Master Data Management 2015

One Network Enterprises | www.onenetwork.com

WHITE PAPER MASTER DATA MANAGEMENT

Why Wall Street Cares About Your Master Data Management Strategy How effective master data management can increase earnings per share, drive business value, and improve your company’s overall financial health

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In business our mission is to leverage our assets to the benefit of both our shareholders and stakeholders. Yet is today’s standard practice of merely maintaining master data across our various and disconnected transactional systems achieving this mission?

This white paper explores how master data management (MDM), a topic traditionally thought of as a matter of interest only to CIOs and IT Directors, can have a big impact on a company’s bottom line, both positive and negative. As such, CEOs, CFOs, and other executives on the business side are increasingly involving themselves in MDM projects.

The simple fact is that most executives are completely oblivious to the data issues that are eroding the value of their organizations, which is in total contrast to their being up-to-date on most financial issues. Both are critical corporate assets with utmost visibility to both customers and shareholders, so why the gap?

This steady erosion of an organization’s credibility among customers and suppliers, as well as its inability to leverage business intelligence investments and make sound decisions based on accurate information is a primary causal factor in market share loss.

This paper will explore how MDM should be contextualized and actively leveraged in an analytics framework to drive business value.

In addition to providing the baseline for efficient planning and execution, MDM has the capability to power a company’s BI engine by providing a network-wide view of business performance analyzed through the master entities of an organization.

MDM is a multi-party, multi-echelon, cross-functional, and process-oriented discipline affecting information about customers, products, suppliers, locations, etc.

LINKING FISCAL MEASURES TO MDMFiscal responsibility is core to the makeup of all corporations, whether public or private. In addition to Market, Income Statement, and Balance Sheet information, we monitor financial health through a series of ratios such as liquidity, leverage, coverage, operating, and expense to sales. And more recently a significant amount of energy has been focused on improving the cash-to-cash cycle times of our businesses. Furthermore, measures like Net Promoter Score or NPS have taken center stage when considering the growth and market share prospects of any corporation.

Achieving top quartile performance across these financial measures, which in turn directly drives indicators such as earnings per share, requires a business outcome-oriented MDM strategy and platform. Traditional ERP technologies have struggled to formulate such a strategy, let alone execute it. Yet a new generation of cloud-based network platforms have emerged and risen to meet the task.

Why Wall Street Cares About Your Master Data Management StrategyHow effective master data management can increase earnings per share, drive business value, and improve your company’s overall financial health



MDM AND THE HIDDEN COSTS OF CUSTOMER SERVICEAn MDM strategy enabled with today’s cloud-based network platforms begins with the basic premise that healthy financials are driven and sustained by a healthy relationship with our customers. We go to great lengths in protecting our relationships with both our customers and suppliers in order to be sure we can satisfy the actual demand at the right time in the right location. But what are the hidden costs of providing these higher levels of customer service?

In order to manage the risks associated with lead times and variability in our supply networks, corporations invest in both physical assets as well as additional operating expenses in order to protect their ability to serve actual customer demand at the right time in the right location.

These investments are a necessary by-product of an ERP style architecture that forces multiple enterprise silos to plan, forecast, order, replenish, ship, reconcile and invoice across multiple parties through various supply network echelons in order to satisfy the actual consumer demand signal…..which from an NPS perspective is really the only independent variable across the entire network.

This is where MDM comes in. From a business performance perspective, fragmented and inconsistent data negatively affects cross-sell/up-sell, delays time-to-market, creates supply chain inefficiencies and weakens a corporation’s

overall market penetration. When customer data has duplicates, is incomplete, or just generally inaccurate, companies will experience problems in revenue recognition, risk management, marketing and customer loyalty.

BRINGING VISIBILITY AND RELIABILITY TO ENTERPRISE DATABy bringing visibility and reliability to enterprise data, new MDM programs that are based on the latest cloud network platforms can improve business decision-making and drive improvements to both operating and financial metrics.

