Master Data and ERP Software - an emotional connection with ups and downs for users!
Ensuring Master Data quality in a company is a Herculean task in itself, yet in the environment of a group of companies, master data is a topics that usually present those responsible with great challenges. Harmonising and ensuring master data quality in a company is difficult in itself. However, the requirements rise steeply when an exchange of master data becomes necessary in a group of companies.
This experience report will show what needs to be taken into account in a group of companies when the idea of central data storage and a "Master Data and ERP Software" project are on the agenda.
Table of Contents
- What Should You Keep in Mind About Master Data and ERP Software?
- Master Data Strategy in a Group of Companies
- Example of De-centralised Master Data Management
- Example of Central Master Data Management
What Should You Keep in Mind About Master Data and ERP Software?
Reconciling different application systems within the framework of master data management is not an easy task. First of all, a distinction must be made between transaction data and quasi-static master data. This rough classification can help to estimate the scope of master data maintenance.
As a rule, it is systems of merchandise management or classic ERP software, in conjunction with customer relationship systems (CRM) or with product information systems (PIM), that should or must exchange master data with each other.
1. Who Is Dependent on an Exchange of Master Data?
What role does the company organisation play?
- Financial accounting systems FAMIS
- Classic ERP software and ERP systems
- Enterprise resource planning systems
- Product Lifetime Software PLM
- Logistics processes within the framework of ERP software, or the requirements within the framework of data exchange within a supply chain are applications that rely on master data and master data exchange
The advantage of integrated business software is precisely that master data only has to be entered, enriched, qualified and released once - usually centrally. This saves duplication of work and the danger of duplicates. It is important to clearly regulate the framework conditions - processes - for the release of master data within the company organisation. This also applies to the lifetime of different master data and times of master data archiving. In the integrated ERP system, this makes it possible to realise savings effects, to accelerate throughputs and to depict reality more easily and in real time within the framework of evaluations.
2. What Are the Consequences of Insufficient Master Data Quality?
In our experience, insufficient master data quality usually leads to process or accounting errors because the documents generated do not correspond to the truth. Evaluations on this basis are usually not useful because the real factual and process status cannot be represented truthfully. As a result, even wrong management decisions can be brought about. Data-driven decisions cannot be made on poor data quality. Incorrect control of goods (e.g. wrong address data, wrong delivery times, insufficient customs declarations, etc.), insufficient support of the process staff due to deficiencies in the parts lists or work plans, insufficient documentation in the context of warranty claims (which part - or which article - was installed where and when?) are scenarios we encounter again and again.
These are usually the main reasons why a master data quality initiative has to be initiated. Mostly this also happens in connection with decisions for a new ERP system, where the master data has to be reinterpreted and usually revised in the course of the project.
Different terms for the same facts - often found in organisations that are spatially separated operationally (different cultures) - as well as outdated architectures of ERP systems in use often lead to redundant data storage. This data redundancy can also lead to the fact that responsible master data managers can be found for the individual company division, but not necessarily for the entirety of the master data in the company group. High harmonisation efforts and thus high costs are usually the result of this organisational model.
3. What Is Master Data?
Master Data usually represents objects with the aim of providing the business processes with the required data. The simplest example is address information. Article information (article master data) also belongs to these objects and is used to process master data and ERP software in order to provide business processes with information.
Master data is also often defined by the fact that it has a low frequency of change (for example bank data, IBAN numbers or birthdays in the context of employee information). They are clearly identifiable by numbering. The volume of data is usually rather constant compared to transaction data in an ERP system, where the amount of master data increases with each ERP transaction.
4. What Is the Purpose of Holistic Master Data Management?
The increasing integration of business processes and supply chains requires unhindered data exchange for all parties involved. A master data organisation (if this should exist in an organisational model) must be integrated into the organisational structure of a company. This allows responsibilities to be defined, as well as the necessary coordination tasks. It is necessary to establish standards for the notation of master data (simplest example: how is an address written? how is a telephone number entered, with or without an international identifier? etc.). Implementing and monitoring them is a task within a master data project with clear responsibilities (keyword: data steward).
