Mdm for materials –positive impact of data quality improvement

MDM for Materials –Positive Impact of Data Quality Improvement
Arthur Raguette
Executive Vice President
Verdantis, Inc.
Arthur @ Verdantis.com
1 732 692 3257 (m)
1 609 799 5665 ext225 (o)
MDM for Materials
.
© 2014 VerdantisInc. All Rights Reserved.

Agenda
2:50 –3:00 Introduction -Positive Impact of Data Quality Improvement
3:00 –3:30Customer Case Studies
Oil & Gas Service Provider –Global MDM Initiative for MRO and ETO
Global Oil & Gas (E&P) SCM/Procurement Initiative
Post Merger Material MDM Initiative
3:30 –3:50 Questions and Answers
MDM for Materials

Successful MDM projects go farther than just data migration and data aggregation.
Whether part of:
SAP Consolidation/Upgrade, or
Overarching re-architecture for MDM or
SCM/Logistics/Procurement Project,
Implementations that embrace master data quality improvement and master data governance have a significantly more positive impact to the business.
Impact of Data Quality Improvement

Material Master Data –Improve Performance
Search Efficiently
“Part descriptions are short, cryptic and often obsolete, so shop-floor technicians are unable to locate parts and determine if it will meet their needs.”
Reduce Inventory Costs
“We are mandated to cut inventory carrying costs by 8%, but the presence of duplicate items is diluting our efforts, and we end up stocking the same item multiple times in different storage bins.”
Create New Items Easily
“Technicians resort to continually creating new items in the master because they can’t find the ones that already exist.”
Leverage Your Spend
“My suppliers hide MFR information, but I’m sure I’m buying the same part from multiple distributors, and need to leverage that spend.”
Manage Categories
“I want to setup commodity sourcing strategies for high value items and strategically critical commodities for my plants, but lack the necessary spend overview.”
Cross Plant Inventory
“My plant in VA scraps spares for the NCX-10 bottling machine since they are upgrading to XLT-133 … however, the plant in WA still purchases those very same spares.”
Number of Plants-42
Number of Source Systems-200
Data Volume-470,000 SKUs
Taxonomy-NATO,UNSPSC, Custom
Maximo, SAP & Legacy Systems
8 brands in the U.S, 13 legacy systems
102,000 customers; 63,000 suppliers
18 different business platforms including SAP, Oracle and Baan
Harmony for 1,300,000 Item Master Records
600,000+ master records
Over 90 legacy source systems
Migration of five nuclear power sites
12 plants on non-nuclear power side
Migration of multiple company holdings across some 29 states

Material Master Data is:
The most complex master data domain,
The most challenging to do well.
Yet is the MOST rewarding in dollars and cents impact
Material Master Data needs to be SNARE(d):
Standardized
Normalized
Attributed
Rationalized
Enriched
Material Data Quality Improvement

Material Data Quality Improvement
VERDANTIS AUTOMATED MDM SOLUTION SUITE
GET IT CLEAN
Automated solution
for historical master
data harmonization
AutoClass
AutoSpec
AutoNorm
AutoCrawl
Classification into
pre-determined
codes
Attribute extraction
& de-duplication
software for
Material master
Normalization
& validation of
MFG, MPN and UOM
Intelligent web
spidering tool for Data harmonization
Verdantis Knowledgebase
Dynamic content Repository
AI Technology
AI-based Software Tools
AutoClass AutoSpec
AutoNorm AutoCrawl
VERDANTIS
HARMONIZE®
Fully automated
solution to cleanse
and enrich historical
master data
Licensed SaaS Platform
(or a Turn-key service)
What is Harmonize?
Harmonize is a customer accessible data management platform for Material, Purchased Product,or CatalogueMaster Data. Optimized for Automated:
-Standardization
-Normalization
-Attribution
-Rationalization
-Enrichment

Agenda
2:50 –3:00 Introduction -Positive Impact of Data Quality Improvement
3:00 –3:30Customer Case Studies
Oil & Gas Service Provider –Global MDM Initiative for MRO and ETO
Global Oil & Gas (E&P) SCM/Procurement Initiative
Post Merger Material MDM Initiative
3:30 –3:50 Questions and Answers
MDM for Materials

Oil & Gas Service Provider
$8 Billion in Revenue
$1 Billion in Maintenance, Repair and Operations
$400 Million in Inventory
Global MDM Initiative for MRO and ETO Components
Reduce MRO SKU Counts from 400,000 to 340,000
15% Reduction in SKUs (Master Data Records)
10% Reduction in Inventory in Year one due to duplicate identification
Customer Case Study (MDMA)

