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The best run ERPs run on good master data

Enterprise resource management systems support each step of an organization’s value chain with modules for product development, procurement, logistics, manufacturing, and sales and service. Additional modules support overlay functions such as finance, human capital management and corporate services. 

Each one of these ERP modules rely on a special kind of data, called master data. Master data represents the shared data that’s in use across the value chain, examples include: G L accounts, employees, suppliers, materials, stores or real estate. Your business teams (and consequently the ERP modules they use) need consistent master data to coordinate activities. Errors or (more commonly) inconsistencies in master data, lead to failed business transactions and inaccurate reporting. For example, the GL account assigned to a key supplier by finance needs to match the account recorded by procurement or replenishment orders from manufacturing may not be fulfilled. 

Because accurate and consistent master data is critical for your ERP, each module includes screens for entering and editing master data: Finance includes screens for managing new account requests, product development and manufacturing has screens for creating new materials, or Procurement ships with screens for onboarding new suppliers. The existence of screens makes many teams believe that the ERP is the best place to manage this master data.

The reality is that ERPs are designed to streamline operations not manage master data. Bending the ERP to this cross purpose has drawbacks. 

However, the reality is that ERPs are designed to streamline operations not manage master data. Bending the ERP to this cross purpose has drawbacks. In the following sections we describe a couple of the issues we have seen at our customers: 

The Lack of Workflow

Consider a typical new material setup process that requires collaboration between teams in sales, manufacturing, and finance. Setting aside the security and access issues, if your teams are small enough it’s possible to give every participant permission to access the ERP and train everyone on the use of the complex data-entry screens–some systems have 35 screens to set up a new material. But bear in mind that even after investing all that effort, the collaboration and approval steps in your setup process would still exist outside the ERP because most ERPs lack workflow.

The lack of workflow means sales, manufacturing and finance collaborate through spreadsheets and email, before data is entered into the ERP. Confusion about spreadsheet versions and miscommunication notwithstanding, manual collaboration can be a pragmatic solution. However recognize that the lack of workflow means an inability to audit and monitor the parts of the process that happen outside of the ERP creating potential compliance problems. And because most organizations limit access to their ERP, the setup team that is responsible for navigating the ERP screens to create new accounts, materials, or suppliers promptly becomes the bottleneck for every request. Finally, we’re describing a scenario where there’s one ERP module — the complexity goes up if the entire process spans multiple modules.

In comparison, our solution, EBX5, supports your ERP with workflows for authoring and maintaining master data. Teams use intuitive, workflow-driven user interfaces, for creating the new material, account or supplier. Since the workflow spans the entire process, it manages approvals, notifications, deadlines, and escalations. For regulatory compliance, audit trails, and history are maintained. At the end of the process, EBX5 updates the ERP module (or modules) that require master data. Finally, our solution provides powerful capabilities for detecting duplicates at the point of creation, managing hierarchies, and enforcing fine grained permissions. 

The Cost of Synchronization 

Implementing a structured process for authoring master data is not the only issue facing ERP teams. There’s also a need to ensure that the values are consistent across all the instances, ERP modules (of varying versions), and applications (sometime other legacy ERPs) in the organization. 

Consider the case of one of our customers. Their North American region has two ERP instances: one for manufacturing at their plant and another for sales and finance at their regional HQ. Because each instance has its own copy of master data, successful collaboration depends upon keeping these two copies consistent, or in sync. Synchronization processes are what organizations use to keep these copies consistent. Occasionally, these processes are automated using tools like ETL, although more commonly consistency is maintained using manual methods. 

While cumbersome, at two ERP instances (maybe even three) the problem is somewhat manageable. But in our customer’s case the North American instances were not the only instances that needed to be synchronized. At corporate there are instances for human resources, sales and finance and in Europe there were even more. And all this ignores the other applications that need consistent master data such as their legacy ERPs and enterprise data warehouse.