The best approach to MDM is to drive the deployment requirements by using a set of targeted business outcomes. An example set of outcome-oriented questions is as follows:

“What are our customers buying across various channels, geographies, and lines of business?”

“Can we react to variation across our promotions and new product launches?”

“Am I able to allocate supply in real time across my entire network to maximize revenues?”

“Are we able to reduce our freight costs and maintain on time deliveries?”

“Do we have any opportunities to reduce inventories while simultaneously improving customer service levels?”

An MDM strategy enabled with today’s cloud-based network platforms begins with the basic premise that healthy financials are driven and sustained by a healthy relationship with our customers.



These are the types of questions being asked by business executives who are under pressure to increase sales, decrease risk, and improve profitability on a daily basis. To be effective, executives need a set of core master data about customers, products, locations, vendors, and suppliers in order to answer these questions.

Today these executives lack quality data in these areas due to the fact that it is spread across disparate systems and business units, exists in different formats, or cannot be used in a standard way to collaborate and manage exceptions with their supply network trading partners.

Basically today’s business executives don’t know which data records to trust and this makes it difficult to answer the fundamental business questions which would allow them to manage their risk with data and information rather than physical assets and excess expense.

PROVIDING A “SINGLE VERSION OF THE TRUTH” MDM has been designed specifically to address the issues of visibility and reliability. More than just a technology platform, MDM is a combination of technologies and information governance practices designed to confirm the integrity and accuracy of data across the supply network, as well as to provide all trading partners with a “Single Version of the Truth” to better answer important business questions. This enables internal teams and groups of trading partners to optimize their decision-making in unison.

For example, from a customer management perspective, many companies “maintain” mountains of customer data, but because the data is typically subjected to long lead times, lacks the right context due to poor process, or is inconsistent, they cannot apply the data effectively. As a result, companies miss opportunities to expand promotions or offer discounts and other incentives aimed at growing revenue. MDM can standardize and unify customer data across disparate systems, eliminating both latency and variation.

Or if we look at an example from a supplier’s perspective, let’s say a supplier has been able to discern that a manufacturer has spent $100 million on their products over the past 12 months. This knowledge would allow the supplier to present a new offer, potentially giving an additional discount on products and service if the manufacturer commits to $200 million in purchases.

Quality data about sales, profitability, and discounts can give companies the confidence they need to make game-changing offers knowing they’ll pay off in the long run. In this example, the offer would benefit both parties, with the manufacturer receiving a better discount, and the supplier getting more schedule stability which allows them to lower inventories and reduce costs below the discount level and thus improve profits in addition to revenues.

MDM is a combination of technologies and information governance practices designed to confirm the integrity and accuracy of data across the supply network, as well as to provide all trading partners with a “Single Version of the Truth” to better answer important business questions.



IMPROVING EARNINGS PER SHARE Earnings per share (EPS) is directly related to understanding customer level profitability. With an effective MDM platform, business units are able to identify their highest and lowest profit customers by analyzing the amount of revenue each customer or customer segment generates, coupled with the cost of serving those customers or segments. Bundled with that segmentation analysis is a longitudinal analysis which allows us to understand the lifetime value of a customer. Knowing a customers’ total value allows companies to assign and deploy resources more efficiently.

Furthermore, real time consumer purchasing patterns and related causal variable analysis not only has the potential to significantly improve sales forecast accuracy, but also provides the ability to maximize consumer sell-through based on available supply. MDM enhanced sales and inventory planning lowers costs, increases revenues, and improve EPS.

For example, let’s examine a typical Consumer Packaged Goods (CPG) business. CPG companies are faced with constant market shifts along with global competition and increased global sourcing. In order to compete they must deliver on the complexities of launching profitable products while simultaneously improving distribution and operational efficiencies. However, in most large CPG companies, critical management information is housed in various disparate systems across the enterprise. With the ever increasing data volumes and growing data complexity that CPG companies are experiencing today, this problem is only going to get worse.

