MDM gets real with Purchased Parts

One of our senior implementation managers returned to the office last week after the kick-off meeting for a Fortune 500 chemical company in America’s southeast. The company had completed an acquisition last year, and was rolling out a common SAP ERP throughout the combined entity. Verdantis was called in to ensure that the purchased part masters from the SAP and non-SAP source systems with a total of 600,000 items were harmonized before they became the backbone of the single SAP instance.
He and I reminisced about how this particular account had developed into a customer. It had started with a manager from their Materials management team registering for our webinar with SAPinsider last year – Advanced Self-service Master Data Improvement. The interactions that followed made it clear that our prospect organization had a need to safeguard their huge IT investment – the ERP migration exercise. I’ll be honest – their evaluation of Purchased Parts master data management solutions for delivering this ROI made complete sense to me. ERP consolidations are the harbinger of mandates for Material/ Item / Purchased Part master harmonizing projects due to the inventory optimization and strategic procurement opportunities that data harmonization projects unlock.
I have been pretty vocal about how Purchased parts / material MDM has a measurable and meaningful impact on an industrial company’s financial performance. My reply on Forrester analyst Michele Goetz’ blog – MDM: Highly recommended, clearly mis-understood underlines that point.
Gartner’s Hype Cycle for Procurement and Sourcing, 2014 report, published July 29, 2014 quotes, “The business impact of MDM of purchased parts is significant for organizations that have multiple divisions (each with unique items part masters) that are buying similar parts and that can more efficiently utilize inventory across multiple locations”
So, our prospect organization had a mandate, but yet no budget allocated. To demonstrate the value of a harmonized material / purchased parts master to the decision makers, we undertook a POC for 3000 items across categories such as pumps, motors and valves from 2 sites. 6% duplicates were identified after running those records through our automated software – Harmonize. We helped them build a business case extrapolating these findings to their $400 million in inventory.
From our industry findings, we know that buying items on-catalog can be on an average 17.9% cheaper than buying them off-catalog. A standardized, enriched and de-duplicated material master governed by a domain-specific Data Governance layer brings in greater procurement discipline. Going by the 2014 Hype Cycle for Procurement and Sourcing, we believe Gartner agrees – “Investments in data quality and master data management (MDM) solutions can significantly enhance productivity in sourcing and buying direct components, materials and ingredients.”
One quarter later, our prospect organization had the budget!
What’s your favorite strategy (IT or non-IT) for a large industrial company to optimize its operations and save substantial sums? Answer in the comments section below.
Recommended Reading:

White paper – Operational Efficiencies with Purchased Parts MDM

Business case – The Business case for Material Master Data management

White paper – MDM as an Answer to ROI of ERP Deployment

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Prathamesh Prabhu

Prathamesh Prabhu

Prathamesh Prabhu heads the Marketing department at Verdantis Inc. He holds the Master of Management Studies degree.

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