By bringing integrity, visibility, and accuracy to enterprise data, master data management (MDM) programs can improve business decision-making and even move the needle on KPIs.
“What are customers buying across channels and lines of business?”
“What is our trade compliance risk?”
“What is our credit exposure across our customer base? Can we lower it?”
Those and other questions face business executives who are under pressure to increase sales, decrease risk, and improve profitability. To answer them, executives need definitive data about customers, products, locations, vendors, suppliers, regulations, credit limits, and credit exposure. But too often, they lack quality data because it’s spread across disparate systems and business units, or exists in slightly different formats, among other reasons. Consequently, they don’t know which data records to trust, making it difficult to answer fundamental questions about the business.
Enter master data management (MDM), a combination of technologies and information governance practices intended to confirm the integrity and accuracy of data, and provide organizations with the “single version of the truth” needed to answer important business questions.
MDM spending is on the rise. Gartner Inc. estimates that total software revenue for packaged MDM solutions was $1.5 billion in 2011, a 15 percent increase over 2010, versus a 9.75 percent growth rate for the overall enterprise software market.¹
While investment in MDM is increasing, Michael Reid, a director with Deloitte Consulting LLP, notes that some enterprises don’t know how to make a business case for it. “It’s hard for them to quantify the business value MDM can deliver,” he says. “In fact, MDM can offer a variety of benefits beyond providing a single version of the truth or a foundation for making better data-driven decisions. It can move the needle on dozens of key performance indicators.”
Deloitte Consulting LLP has created set of enterprisewide metrics as a part of its Enterprise Value Map tool, designed to help companies select the business activities that can impact shareholder value. Reid has identified a subset of 130 enterprise performance indicators that MDM can affect. He explains MDM’s potential impact on five KPIs related to revenue growth in particular.
1. Revenue per customer: Many companies maintain terabytes of customer data, but because it’s often inconsistent, they can’t use it effectively. As a result, companies miss opportunities to offer discounts and other incentives aimed at growing revenue. MDM can standardize and unify customer data across systems.
Consider how MDM could help a supplier extract more business from a manufacturer. If the supplier knows the manufacturer spent $2.8 million on the supplier’s products and services last year, the supplier could share that information with the manufacturer and present a new deal, says Reid. The supplier may offer an additional discount on products and service if the manufacturer commits to $3.5 million in purchases. “Quality data about sales, profitability, and discounts can give companies the confidence to make bold offers knowing they’ll pay off,” says Reid.
2. Customer profitability: Organizations can identify their most and least profitable customers when they know the amount of revenue each customer or customer segment generates, coupled with the cost of serving those customers or segments. By grouping customers according to a company’s ownership structure, companies can understand a customer’s total value, as opposed to their value to a particular division or location. Knowing customers’ total value allows companies to focus their resources on retaining those that matter the most.
3. Percent of new customer sales due to products and services launched in the last year: This KPI measures the value of new products and services and their effectiveness in attracting new customers. Standard, centralized product data makes it easier for companies to promptly post information about new products to their various sales channels, speeding time to market and increasing available selling days. And by giving companies visibility into demographics and purchasing patterns, customer master data can help companies better target potential customers with new products, which in turn can lead to increased sales.
4. Inventory levels: Product master data may help organizations identify when they’re carrying duplicate product components—an excess cost. Meanwhile, data about customers’ purchasing patterns has the potential to improve the accuracy of sales forecasts and help companies better match supply and demand. Enhanced sales and inventory planning can lower costs and increase revenue.
5. Services for free divided by fee: By connecting service contract records to master customer records, companies can more easily identify whether customers’ assets are covered by service agreements. Knowing which customers aren’t covered as well as customers whose contracts are due for renewal presents potential revenue generating opportunities.
“An awareness of these metrics can help IT leaders guide business case conversations,” says Reid. “If a CIO gives business executives a list of KPIs and operational metrics that tie into MDM capabilities, business executives can more easily select which metrics make sense for their business case. Identifying appropriate metrics for the business case will, in turn, make it easier for executives to pinpoint and quantify MDM’s benefits.”
¹“Magic Quadrant for Master Data Management of Customer Data Solutions,” Gartner Inc., October 18, 2012
“The way customers are shopping has changed and continues to evolve,” said Sam Copeland, Vice President of Merchandising Operations for Office Depot, in a recent interview with DATAVERSITY®. To meet this new challenge, he said, “We need to have nimble systems, processes, and perfect data quality.” Since the implementation of Stibo Systems’ STEP solution for Master Data Management (MDM), Office Depot’s successes include a 60% reduction in new product time-to-market, and improved efficiency because data only needs to be input once, regardless of the source, said Norbert Donders, Office Depot’s former Manager of Product Data Management.
