International Standards for formatting master data can lower purchasing and inventory costs by 15% and at the same time reduce supply chain risk.
Duplication of supplier and material master data records is one of the most common and avoidable causes of higher MRO costs and unnecessary supply chain risk. The application of international standards for formatting master data makes it easier to identify duplicate master data records within a business unit and across business units.
Improving a supplier or customer master is surprisingly simple and low cost, typically $1 per record. The process consists in verifying legal name, date of formation and status with the official government registry. ISO 8000-116 is the international standard for formatting the Authoritative Legal Entity Identifier (ALEI), the reference created by the government registry when a legal entity is formed. Beyond the Verified Legal Name (VLN) the ISO 8000-116 formatted ALEI is an excellent open, universal and globally unique, supplier or customer identifier. In the same way you add a country code to turn a local telephone number into an international telephone number, ISO 8000-116 turns the local ALEI into an international identifier that is unique for each supplier by adding a prefix to the local ALEI to create an international ALEI.
A typical supplier master will contain as many as 20% unidentifiable suppliers, this occurs where the name in the master data record can not be found in an official government registry. This can be a big problem but luckily it is easily fixed by asking the supplier for an ECCMA Legal Name Verification Certificate (LNVC). Suppliers can obtain a free Legal Name Verification Certificate from ECCMA by visiting www.eALEI.org and they can also use the site to make available public information their customers need such as office locations.
Once the legal name has been verified, it is common to find that there is a 30% duplication in the supplier master. What this means is that items are being bought from the same supplier under different names and typically at different prices. We call this the low hanging fruit as a simple telephone call is all that is needed to adjust all purchases to the lowest price.
A typical material master will also contain many duplicate records, 25% to 30% is common. Improving the quality of a material master, allows the Identification of duplicate and substitutable materials which drives down purchasing and inventory costs while at the same time highlighting opportunities to optimize suppliers to reduce cost or reduce risk by identifying alternate suppliers. Improved material and service specifications and descriptions using international formatting standards for quality data makes managing bids and contacts easier as well as improves the accuracy of tracking spend.
Master data is a critical business asset that needs to be managed and protected. ISO 8000 protects master data from potential third part claims that can restrict is use. It is all too easy for data to be captured by the application used to collect and manage it, this is called lock-in. Application providers can make it difficult (costly) to move data from their application to another. Requiring that an application supports ISO 8000 formatting is valuable insurance against lock-in. Simply asking (in writing) if an application can export ISO 8000 portable data is often sufficient to highlight and resolve any issues with data lock-in.