It is necessary and expedient to define the leading master data system in good time. The other subsystems are served from this leading system. The qualification of master data in the leading system (master) must be defined, for example by qualifying with a dual control principle. It must also be defined whether the input system (user interface) can intercept incorrect or nonsensical entries during input as part of an error query in order to support the user.
Master Data Strategy in a Group of Companies
A group of companies usually consists of legally independent, operationally active companies that have their own value creation structure. (Mergers of medium-sized enterprises can serve as an example. It is not the case that only international groups have these requirements).
Example of De-centralised Master Data Management
These requirements are most likely to be found in a holding company (or in a group of companies) and its organisational form.
In this example, it stands for a central unit with the goal and purpose of preparing the entrepreneurial activities for the shareholders. Operative units at home and abroad, also with a legally independent character, achieve their added value in the local markets.
In the context of master data and ERP software, the question arises as to which autonomy and which data should or must be exchanged. As a rule, it is usually data on customers, suppliers and article master data. The definition of which data must be exchanged is not trivial, especially with regard to the quality assurance of the data at different input points.
A group of companies with a holding structure can be designed in such a way that there is little or even no overlapping customer, supplier and item master data. In such a case of a holding structure, we recommend from our experience in consulting to do without a central master data management. The effort for quality assurance is disproportionate to the revenue from this data in this business model.
5. Which Questions Are always Important?
- Create: where is the master data set created?
- Manage: who takes over or has responsibility for the data quality and its updating?
- Extend: who or which department adds subject-specific master data to the master data?
The goal of improving the master data quality can usually be achieved by addressing these three questions.
Figure: Example without Central Master Data Management
Example of Central Master Data Management
In international companies, it may be necessary for the company's divisions to present themselves uniformly on the market. In the context of increasing digitalisation, more and more service processes are being standardised and distributed globally. This leads to new challenges in central ERP systems, as national requirements for data protection, data management and the associated networking of transaction and master data have to be taken into account. Another example of central master data management can be the use of centrally managed supplier master data to apply to all companies in the context of supply chain optimisation and purchasing cost optimisation. The central administration of conditions and delivery terms are usually the background for these process models, which can lead to lower purchasing prices. Logistics also offers savings potential because de-centralised ordering based on a company-wide conditions policy ensures clarity for all parties involved about the requirements of the supply chain. This means that suppliers can supply all plants and branches directly and the delivery documents are managed centrally in the ERP system.
However, this also inevitably leads to the fact that the article master data must also be centralised. Associated with this are requirements for the exchange of master data through IT systems up to MDM Master Data Management (MDM) software solutions. These are usually independent solutions that are centrally accessed by the respective ERP systems. Central access naturally applies to all IT systems, such as financial accounting, CRM solutions, QM systems, and many more. The term ERP system was mentioned here as a representative.
6. Where to Maintain Master Data?
The creation of Master Data is usually done centrally. A uniform framework is defined and effective so that users can add master data on site to meet their requirements. A creation of new articles is thus also done centrally in the defined uniform article Master Data scheme.
Each business unit would thus be responsible for synchronising and keeping the Master Data up to date.
A central Master Data Strategy makes sense especially when customers and suppliers overlap and maintain business relationships in the different business units. This can also fulfil the often encountered management requirement that suppliers and customers and their value contribution to the company as a whole must be evaluated. Especially in the context of digitalisation strategies, it is imperative that stable processes and reliable master data are in place. Process optimisation will only be sustainable if the process can access stable parameters. High-quality ERP consulting can provide valuable assistance to the company in setting up the organisational and I.T. framework.
Figure: Central Master Data Management
(Organisational Model often used in the context of Master Data Optimisation & ERP Software Projects)
In a Project for Master Data and ERP Software, it is first important to be clear about the structure of the centralised or de-centralised Master Data Organisation and to determine the future direction. Once the questions of the use of master data have been clarified, the organisational structure of the requirements can be defined:
Who and where will master data be created?
Who and where is responsible for master data and how is it qualitatively maintained?
Who will make any additions or enrichments?
These are initially organisational tasks that are closely related to a Master Data and ERP Software Project and must be defined. The purchase of ERP Software will not solve these questions - but they will arise!
Success is achieved when the Organisational Model - who needs Master Data, when and where - as well as - who supplies the Master Data and qualifies it - are defined and responsible persons are identified.