First of all, master data management, MDM – Master Data Management arose from a corporate need regarding data management quality. In other words, how to improve the quality of data organization and its integration within a system. Thus, achieving more accurate forecasts, as well as ensuring better insights derived from this data.
Making wrong decisions based on the argument that there was insufficient data can be very costly for a company. Better management of this data is required. This involves reviewing information and its structures (Standard Description of Materials and Services). In addition, naturally, to a methodology for change control through a governance process.
There is so much data that a specific international standard was created to regulate how it should be structured, classified, and managed.
MDM – Master Data Management is the set of processes and tools that govern the management of an organization's master data.
Contextualizing MDM – Master Data Management
In fact, many people may confuse data concepts, using 'reference data' or 'primary data' interchangeably with master data. Sometimes data exchange can be one of the reasons generating these conflicts. Therefore, we will highlight a few aspects before moving on to the MDM solution.
Reference Data or Primary Data
Both are external data. Used for information exchange, they generate value due to the need for reference use. For example: Security ID (CUSIP, SEDOL, ISIN), country's current currency code, country code, asset category code, etc. These are relevant data for the export market.
Master Data
Master Data or Master Data is the core dataset essential for any business, stored across multiple systems allowing integrated capture and cross-referencing of this data, which in turn is used across various company departments.
Master data typically undergoes very few changes over time. Some undergo no changes at all. They are generally divided into four categories: Things, concepts, places, and people. There is also segmentation within these categories known as subject areas, domain areas, and entity types.
- Things – product lines, accounts, business units, etc.
- Concepts – deals, contracts, warranties, licenses, etc.
- Places – office locations, among other georeferenced divisions.
- People – customers, employees, relationship managers, among others.
For each category, there is a range of segmentation possibilities. Based on relationship and history, for instance, a customer can be segmented by market value, incentive types, etc., being categorized as basic, executive, global, or premium. The same applies to product and service segmentation depending on geolocation, size, and industrial sector.
How MDM – Master Data Management can help your company
Among the main challenges companies face that can be solved through MDM-focused management are:
- Spend Analysis and Management
- Unforeseen costs from purchases that do not align with demand
- Reducing procurement lead time with standardized and complete demands and specifications
- Unnecessary inventory costs with duplicate or obsolete items
First, the issue of creating spend forecasts in the procurement area must be supported by an adequate description of demands, based on history and planning.
Another relevant point to consider regarding MDM as a solution concerns purchasing processes that lack well-defined information about demand: incomplete or erroneous descriptions. As a result, the impact on the procurement process can range from increased replenishment lead time due to difficulties in communicating requirements to the market, to finalizing the process with incorrect delivery, tax issues caused by improper material classification, and even impacts on inventory levels with items that do not meet company needs and may become obsolete. To complete the list of process inefficiencies caused by poor data management, we can cite additional logistics costs for material return and repurchasing.
Above all, in order to eliminate the mentioned problems, it is important for the company to prioritize the cleansing of material and service registries, sustained by registry governance.
Data cleansing is a process aimed at reviewing material and service descriptions, as well as standardizing, supplementing, and correctly classifying them according to their taxonomy. This allows the company to communicate its needs to the market clearly and objectively. Additionally, it integrates all company processes that rely on high-quality registry data.
After data cleansing, governance ensures information integrity and standards in Data Management. Level Group provides a Portal that supports governance demands. Featuring requests for new registrations, registry maintenance, approval workflow or validation requirements by stakeholders (quality, maintenance, warehouse, tax, accounting, etc.), as well as offering a dashboard and reports for tracking governance status and SLAs.
Why hire specialists to manage MDM – Master Data Management
In short, master data is the foundation of a company's information and reporting. Thus, any error in master data creates a costly, cascading effect on the company's business. Going beyond procurement examples, we can highlight impacts on sales, production, and tax processes, such as: sorting and delivering incorrect materials or delivering to wrong addresses and incorrect customers, and even in tax collection.
Therefore, it is essential to rely on MDM specialists with experience in implementing data cleansing and governance projects, who possess knowledge of market best practices and are qualified to evaluate the solutions best suited to each company's industry and business rules.
Count on Level Group, which has been delivering results in the B2B market for 15 years.