Leveraging actionable insights from customer and product data for real-time promotion optimization, category/SKU profitability reporting, and demand sensing/forecasting is table stakes in today’s market. Managing a Demand-Driven Value Network (DDVN) and providing not only a single version of the truth across the supply network, but the “Best Version of the Truth” using advanced MDM techniques is critical to success.

SHARING THE “BEST VERSION OF THE TRUTH” TO TRADING PARTNERSSharing the “Best Version of the Truth” information within the organization and across replenishment channels allows companies to focus on streamlining their processes to increase profit, efficiently manage promotions, reduce supply chain costs and improve collaborative planning. Providing a platform to enable the sharing and collaboration is only part of the solution. How the participants interact with the data based on their roles and permissions must be orchestrated based on desired business outcomes as well as any related data security protocols.

In a typical multi party, multi echelon supply network deployment, the following roles must be defined and granted permission-based access to interact with their assigned business transactions/data, related business plans, as well as any exception-based workbench UI’s. An example supply network configuration of these roles includes:

With an effective MDM platform, business units are able to identify their highest and lowest profit customers by analyzing the amount of revenue each customer or customer segment generates, coupled with the cost of serving those customers or segments.



Buyer Side• Buyer Supply Chain Planner – all the business functionality • Buyer Supply Chain Manager – Planner + Master Admin• Buyer Supply Chain Admin – Manager + user/role admin

Vendor Side• Vendor Supply Chain Planner• Vendor Supply Chain Admin• Vendor Supply Chain Manager

Enterprise Business Function• Inventory Planner• Demand Planner• Replenishment Planer• Buyer – Bidding/Negotiation (Buy Side)• Buyer Manager – approves PO/Contract• Buyer Planner• Vendor Sales Rep - Bidding/Negotiation (Sell Side)• Vendor CSR• Buyer Financials Manager (AP)• Vendor Financials Manager ( AR)• Warehouse Manager• Inventory Clerk• Production Manager – manages production capacity and

resource setup• Production Planner – PP & DT• Master Data Admin – manages master data for the

enterprise• User Admin – manages security User/Role

In reviewing these roles it is evident that the implementation of an advanced MDM based platform solution requires a rethinking of the processes that traditional ERP vendors

have led us to believe are best practice. As defined by an ERP configuration, their best practice processes lead most CPG companies to run with over 60 days of inventory, retail forecast accuracy of 60%, DC forecast accuracy of 80%, and supplier forecast accuracy of 60%.

A better way would be to implement a state-based set of transactional processes that move seamlessly between trading partners, through your defined roles and across the supply network, all being driven through a common MDM infrastructure supported by a cloud-based network platform.

With such platform it would be possible to implement a true DDVN based on the “Best Version of the Truth” across your entire supply network. While this might sound too good to be true, in actual CPG deployments One Network has experience the following improvements:

• Days of inventory across the entire trading network dropped from 60+ days to 25;

• Retail forecast accuracy improved from 60% to 80% at the shelf/item level;

• DC forecast accuracy improved from 80% to a whopping 99.5%;

• Supplier forecast accuracy improved from 60 to 75%.

ERP best practice processes lead most CPG companies to run with over 60 days of inventory, retail forecast accuracy of 60%, DC forecast accuracy of 80%, and supplier forecast accuracy of 60%.



CONCLUSIONIn conclusion, remember that your master data is a subset of all the data used across your applications. Focus on the master data which can be used to drive differentiated business outcomes and related business process improvements across your supply network.

Benefits can be realized by operationalizing your MDM strategy through a cloud-based supply network platform. This platform will provide a subscription-based federated network

so that all participants, based on roles and permissions, can benefit from your data assets. These benefits will translate directly into improvements in your Earnings per Share and other fiscal health indicators.

In the actual CPG business example given earlier, those benefits translated into a quarterly EPS results which beat Wall Street’s expectations by an order of magnitude.

Focus on the master data which can be used to drive differentiated business outcomes and related business process improvements across your supply network.



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For more information contact One Network at:

Tel: +1-866-302-1936 (toll free)Email: [email protected]

Master Data Management 2015

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