“Office Depot is a company that thrives by providing the best solutions for clients’ constantly changing workplaces,” Donders said, yet in 2009, they were struggling with inconsistent and time-consuming recording of product details, an inability to deliver requested product information to customers on a consistent basis, and a longer than desired time-to-market for new products.
With a desire to respond to increased customer demand for a more comprehensive, multi-channel shopping experience, the company realized that they were unprepared to efficiently manage data coming from internal sources as well as third-party suppliers. “The departments responsible for our publications and merchandising were spending too long categorizing products,” which delayed time-to-market, said Donders. “While we should have been focusing on selling products, sometimes it seemed like we were only processing data.”
The decision to improve customer experience included a desire to respond to evolving customer needs in the future as well as meeting current demands, said Copeland. “Traditional sales channels are blurring. Customers may start the shopping journey through web or mobile, but the transaction may happen online or at retail through a dedicated sales associate. The fulfillment of those products may happen in a direct-to-consumer model, in a store at the POS or via ship-from-store or with a third party,” he said.
In order to reach omnichannel customers, Office Depot needed consistent, trusted data, and systems and processes that were nimble enough to adjust quickly to changing demands. A Master Data Management (MDM) solution was identified as a priority, so that data input and categorization could be streamlined.
Finding a Solution
Office Depot needed a responsive solution that could standardize the data for a complex web of hundreds of suppliers offering millions of products. This level of complexity demands centralized master data, Copeland said. “Stibo Systems’ STEP platform was selected as the best solution set to facilitate our future state needs. The data quality engine, ability to be nimble,” and a user interface that is easy for suppliers and internal associates to use was considered of critical importance.
STEP is a Master Data Management (MDM) platform that “integrates multiple disparate systems by streamlining the process of aggregating and consolidating information around an organization’s products, customers, suppliers, employees, assets, location and reference data from multiple sources and formats,” he said. “STEP connects information sources to derive actionable insights, and publishes it to backend systems as well as online and offline channels.” This is particularly important because today’s consumers increasingly expect a consistent experience whether shopping in a store or on a website, or browsing via mobile device, he said.
According to a May, 2017 press release from Stibo Systems, they are “the global leader in multidomain Master Data Management (MDM) solutions.” The company provides “cross-channel consistency by linking product and customer data, suppliers, and other organizational assets,” enabling businesses to “make more effective decisions, improve sales and build shareholder value.” A privately held subsidiary of the Stibo A/S group, which was originally founded in 1794, Stibo Systems’ corporate headquarters is located in Aarhus, Denmark.
In an article by Stibo Systems entitled “Success Story/OfficeDepot,” Donders said that the initial implementation went well enough that the team wanted to expand the scope to include more data. “With our old way of working, this would have given rise to a lot more work,” said Donders, “but now we’ve set up a structure and tools, we only need to set up the product data once.”
Office Depot is now using data brokers as a way of centralizing and standardizing product data. “There are pros and cons to this as the data becomes available to our competitors, so of course you lose some control,” he said, “but it allows us to deliver the right data to our customers. Moreover, the broker arranges the data, so we only need to concern ourselves with publishing it online. It’s also good for our suppliers as they only have to supply the data to a single party, not to dozens of resellers.”
Efficiency and accuracy have improved significantly, he said. “By implementing a content management system that’s fed with data from MDM, we’re able to develop our online catalogue thirty to forty percent faster.”
The online customer experience has improved as all data is now standardized across all channels. “Using master data has also improved our online search functions, meaning that our customers can now find products more easily with fewer searches being abandoned prematurely. As our websites are now fed with MDM, rather than manually, we’ve also managed to reduce the number of errors,” Donders said.
Copeland shared some of what Office Depot learned from the process. “We are very early on in our journey, but all team members involved have had a seat at the table and have been encouraged to be very vocal,” he said. “We continue to have candid conversations to ensure that we are designing the best solution.”
He also noted that an ongoing evaluation of the systems that provide, manage, and govern their data is a key part of success going forward. “Implementing a new technology is only one piece of the puzzle. A significant portion of the work from this project is undergoing a robust process redesign effort.
We are looking hard at the processes, roles and responsibilities to ensure that we are bringing best-in-class influenced processes, which the MDM technology will enable,” he said. “This also means looking at the organization and identifying gaps from best-in-class. For example, we recognize that we need more robust Data Governance to ensure that we aren’t making short-term decisions with negative long-term impacts.”
“Given the early stage of the project, next steps include further socialization of the project internally and externally with our suppliers, refinement of the plan and continued execution on the foundational aspects of the project,” said Copeland.