Before..
After
Customer Case Study (MDMA) Cont’d
MATERIALID
DESCRIPTION
MFR
MPN
XXXYYYZZZ
BEARING,BALL,RADIAL,SKF,PN,6309-ZJEM
SKF
6309-ZJEM
XXXYYYZZZ
BEARING;BALL:309SZZ,MRC,RDL,2 SEALS,SING
MRC
309SZZ
XXXYYYZZZ
BEARING,IMPELLER END,SKF 6214-C3
SKF
6214-C3
XXXYYYZZZ
BEARING;BALL:214K,FAFNIR/TORRINGTON CO,R
FAFNIR INC
214K
Verdantis Harmonize Output
MATERIALID
XXXYYYZZZ
XXXYYYZZZ
XXXYYYZZZ
XXXYYYZZZ
DUPLICATE GROUP
Group 1 -L2 (Matching attribute values)
Group 2 -L2 (Matching attribute values)
TYPE
RADIAL
RADIAL
RADIAL
INSIDE DIAMETER
45MM
45MM
70MM
70MM
OUTSIDE DIAMETER
100MM
100MM
125MM
125MM
WIDTH
25MM
25MM
24MM
24MM
GROOVE TYPE
DEEP
DEEP
DEEP
DEEP
NUMBER OF ROWS
1
1
1
1
SEAL/SHIELD TYPE
1 SIDE SHIELD
WEIGHT
1.84LB
1.84LB
2.340LB
2.340LB
HARMONIZED SHORT DESCRIPTION
BRG,BALL;RADIAL;45MM ID;100MM OD
BRG,BALL;RADIAL;45MM ID;100MM OD
BALL,BRG;70MM ID;125MM OD;24MM WD
BALL,BRG;RADIAL;70MM ID;125MM OD

Annual Inventory Carry cost reductions of 4.4% (Factored cost of capital) as write-down (positive impact to balance sheet)
400 Million in Inventory
10% Duplicate Identification
40 Million in Duplicate Inventory value
Write Down of Factored Costs at 4.4% of 40 Million =
$1,760,000 positive impact to balance sheet

Cost Reduction on aggregation of demand across 15% of $1BN in MRO
$1 Billion in Maintenance, Repair and Operations Material
$15% Identified through Harmonization as Similar (Across 10% Supplier Base)
$150 Million addressable spend
$12.5% reduction in costs through strategic sourcing
Cost Reduction of 12.5% of $150 Million =
$18,000,000 saved in first 12 months

Global Oil & Gas (E&P)
$4.5 Billion in Maintenance, Repair and Operations
$1.2 Billion in Inventory
Global Procurement Transformation
Identify Duplicate Material Master Data
Create a common “Catalogue” for Stock items
Provide supply chain visibility for Strategic Sourcing initiatives
Increase policy adherence and reduce spot buys
Customer Case Study (SCV)

Supply Chain Visibility
70% of the $4.5 Billion in Maintenance, Repair and Operations spend is covered by pre-negotiated contract or preferred pricing
$3.15 Billion in well managed spending
Data Quality Improvement consisted of:
Consistent Classification
Post Harmonization, Deduplicatethe Material Master
Generate Normalized Descriptions
Extract Critical and non-Critical Technical Attributes
Enrich technical attributes and populate class/characteristic values
Support parametric search for accurate hits and
increased usage by 15% in the first year
Customer Case Study (SCV) Cont’d

Before… and … After
Material Id
Input Short Description
UNSPSC Title
Long Description output
XXYYZZTOP
SOCKET,IMPACT,#07523ML,23MM,DEEP, 3/4"DR
IMPACT SOCKET
SOCKET,IMPACT;DEEP;SIZE 23MM;DRIVE SIZE 3/4IN;6 POINTS;82.6MM LENGTH;FORGED ALLOY STEEL;BLACK OXIDE
XXYYZZTOP
O-RING:277,MOTION,-277,VITON,11-1/2
O RING GASKET
O RING;11-3/4IN OUTSIDE DIAMETER;11-1/2IN INSIDE DIAMETER;1/8IN THICKNESS;75 DURO;VITON
XXYYZZTOP
GAUGE; PRESSURE:0-100 PSIG,FRONT FLGMNT,
PRESSURE GAUGE
GAUGE,PRESSURE;BOURDON TUBE;0-100PSIG;DIAL SIZE 2- 1/2IN;CONNECTION SIZE 1/4IN NPT;-20 TO 60DEG C;FRONT FLANGE MOUNT;ANALOG DISPLAY;BRASS
XXYYZZTOP
VALVE,SOLENOID,3/8" PORT
SOLENOID VALVE
VALVE,SOLENOID;SIZE 3/8IN;4 WAY;SUBBASE MOUNTED;0 TO 150 PSIG;13.8W;120VAC;60HZ;-18TO +71DEG C;BODY SANDCAST ALUMINUM
XXYYZZTOP
FUSE:251 125,LF,FAST ACTING,1/8A
CIRCUIT PROTECTION DEVICES
FUSE;FAST ACTING;1/8A;125VAC;3/32IN DIAMETER;9/32IN LENGTH;SIZE 1-1/2IN LEAD LENGTH;AXIAL CONNECTION;CERAMIC
XXYYZZTOP
SWITCH, DIFF PRESS 0.07-0.15"WC, 15 AMP
PRESSURE SWITCH
SWITCH,PRESSURE;SPDT;SIZE 1/8IN FNPT ;0.07-0.15IN WC;15A;-34.4 TO 54.4DEG C
XXYYZZTOP
BEARING,BALL,RADIAL,SKF,PN,6309-ZJEM
BALLBEARING
BEARING,BALL;RADIAL;45MM INSIDEDIAMETER;100MM OUTSIDE DIAMETER;25MM WIDTH;DEEP GROOVE;1 ROW;1 SIDE SHIELD;1.84LB

