18 Jan Master Data: Is Your Manufacturing Foundation Strong?
By Nate Palmer
An Inherent Conflict
Manufacturing companies share two common objectives: minimizing inventory investment and maximizing customer service levels. These can be conflicting objectives, however, requiring constant attention and analysis to achieve the optimal balance.
Although it is often overlooked, a foundation of complete, current, and accurate master data is critical to achieve these objectives. Accurate master data helps companies optimize inventory and service levels, and it can also enable procurement and production planning organizations to operate more efficiently.
Repercussions of Poor Master Data
For companies that don’t maintain their master data sufficiently, the accumulation of inaccurate and outdated data creates mistrust of planning and procurement systems, and can lead to abandonment of those systems in favor of spreadsheets.
Beyond that, firefighting material shortages sidelines long-range planning and master data improvement, and the planning and procurement organization can quickly descend into chaos. To keep up, the staff must work long hours and turnover inevitably increases, further hindering the organization’s ability to plan and procure appropriate quantities of raw material and finished goods.
Benefits of Improving Master Data
Our experience indicates that by improving master data and implementing the procedures and responsibilities to maintain that data over time, companies can achieve a 5 – 10% improvement in Service Levels (Order Fill Rate), and a 5 – 10% decrease in Raw Material (RM) and Work-In-Progress (WIP) inventory investment.
In addition, planning and procurement efficiency is improved, along with job satisfaction.
Impacts of Poor Master Data
The objective of a planning and procurement organization is to have the right material in the right place at the right time. Modern systems utilize Manufacturing Resource Planning (MRP) and production scheduling to achieve that objective. However, if supporting data is incorrect, even the most sophisticated planning or procurement systems will fail, along with the people who depend on them. The phrase “garbage in, garbage out” never held truer than for manufacturing master data.
The figure below depicts the Plan-Source-Make-Deliver supply-chain framework, detailing the common master data elements in the Source and Make steps that drive inventory levels, customer service levels, and operational efficiency.
If these master data elements are inaccurate, they can have significant negative effects, which we’ve depicted in the following chart. You can see the effects of incorrect data on these key performance measures for selected master data elements:
In each case, incorrect master data has the negative effect of increasing inventory investment, decreasing customer service levels, or decreasing process efficiency. Over time, if not properly maintained, master data tends to get further outdated, and the impact on the organization magnifies.
How to Prioritize Master Data Updates and Maintenance
Management will typically prioritize more urgent business needs over a time- and resource- consuming project like developing master data maintenance procedures. Because of that reality, the first step toward master data improvement is understanding how important it is to manufacturing success.
The organization that suffers from poor master data is inevitably swamped by daily firefighting challenges, which compounds resource constraints. Without an appropriate level of focus on master data upkeep, the organization will struggle to achieve average performance, let alone best-in-class performance.
Outside expertise can help expedite efforts to drive master data improvement. External perspective enables existing staff to continue production while procedures are developed. It can also help the planning and procurement staff better understand the benefits of master data maintenance.
The development of procedures and responsibilities for master data accuracy is critical for long-term success. Companies that tackle a one-time project to update their master data are setting themselves up for failure. Without an ongoing process to maintain master data over time, the company will find itself in the same situation one or two years later as suppliers, lead times, production capacities, and other master data elements change.
Because any supply chain will continuously evolve, the key to long-term manufacturing success is developing an ongoing strategy and process for master data maintenance. Complete, current, and accurate data ensures a company can operate efficiently and balances the key objectives of minimizing inventory investment while maintaining customer service levels.
About the Author
Nate Palmer has 25 years of consulting and business leadership experience within life sciences and high-technology companies. His focus includes process design and project team leadership for product development, operations, customer service and support, and information systems programs. Before joining Accel Management Group, Nate held positions as Vice President of Professional Services at RiverOne, Principal at PRTM, and Manufacturing Engineer at Raytheon. Mr. Palmer earned his BSME from the University of Massachusetts, Amherst, and MBA from the Anderson School at UCLA. He is CPIM certified.