The need for effective Material Master Data Management – Part 3
Our last post talked about the Operations issues that arise from poor Material Master data quality. Let’s take a look at purchasing and spend analysis impacts of poor data.
Sourcing projects and the make-versus-buy decision process in general require a view of what exists already in the approved parts lists and approved vendor lists. Bad material master data can result in supplier proliferation, part proliferation, and a failure to leverage existing contracts.
Effective Spend Management
Many material items are infrequently replaced items purchased on a decentralized basis from a broad range of suppliers, resulting in inefficient purchasing processes such as increased order fulfillment times, higher transaction processing costs, and time-consuming administrative support. In many purchasing departments, there is still an enormous potential for savings, e.g., in the area of bundling of demand across locations, supplier management, and shared purchasing contracts. However, companies waste millions every year because of different material and supplier data in distributed IT systems, leading to lack of spend visibility and poor inventory control. Inadequate material descriptions are a source of frustration for those employees who cannot find the right parts and supplies to allow them to do business. This situation leads to maverick purchasing – when an organization has negotiated strategic contracts with suppliers but employees buy outside these contracts, typically at higher prices. Such off-contract spending reduces an organization’s ability to efficiently monitor its expenditures and raises its costs. Professional purchasing as well as professional supply chain management are thus closely dependent on professional material master data management in order to fully leverage its potential.
We’ve spent too much time on the problem – let’s turn optimistically towards solutions.
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Latest posts by Arthur Raguette (see all)
- Benefits of Material Master Data Management-Part 5 - March 21, 2018
- Benefits of Material Master Data Management-Part 4 - March 1, 2018
- Benefits of Material Master Data Management-Part 3 - February 19, 2018