Enterprise integration efforts and interenterprise initiatives are very different, with an exponential impact on MDM. In defining these projects, think of MDM as the foundational element for all types of integration. While the scope of an MDM project varies, the longer the supply chain and the greater the supply chain complexity (that is, the number of supply chain relationships, the number and scope of manufacturing sites combined with product proliferation, constraints, and the nuances of the competitive environment), the greater the need for MDM.
Customer compliance initiatives, ERP instance consolidation, and the need to better use data in business intelligence (BI) strategies are behind most MDM projects today. For the average CP company, three tough areas for MDM integration are customer data management, formulation and specification management, and data synchronization.
Customer data is necessary to create and maintain an accurate, timely, and complete representation of a customer across multiple channels, divisions, and lines of business. With more sources of data, more complex challenges, and greater requirements for data enrichment (attributes, company hierarchies, and cross references), there is greater complexity.
With the increase in functional integration and a focus on outside-in processes, the average CP company is facing a highly complex customer MDM problem. It's no longer just about getting the customer master right to improve order-to-cash processes.
Functional and vertical integration elements have dramatically risen:
1. 82% of CP companies use some form of customer point-of-sale (POS) data for decision making.
2. 69% of CP companies use customer data for customer-specific forecasting.
3. 66% are developing customer-specific promotion plans.
4. 56% are targeting format-specific product launch programs.
Each of these initiatives put pressure on vertical and functional integration. As data synchronization efforts intensify, greater discipline is also needed to satisfy the standards for the global location number (GLN), a 13-digit number used to identify parties and physical locations that is used in electronic commerce transactions. It is encoded in a barcode that includes the GS1 company prefix, the location reference, and a check digit. All of this is making for increasingly complex data management needs.
In the management of manufacturing MDM, master data is linked inextricably to physical manufacturing assets. For process manufacturers (chemical, CP, and pharmaceutical companies), product recipes and outcomes are inextricably linked to the assets that produce them. As a result, these manufacturers need to improve manufacturing MDM processes more than their discrete, make-to-order counterparts.
According to a recent survey on manufacturing investments of companies in the United States and Europe, that while the direction of the master data efforts are slightly different--U.S. companies focus on master data to support innovation, while manufacturing material specifications is the European priority--this investment is considered more important than the more traditional investments of supply chain planning, MES, or plant automation in both continents.
Why? Companies that have invested in these traditional investments are stuck. They cannot progress their manufacturing excellence initiatives without an investment in manufacturing MDM. MDM is also growing in complexity. Formulation and specification management are linked to layers of these investments (master scheduling is tied to the bill of materials, which is tied through recipe management to asset details and control processes). While ERP and advanced planning and scheduling (APS) focus on the top-level flows, the management of manufacturing 2.0 processes, especially in multitier environments, requires deep vertical linkage.
The average CP company outsources 22% of manufacturing (by volume) and needs to reliably produce products at more than 40 factories globally. The increasing scale of the problem is driven by five factors: global expansion, manufacturing outsourcing, M&A work, new product launch, and the increased focus on quality and product safety.
While 74% of survey respondents had a manufacturing scheduling system, 62% had a formula specification system and 52% had a quality/process management system. Some respondents say their main issue in 2008 will not be more applications, but manufacturing MDM.
As for the differences on each side of the Atlantic, North American teams are looking to MDM to support the interface between product development and supplier interactions because of their focus on R&D. The European teams, on the other hand, are focusing on the work between plant ingredient specifications and supplier quality programs.
Data synchronization is a complementary but separate MDM activity. While efforts on data synchronization have been progressing slowly, the recent work on price synchronization is causing leaders to rethink traditional data synchronization efforts. It is based on a set of standards by GS1 and is supported by the Global Data Synchronization Network (GDSN), an Internet-based, interconnected network of interoperable data pools and the GS1 Global Registry. This is meant to let companies around the globe exchange standardized and synchronized supply chain data with their trading partners.
The current status of data synchronization, based on joint studies between AMR Research and CGT, is as follows:
1. 33% of CP companies are synchronizing data with one to two partners
2. 22% with three to five trading partners
3. 20% with more than five partners.
Compliance is the main factor behind the efforts. The more mature the company is on data synchronization, the greater the benefit for MDM. 33% of CP companies are finding benefits from data synchronization projects that help their MDM initiatives.
Wal-Mart and Wegmans get equal votes from suppliers on the ease of doing business with both companies in data synchronization efforts. As you plan your budgets for 2008, think about MDM and the requirements in your business for success. In designing a successful MDM project, we see three foundational pillars:
Ownership: MDM projects must be owned by the line of business. In fact, 75% of respondents to a recent AMR Research survey said they operated MDM as a shared service that is managed by the line of business. This is a significant change from a couple years ago when IT organizations were saddled with fixing the MDM issues. MDM project success demands that there is clear organizational ownership.
Alignment: The lower the level of functional integration, the greater the MDM challenge. Organizations that lack cross-functional integration at a goal and business strategy level should expect greater difficulties reaching MDM excellence. One company recently shared its experiences with us. Despite the formation of an MDM group within the line of business three years ago and significant improvements in the process flows, it finds new product launch processes require cross-functional team work from 22 disparate organizations. If the group didn't have high functional integration against a common goal, the MDM elements of a new product would not get reviewed, resulting in product launch failure, packaging and product waste, and inaccurate accounting. Targeting functional integration efforts and cross-functional alignment makes MDM initiatives easier and more reliable.
Clarity: MDM projects have many dimensions and CP companies have many large gaps. It will take time and experience to understand where to start and how to build a roadmap. To get started, focus on the important elements as defined by your supply chain strategy and assess if you have the right stuff. If not, hire experienced talent or consulting experience.
For the complete article, charts and links to additional reading on the subject of MDMgo to
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