Success Metrics for Business Led Material Master Data Quality with MDG
In my previous posts I mentioned two different approaches taken for Data Quality and MDG projects initiation and how success of these projects are often measured.
Let’s get to some real numbers based on more than 50 implementations.
Increasing spend under management (Reducing Maverick Spend)
It’s not uncommon to see 30-50% maverick spend in the various industries we serve. A common goal is to reduce the maverick spend by 50% each year for three years. Business value – Maverick Spend is typically 17% higher than managed spending.
To pull these kinds of numbers off – you need both the DQ Levels to increase the accuracy of the overall material master, and the MDG search capabilities to embrace heritage organization nomenclature with current taxonomies and attributes.
Reducing MRO Inventory
Identification of exact duplicates can realize 4% to 8% of MRO inventory levels.
Identification of near-exact, or “form, fit and function” duplicates can realize an additional 6% to 12% of MRO.
To keep inventories from getting bloated in the future, the MDG solution needs to be able to identify these “form, fit and function” in real-time.
Leveraging Economies of Scale
Global Purchasing departments need to be able to look at demand from a level beyond supplier names, and sometimes even beyond manufacturer names – they need to be able to line up technical attributes to identify best quality at best cost and increase volumes through those channels. A material master specific DQ effort drives this granular visibility and a material master specific MDG drives reporting and analysis to make this easy on the commodity managers (let’s face it – getting down to technical characteristics exponentially increases data points for analysis – the tool should do that heavy lifting for you – right?).
Economies of scale – through VLAs, or even hedged buying drives 5% to 15% gains in savings and the MDG framework can help guide new requests to preferred contracted suppliers.
Reducing New Requests and Approval Turn-Around
This is all about improved performance and hard dollar savings associated with
- Finding the right items in inventory
- Expediting new item additions
The DQ effort cleans up the material master (“Get it Clean”) which drives search-ability to new levels. Further, implanting the MDG framework to block duplicates and find “form, fit and function” alternatives is key here. Reduction in extraneous new item requests by 75% is realistic within 12 months.
Speeding up the process from initial request for a new material, through the approval process, and its entry in the ERP/EAM system is somewhat dependent on the number of approvals needed, but using an MDG framework that leverages dashboards, a robust workflow and flexible notifications is far superior to routing forms in emails. Robust workflow management expedites, routes, and pools requests. We have seen customers reduce the time for addition from 7 business days to 4 hours.
The hard currency savings are tied to reduced expedited shipping and reduced p-card usage at local suppliers, not to mention any actual outages or delayed maintenance related costs.
Whitepaper: Effective Plant Management – The Role of Sound Master Data
Latest posts by Arthur Raguette (see all)
- The need for effective Material Master Data Management – Part 2 - January 16, 2018
- The need for effective Material Master Data Management - January 4, 2018
- Material Master Data Governance Teams - December 26, 2017