Mastering Your Master Data

• A Single Source of Truth

Master data is the common thread that binds various functions in an organisation. If it is compromised, the one single source of truth will be affected leading to lack of confidence and individual departments going back to their own data silos to avoid mistakes. On the other hand, one source of master information puts everyone on the same page and ensures business processes operate seamlessly across functions.

• Foundation for Complete, Accurate Transactional Data

Transactional data is based on the master data that it draws from. Inaccurate master data will affect the integrity of every single business transaction that depends on it. A stitch in time saves nine is an old adage that is appropriate in these circumstances.

• Tangible Business Impact

Imagine a business that doesn’t have an accurate database of its customers and their contact details. If reaching out to your business associates is a struggle, how do you expect to do business? Especially in the times that we live in, when everyone is rushing for a share of the customers’ attention and wallet. If you don’t get there fast, someone else will, thanks to their accurate customer master data.

This can be the case in every area of your business, vendors, materials, employees and fixed and current assets. Imagine the cascading losses that could arise from multiple errors in master data in every area of your business. The consequences could even include direct cash leakages through erroneous or duplicate payments, non-availing of discounts or rebates, picking of the wrong item codes or price masters and whole gamut of discrepancies.

• Operational Efficiency

The cost of re-work when the foundation is faulty can be colossal. Since master data is the starting point of all transactional activity, it has an adverse effect on every downstream activity. However efficient manual and system processes may be, they will continue to be sub-optimal if the base of the master data is not strong.

• Enterprise Uniformity

Standardisation sets a common understanding for all stakeholders. It is a pre-requisite for all the other benefits of master data to flow through to the business. Master data creates a common vocabulary for the entire business and ensures that there is no misunderstanding due to lack of a standard framework. This facilitates cross-functional interaction and builds synergy within the organisation.

1. Urgency

Transactional activity usually happens in a hurry, an urgent invoice to be raised. A vendor to be paid. In the heat of the moment, there is a tendency to cut corners and save time. Clerical errors, short forms, duplicates, incomplete fields, non-standard terms etc can lead to headaches at a later date. This short time saved now can end up in a lot of time and money lost later.

2. Rigidity

Very often masters are prepared by people who do not have visibility into the future. Therefore, there could be limiting factors causing rigidity in the structure of the masters which limit their full functionality. For example, if one type of material is only allocated two digits’ space, there would a constraint if the number of items were to exceed 99. So, masters need to be structured with an eye on future possibilities.

3. No Single Owner

Till recently, it used to be the responsibility of staff handling transactions to create the master record. This was replete with issues. These individuals were handling routine, time-bound work and did not always have a cross-functional understanding of the implications of their actions on other functions. Of late, organisations have started making a centralised team responsible for master data management. However, just bringing everything under one roof doesn’t solve the problem if the mindset and approach remains the same.

4. Disparate Stakeholder Needs

If the master template is created or updated by a particular function there is always a likelihood that the information contained will be limited to only what is important or relevant for that function. The chances are that the requirements of other stakeholders will be omitted. For example, if the purchase department creates the item master, only the purchasing unit of measure (UOM) may be allotted to that item. If an item is purchased in kilograms but sold by numbers only the former UOM may be allotted to that item instead of both.

5. Creator Unaware of Consequences

As we can see from the above example, such an omission is not deliberate but arises due to the ignorance of the originator about the consequences of his actions on other functions. Therefore, it is essential that the master creation is centralised with a team that has full visibility and responsibility for all the upstream and downstream effects of the master’s contents.

6. Workarounds for Errors/Limitations

Today various systems have to integrate with each other to complete an end-to-end action. For example, a vendor master creation would involve validating the GST number from the government portal or setting up vendor bank account for bank’s payment transfers. Certain limitations from external systems or risk of human errors may lead to work arounds in the master creations. For instance, certain ERP systems will not allow more than one bank account for a vendor. So, if the company is dealing with two divisions of the same vendor with different bank accounts, there would be a need to create two vendor codes though the entity is the same. Similarly, some companies create separate codes for the same vendor for services and goods as the former are subject to tax deduction at source. If there is one vendor code for both types of transactions, the selection of type is left to the operator. This leaves a risk of erroneous transactions which is avoided by creating two vendor codes.