Positive impact -Reduce “Maverick” Spending
Improved Catalogue search increased usage from 60% to 75%
15% increase translates to an additional $472 Million in well managed spend
Incremental cost reduction of 16.5% (on average across categories) of the $472 Million equaled
$77.8 Million in first year savings

Post Acquisition Operational Improvement
A well run $5 Billion US Company acquires a badly run $10 Billion competitor
Executive team is confident of bringing best practices to the acquired company
CFO is surprised to find that he volunteered to accept the target
CFO Shares his new assignment to Operations and Supply Chain
This could be ugly
Disclaimer –For this case study we have aggregated several customers
Customer Case Study (PMnA)

Well Run Inc.
Tight coupling of Materials Management and Procurement Systems
Organizational Ownership of Material Master by Operations Engineers
Strategic Sourcing managed by central procurement
Material Management and Logistics owned by Operations
Challenged Inc.
Materials Management linked to Financial Systems
Procurement linked to Financial Systems
Procurement operations decentralized at the facility level
Material Management decentralized to the regional level
Customer Case Study (PMnA) Cont’d

Post Acquisition Environment
Common Material Master for Operations, Material Management and Procurement
Single link to Financial Systems
Best Practices for Material Master enforced through organization and enabled through data governance workflow
Migrate nearly 200 instances, including Material / Item Master through:
Standard Categorization for Strategic Sourcing
Standard Nomenclature for Materials Management
Attribute Extraction, Normalization and Enrichment
Include Stock and Non-Stock Items and Extend to 3PL Catalogues

 Results
 Duplicate Identification greater than 15%, close to 30% in certain
categories
 Workflow environment extends to edge of the organization for
compliance levels over 75% in first 6 months
 On Track for Savings Goals
 Business Case supported through our template
# Elements Value Recurring Onetime
INVENTORY COST AVOIDANCE
1 Total dollar value of MRO spares purchased per year ($) $ 895,000,000.00
2 Percentages of time spares are already in store when others are purchased (%) 7.5%
3 Savings total (cost avoidance), $ $ 67,125,000.00 $ 67,125,000.00
4 Additional savings - Stores overhead (%) 9%
5 Additional savings (inventory overhead@%), $ $ 6,041,250.00 $ 6,041,250.00
INVENTORY HOLDING COST REDUCTION
6 Estimated total inventory valuation, USD $ 179,000,000.00
7 Estimated inventory reduction, % 8.0%
8 Estimated one-time inventory reduction, USD $ 14,320,000.00 $ 14,320,000.00
9 Estimated additional savings (inventory overhead (%) 18%
10 Estimated additional savings (inventory overhead@%), USD $ 2,506,000.00 $ 2,506,000.00
© 2014 Verdantis Inc. A©ll R2i0g1h4ts V eRredsaenrtviesdIn. c. All Rights Reserved.

Thank You!
Questions?
Arthur Raguette
Executive Vice President
Verdantis, Inc.
+1 732 692 3257 (m)
+1 609 799 5665 x225 (o)
Arthur@Verdantis.com
The name Verdantiscomes from the Latin word for truth –veritas, and the word verdant–meaning abundant and sustainable.
Verdantis, Inc. has been delivering Automated Master Data Quality Improvement Solutions for more than a decade to Global 500 Customers across industries, domains and the globe.
www.Verdantis.com
Info @ Verdantis.com

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Mdm for materials –positive impact of data quality improvement

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