The Role of Master Data Management in Supply Chain Crises
The past two years have propelled supply chain management to the top of the agenda for businesses everywhere. The COVID-19 crisis, post-pandemic economic effects and the ongoing conflict in Ukraine have highlighted the vulnerabilities of today’s global supply chains.
Today, forward-thinking leaders have a golden opportunity to future-proof their supply chains – starting with a master data management (MDM) strategy.
Gartner defines MDM as “a technological discipline in which business and IT work together to ensure the uniformity, accuracy, management, semantic consistency, and accountability of the enterprise’s official shared master data assets”. As Gartner points out, organizations benefit from MDM by creating a “single source of data truth” that drives improvements across the organization.
For example, an MDM strategy can help organizations uncover data-driven insights to improve customer experience and satisfaction, as well as enable more effective marketing and loyalty. Additionally, it can help the organization mitigate potential risks by identifying over-reliance on particular customers.
On the supplier side, MDM can help organizations create purchasing negotiation leverage, accelerate sourcing, and reduce duplicate parts, first article inspections, and supplier approvals. This information can also help organizations mitigate risk by increasing supply chain resilience.
In crisis scenarios, MDM prepares organizations to create a holistic, data-driven response by helping them understand risk management factors and define information criticality horizons, ensuring that their supply are under control and prepared for the next unprecedented event.
MDM helps organizations gain visibility into critical information, understand and anticipate risks across all departments, and manage accordingly before a crisis occurs. On the inbound supply chain side, for example, large companies source materials from a complex network of suppliers and manufacturers. In turn, each supplier can source from many sources. What appears to be a diverse supplier base at the first or second tier could have a specialized supplier at the third tier, creating a single point of failure that could undermine the entire supply chain. In the event of a crisis, organizations using MDM can quickly understand which products depend on which suppliers, the geographic location of suppliers and manufacturers, the availability and supply of spare parts, and what shipping lanes are in effect.
When it comes to managing customer data, organizations can sometimes run into trouble if they have multiple systems that store and track customer data across different departments. Such a setup can prevent them from having a clear picture of the purchase volumes of their big-name customers. With MDM, organizations can provide an appropriate level of service during a crisis scenario and mitigate the risk of losing large customers by gaining clear visibility into who their customers are, their contact preferences, where they are, and what geopolitical threats or others they are sensitive.
As organizations implement MDM to mitigate future crisis risks, they must understand that there are limits. Even in an MDM environment, it is nearly impossible to accurately model the entire inbound and outbound supply chain without the proper categorization strategy. To gain full control of their supply chains, companies will need to segment their suppliers and customers based on business criticality and categorize each segment into an information criticality horizon.
Information horizons define how much data organizations collect about their customers and suppliers, and how far an organization can see up and down the supply chain, based on critical factors such as importance third-party strategy. Organizations should create these horizons based on how they define their criticality levels.
For example, very mature data-driven companies typically create their information criticality horizons by identifying, gathering, managing, and tightly governing a set of key data elements produced by strategic customers and suppliers. This ensures that the most critical supplier impacts, direct and indirect, are under control. Additionally, a smaller set of data points should be collected and governed for ad-hoc trading partners. The priority and response levels of risk mitigation efforts should increase in proportion to the criticality of suppliers.
Consider the history of one-time losses, realized risks, and other adversities that have impacted the global supply chain over the years. Imagine which of these events might have had the least impact in an MDM environment that provided the affected companies with advanced capabilities to analyze suppliers, customers and products before the event.
An established MDM practice is the foundation that supports decision-making related to risk and other business decisions. Companies with established MDM capabilities have clearer visibility into their customers, suppliers, and products, and are therefore better positioned to deal with the unprecedented, whether it’s a natural disaster, a pandemic, a disruptive competitor or a change in the regulatory environment.
Andrei Tchourakov is a manager with Calypso.