Complicating matters was that our customer needed selective synchronization between their ERP instances in North America, Europe and Corporate–not identical copies. In finance, usually only consolidated accounts were synced between North America/Europe and Corporate (usually being the operative word). In purchasing, corporate may have adopted a global supply contract, but a few local contracts were always grandfathered in. Going through the expense of writing code for the ETL to handle every new non-standard change, or “one-off,” was often impractical. This meant some of the “one-offs” were handled manually, with collaboration between teams over email with mapping spreadsheets. The partially automated, routinely manual, selective synchronization is an imperfect process–mistakes happen and the result is usually copious amounts of downstream reconciliation and erroneous reporting.

With EBX5 our customer centralized the management of its master data. Instead of a collection of very slightly different duplicates spread throughout its organization there was one, consistent, source of suppliers, products, accounts, etc. This single source of master data translated into cost savings, as they simplified their synchronization architecture, moving from a web of point-to-point routines between all their ERP modules to connections between EBX5 and ERP. Additionally, the regional/business line/functional variations were supported using EBX5’s inheritance features. Inheritance allowed our customer to create adaptations by selectively overriding inherited relationships or values (all other inherited values and relationships remained synchronized). Inheritance eliminated the need to maintain any of the selective synchronization logic in the ETL. 

Finally, with EBX5 our customer could manage selective updates within the confines of a workflow. Additionally, standardized workflow means that your business teams, whether they work in business units, or at the corporate level, can share the same process for creating and maintaining their master data such as materials, suppliers or accounts.

The need for reporting on master data

In the previous sections we described two ways in which EBX5 improves ERP operations. Workflow synchronizes and monitors all the efforts of those that are responsible and accountable for creating new materials, updating accounts and onboarding new suppliers. The architecture of the EBX5 solution cuts down on the amount of work IT needs to do to keep values consistent across the enterprise. However not every individual in your organization is involved in operations; in fact most people are information consumers. This is why EBX5 provides reporting and dashboarding capabilities for sharing, measuring, and auditing your master data and process. 

As we pointed out in the previous sections, much of the collaboration around master data authoring exists outside the ERP system. Performance analyses that rely only upon the ERP’s logistical data (audit trail) misses a big portion of the process. With EBX5 dashboards, you can monitor the improvement in quality. And, because these dashboards are integrated with workflow, you can also track improvement in process times, for example the time to onboard a new supplier. This performance data is especially useful for process improvement teams and management. Also the EBX5 history and audit trails help you comply with internal controls and regulations, such as Sarbanes Oxley or 21 CFR part 11, by providing a complete breakdown of who changed, what and when.

There’s a final reporting issue and it pertains to data distribution. Many of the ERP teams we meet with ask about how to distribute master data such as the list of suppliers, material master, and charts of accounts. Because providing access to the ERP to everyone is unworkable (not to mention a security problem and licensing issue) organizations often distribute reports or spreadsheets via intranet sites or portals. While this is a workable solution it requires that someone build and maintain the infrastructure to produce and distribute the reports. And also, since these reports are snapshots, there’s always a concern about the freshness of the information. 

With EBX5 don’t need to invest any effort building or maintaining the infrastructure to produce and distribute reports on their master data. Reports on suppliers, materials, financial accounts, etc are automatically produced by the components in the software. Many of our customers embed components (such as the hierarchy viewer) in an intranet site, or portal. It is also possible to allow direct access to the software via a web browser. Since these components are always displaying the most current master data values, users do not need to worry if the information is out of date. Finally, it is also possible to view master data in different points of times, in order to retrieve/compare previous (as-of) versions for reporting, see future versions (both effective-dated and hypothetical) that are being prepared.

Final Thoughts

Whether your organization runs on SAP, Oracle EBS, something else (or all-of-the-above), master data is a critical component in successful transactions and accurate reporting. That said, because of the lack of workflow, challenges in synchronization and issues in reporting– the ERP is a less than ideal place to manage your master data. 

Visit our ERP Master Data section to see our solution in action and learn from large ERP customers.

By Conrad Chuang