Michael C. Pelletier, MBA, MSCS
Partner
 

Regardless of the size of your organization, if you've integrated multiple lines of business systems (such as ERP, CRM, etc.) into your environment, you likely have a Master Data Management (MDM) problem.  The likelihood of this is further amplified if you've acquired or merged with other businesses. 

This article is the first in a series that will serve to educate organizations on the importance of MDM, as well as some of the best practices and pitfalls associated with implementing an MDM solution.

Why Master Data Management
MDM is a set of tools and business processes an organization uses to manage one system of record.  A system of record is simply the authoritative list of customers, products and vendors with which your organization works.  MDM is not necessarily a new concept – in fact many Fortune 100 companies have leveraged solutions that have been available in the marketplace for the last few years.  What's changed is that these solutions have become more affordable and relevant within the middle market. 

A classic example where MDM would have proved useful is a customer calling up a credit card company to tell them he/she is moving.  While the company updates the customer's information in the CRM system, the billing takes place out of a different system.  As a result, the customer's bill gets sent to the old address, several weeks go by and the customer gets a letter sent (from the CRM system) stating that he is late and has been assessed a fee.  The customer then calls the credit card company, enraged, and with any luck the credit card company figures out that the billing system didn't have the address updated.  But this does not have to happen.

This example is one of many that results in undue stress on the part of customers, potentially leading them to use a different card company going forward, as well as wasted resources (time, money, etc.) on the part of the credit card company sending out the letter, taking the customer call, backing out the service charge, etc.  All of this could have been avoided if an MDM solution had been put in place.

Current Practices Are Not Enough
Many organizations look to their ERP system as a sufficient solution to support the challenges of MDM.  However, ERP systems are not well suited to support many of the requirements brought about by a true MDM strategy, such as:

  • Limited ability to version this master data
  • Inefficient methods of exporting this data into other applications
  • Master data is specific to the functions of the system that manages it and doesn't readily satisfy the requirements of other applications that need to consume it
  • Inability to properly store hierarchies or change hierarchies as business requirements change
  • Limited or no ability to model relationships between different data groups

Do We Have an MDM Problem?
To answer this question there first needs to be an understanding that there are two different types of MDM – operational and analytical.  This isn't to suggest that you need two separate MDM solutions; rather it is simply to point out that there are two types of problems MDM solutions are designed to address.

Most MDM solutions start off trying to address an analytical challenge whereby the organization is attempting to create a consolidated reporting or business intelligence solution across their different systems looking at product, customer, chart of accounts and other entities.  Once this problem has been solved, however, organizations quickly realize that the centralized data store they've created serves as an excellent source to keep other systems synchronized.

So what are some of the indicators?

  • Analytical MDM
    • Trouble managing dimensions
    • Cost/Pain/Dissatisfaction with BI
    • Inability to tie the same customer across several systems together as one customer
    • Desire to report across organizations in a consolidated chart of accounts
       
  • Operational MDM
    • Attempting to align multiple systems
    • Problems with missed orders or stock-outs
    • Customer facing errors

Next Steps
In the next installment we'll look at how an organization should assess taking on an MDM initiative and what some of the important factors are to making an MDM project successful.

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