1. Design with the Future in Mind

While creating the master data strategy and individual contents, the team responsible should have a clear understanding of the business’ strategy and critical performance drivers. These should always be central to the master data model. An organisation with multiple branches all dealing in the same products would, for instance, have one material master but location would have a key place in all its masters with an ability to roll up to the corporate level.

A common flaw with master designs is that they are not future-ready and don’t provide the flexibility or space for growth. A simple example is providing only a limited number of digits, say XXXX for a set of codes. Once the number exceeds “9999”, even the most sophisticated systems will have no way to fix it. Having one eye on the future while setting the ground rules for master data will help avoid the risk of hitting a dead end later.

2. Make Data Hygiene an Ongoing Activity

One of the mistakes organisations make is to treat master data hygiene as a spring-cleaning activity that operates in short bursts. Such an approach tends to be ad hoc, discretionary and prone to delays. Integrity of the masters should be an ongoing responsibility of the teams owning the master data viz. process/function owner. Allowing slipshod quality with a promise to come back and clean up the mess later should be strictly avoided.

3. Identify Explicit Ownership

Having a dedicated central Master Data Management (MDM) team attached to the Shared Service Centre or the head office helps to pinpoint responsibility for master integrity. While creation of the masters can be decentralised if needed, the review and confirmation should invariably be with one central entity for accountability to be established.

4. Standardise at Point of Entry

Setting some ground rules at inception will help create a framework which will prevent careless data errors. For example, just ensuring that one standardises on prefixes (With or without “The”, “Mr.” etc.) or spelling conventions and abbreviations (St. or Street?) will go a long way to ensure silly errors are weeded out.

5. Online Validation of Data Entry Errors

Ensuring that ERP systems or vendor/customer on-boarding platforms have validation rules to prevent typo or rule-flouting errors will ensure elimination of some common mistakes that litter master data. For example, mobile numbers should necessarily be ten digits, Income Tax Permanent Account Number entries without proper sequencing would be rejected i.e., alphabets in the first five spaces, four numeric and one alphabet with a total of length of ten. Reasonableness checks for details like age, date of birth etc. are other means of preventing garbage from seeping into the system.

6. Capture Data from Source

It is obvious that every time data changes hands it runs a risk of unintended corruption. A fool-proof way to ensure that master data doesn’t undergo modifications is to draw it right from source. For example, the item master can be linked to the HSN coding system or the Vendor/customer master can obtain tax information directly from the GST/Income tax portals.

Data Privacy and Security

With increasing digitalisation, identity and personal information including biometrics are being stored on virtual machines. This greatly increases the risk of data theft and leaks. Organisations can be crippled, both financially and reputationally, for inadvertently allowing breach of personal information. Therefore, it is essential that the cloud service provider is not only reputed but is contractually bound to comply with the increasing regulations in this area for example, the EU’s General Data Protection Regulation (GDPR) and other similar statutes.

Multiple Data Types

In the past, data necessarily meant text or numerical information systematically placed in a record form with labels and names for each field. Today, data could take any form over the cloud. Images e.g., scanned photos or documents, biometric information like fingerprints and iris scans, confidential medical records etc. Storing these disparate forms of data securely and retrieving them speedily is a challenge that organisations are learning to deal with in the world of virtual infrastructure.

Remote Working & Metadata

With the trend of remote working getting accelerated, there is an increasing use of mobile devices where the lines between personal and work-related data are increasingly blurred. This results in increased vulnerabilities that need to be managed. Use of security features like traffic monitoring, incident management tools etc. help to prevent, detect and mitigate the possibilities and consequences of a data breach. The growing importance of metadata, or the data that gives information about other data, cannot be ignored in this context.

Software-as-a-Service (SaaS) Risks

Coupled with the shift to cloud, organisations are freeing themselves from the burden of owning, maintaining and upgrading expensive software licenses. The trend towards using “Software-as-a-Service” brings with it the concomitant risk of the service provider’s environment. It is essential that the application software complies with stringent security requirements that safeguard confidential master data and the provider is held contractually liable for breaches.