Organizations around the world face many types of challenges. The current tumultuous economic scenario, coupled with an ever-intensifying competition in the global market, has placed them under constant pressure to enhance business and operational efficiencies, reduce spending, increase profitability and optimize their maintenance, repair and operation (MRO) supply chain to drive bottom-line savings.
MRO tools are at the heart of the indirect supply chain and play an important role in the production lifecycle. MRO supply chain, thus, presents one of the most valuable opportunities for cost reduction, cost avoidance and improved productivity. Many companies in the past have focused their cost-reducing efforts on direct materials and capital spending rather than MRO supplies, which have been traditionally seen as value with little potential for savings. But manufacturers are starting to take a hard look at their MRO supply chain.
With manufacturing facilities spread across multiple locations, companies find it difficult to control their MRO spend without a standard framework in place. Lack of visibility into the inventory hinders asset utilization, prevents efficient use of resources, creates excessive costs and expenses for equipment repair and replacement, leads to low productivity and gives rise to bloated inventories. Lack of visibility into the supplier base gives rise to maverick spending and inefficient sourcing and procurement strategies, thus leading to lost savings opportunities. The list goes on — but all these challenges, when traced back to their points of origin reveal one single root cause: bad master data.
The challenges with master data arise from the structure of the organization itself. Organizations today have been built around a number of mergers and acquisitions, with several ERP and legacy systems in place. Production and manufacturing plants sprawl across various locations across the globe. There are a number of machines operating in the plants with a large number of moving parts within those machines. Many people over many years service or repair the machines and purchase replacement parts for them. Materials are dispersed across many warehouses with every division following different sourcing and, in many cases, inefficient strategies.
This gives a clear picture of how enormous amounts of inaccurate master data piles up over the years. The bulk of material, supplier, customer and product master data is inaccurate, inconsistent de-duplicated, unclassified or misclassified and outdated. This leads to degradation in data reliability. Several negative business outcomes stem from failure to control and manage MRO item and supplier master data:
- Bloated inventory and high obsolescence;
- Invisible and undocumented inventory;
- High carrying costs;
- Increased plant downtimes; and
- Inability to manage spend and reduce total MRO consumption.
With such MRO scenarios playing out every day all over the world, there is a pertinent need of master data management to cleanse the historical master data, optimize the indirect supply chain and sourcing initiatives and streamline the data governance workflow across the organization. Master data management is a comprehensive strategy to build a single, accurate and authoritative source of a company’s information assets and deliver this on demand as a service.
An effective master data management initiative is composed of two key parts: historical data cleansing and ongoing data maintenance.
1. Historical data cleansing involves classification and business-value enrichment of the existing legacy data across all the systems, applications and organizational units of an enterprise. It ensures enterprise wide visibility of the material and supplier bases leading to efficient MRO asset management and supply base rationalization.
2. Ongoing data maintenance involves maintaining quality of data on an ongoing basis and creating a framework for the creation, use, access and maintenance of data across the organization, leading to enhanced operational efficiencies and improved sourcing strategies.
This adds immense value to the MRO and strategic sourcing initiatives of an organization, driving significant bottom-line savings and achieving enhanced business and operational efficiency.
Nupur Agrawal is the analyst and public relations lead with Zynapse. For more information, visit www.zynapse.com.