In this “summer series” of posts dedicated to Master Data Management for Product Data, we go across what we identified as the five most frequent use cases of MDM for product data.
In this post, we focus on MDM for Material Data; it aims to manage centrally information about spare parts, raw materials and final products, and then share this trusted and unified view across organizations, processes and information systems.
MDM for Material Data is seen in industries that engineer, procure, manufacture, store, sell and configure products. Typically, this is what defines the manufacturing industry. Material refers to potentially any inventory items that can be uniquely identified by an SKU (Stock Keeping unit), from the raw material to the finished goods, so the focus is not, or not only, the customer facing side of the product.
One could think that most companies have already established a single point of control to manage material data across their business processes, typically in their ERP. But, the reality is that few companies have consolidated all their processes in a single ERP instance. The others may have a specific system (or systems) and related process for the Research and Development; or for CRM and sales and distribution; or for procurement, maintenance, etc. And they may have different systems and processes across lines of businesses or geographies as well. This heterogeneity tend to increase over time, because of mergers and acquisitions, business processes that are being outsourced or insourced, or IT systems that expand at the periphery of the legacy IT rather that at its core, as illustrated by the current raise of adoption of cloud solutions.
This results in inconsistent and replicated views of product data, with resulting and cascalading process inefficiencies across the product life cycle, which explains why many companies are engaging in MDM for material data initiatives. Having a shared, up-to-date and accurate view of products and their characteristics is a foundation for efficiency. This starts at the early steps of the product lifecycle, where new product characteristics has to be shared beyond the Research & Development team with other activities such as Procurement, Marketing, Supply Chain, or Accounting and Controlling. Reduced time to market while launching new products or improved parts reuse to reduce procurement or manufacturing costs are example of the business benefits tackled.
Then, once the product is ready for distribution, strong alignment is needed between numerous stakeholders across sales, logistics, finance, and manufacturing, especially in a case of build to order products. Inventory optimization and cost reduction optimized spend management when negotiating procurement contracts together with improved visibility into procurement and sourcing are then expected. Although those are steps that may be covered by an ERP, organizations may want to expand beyond its scope. For example, many organizations are looking for more integrated, agile and synchronized for planning, a process that has often been conducted outside of the ERP, sometimes in a poorly coordinated way through ad-hoc spreadsheet or disparate planning applications. Last but not least, the after sales process is a step in the product lifecycle that has its own supply chain, which may have raised little attention for optimization in the past. As a result, Maintenance, Repair and Operations may even be seen as a use case on its own, one that we will further discover in the next post of this series.
IT agility can be another strong business driver for MDM for Material Management, due to increasing costs of data migration and management of data quality, together with a limited ability to reap the benefits of innovation at the right pace. Enterprise agility is another potential benefits, especially in the case of mergers and acquisitions to reap the benefits of a rapid consolidation of activities that rely on the efficient procurement and distribution of items across the supply chain.