Master Data Management

“From frustration to a comprehensive approach”

Marinka Voorhout, Ard van der Staaij and Sander Swartjes

Over the last few years, businesses have further extended their ERP activities from process
optimization to master data management. The extent to which ERP has been embedded in
organizations has made it clear that master data is as vastly complex as it is important. Many
businesses and their boards of directors who are considering embarking on this kind of
far-reaching professionalization policy concerning master data first want to better under-
stand the implications of such a step, ideally through a case study.      

Introduction
“Exactly which benefit will master data management pro‑
M.A. Voorhout duce?” A variety of reasons can be mentioned to explain
is manager at KPMG Advisory.
the increasing interest in the importance of master data.
voorhout.marinka@kpmg.nl
From the viewpoint of process optimization, for example,
there is a growing awareness that correct and accurate
data related to transactional processes is a sine qua non, 1 REACH:
for ERP processes in particular but basically for all auto‑ Registration,
mated processes. At the same time, people are becoming Evaluation and
Authorization of
A.J. van der Staaij MSc RE increasingly aware of the fact that the growing amount of Chemicals is a system
is consultant at KPMG Advisory.
management information, reports and dashboards within for registration, evalu‑
vanderstaaij.ard@kpmg.nl
organizations increasingly relies on the same source data. ation and admittance
More and more often, external auditors are making strong of chemical substances
that have been pro‑
demands for compulsory reports, basing their approach duced in or have been
on Basel, Solvency, SOx, Reach1 and privacy legislation, imported into the
among other things. In addition, in their professional European Union. The
S. Swartjes MSc RE checks, IT auditors are also placing increasing emphasis goal of the REACH
is consultant at KPMG Advisory. system is to control
on data. Nowadays an audit is expected to result in a report the risks of chemical
 swartjes.sander@kpmg.nl
backed up by a correct and complete audit trail that is sim‑ substances, such as the
ilarly based on correct, complete and timely (master) data. risks of toxic disasters,
In this context, it is a critical precondition that master data fire and explosions,
health damage to
must be managed effectively. The demand for accurate employees and con‑
and complete information throughout different corporate sumers, and damage to
activities is extensive.   the environment.

Compact_ 2013 3 International Edition 3

 The fact is that data management
as such is considered boring by the
majority of staff However, it did not
cover all corporate
This high degree of dependencies underlies the fact that issues. This meant that, at the end of the improvement pro‑
unreliable data often causes problems in organizations:   cess, they recognized that there were many more matters
in this area with room for improvement.    
•• missed opportunities in terms of functionality (e.g.,
automated process activities and self-regulating ordering
procedures)   A solid business case
•• increased risks of inefficiencies in data and operational
processes due to rework ([Jonk11] [Unen12]) The question for organizations is: how can we make the
•• reduced reliability and accountability of reports; these most complete business case to accurately substantiate our
must be correct and complete at all times, enabling man‑ master data management-related problems.    
agement to make appropriate decisions
•• extra expenses due to incorrect, incomplete and A business case is regarded as a financial justification for
untimely data (e.g., incorrect payments, fines for evasion of an investment to be made, or as Donkers [Donk05] puts
the law, damage to the corporate image).   it, “A business case is an investment proposal, a justifica‑
tion why it makes sense to carry out the project. In a good
With the growing awareness that incorrect, incomplete business case costs, risks and benefits are weighed against
or untimely master data may be the root cause of such each other.”
corporate problems, more and more businesses are aiming
to improve the quality of their master data. As a rule, the However, there is more to a business case for data manage‑
first stocktaking immediately shows that data manage‑ ment.
ment is an extremely complex matter. There are frequent
differences in source systems and quality, overlapping For a thorough business case and lucid approach to data
targets, divergent contexts and interests, and vagueness management, it is important to demonstrate the correct
with respect to ownership. Dealing with this complicated relationship between business-related problems on the
situation properly often demands an undesirably large one hand and data-related problems on the other.  
and erratic budget. In the current economy, securing
budget funding has long ceased to be an automatic given. Accordingly, there is an N:N relationship between the two.
Businesses increasingly wish to have access to a business Therefore the business case should focus on those busi‑
case in advance, to form the basis of a cost-benefit analy‑ ness problems caused by data quality issues and areas for
sis. Some data aspects can easily be expressed in terms of improvement within the organization.  
money (cost efficiency through process optimization), but
the advantages cannot always be valued properly before‑ After linking the corporate problems to data management,
hand (better reports, displaying compliance, and saving on it is advisable to foster a good understanding of data man‑
audits).     agement on the part of the relevant stakeholders. They are
not really familiar with the matter, entailing the attendant
This is often what makes data management business cases risk that not enough funds will be made available.  
fragmented and incomplete. Businesses tend to focus all
their attention on those corporate sections that cause the
most nuisance, and tackle only specific obstacles. Or they
choose to organize data management on the basis of prede‑
termined benefits alone.  
Business-related Business-related Data
Problems Problems
A food retail company, for example, used a business case due to bad
data quality
with a view to saving costs in the data management pro‑
cess. They saw that the number of FTEs involved could be
reduced and corrections rendered unnecessary, ensuring
that subsequent data clearance virtually became a thing of
the past. The savings realized on an annual basis would be Figure 1. Focus on the corporate problems related to data
so high that it was a sufficiently persuasive business case. problems.

4 Master Data Management

In the business case, always present all essential obstacles consumer). The art is to draw up a business case for the
from two perspectives. Make clear what the obstacle-­ entire organization and not just for a limited group within
related costs are, and also indicate the precise risk if data a chain or organization.    
management is not functioning properly. By following •• Lapsing into data terminology. The business will fail
this principle, the complex character of data management to recognize its own problems, and discount the subject
is made more readily understandable in the corporate as irrelevant. Make the business case clear at all corporate
context.   and knowledge levels. What is perfectly clear to an IT
manager may well be inscrutable to the end user, and vice
Divide the Return on Investment into cost savings and versa.
qualitative improvements. A large chemical company •• A lack of holistic vision in the structure of the business
made this distinction by showing, on the one hand, oppor‑ case. If it consists of a concoction of single examples and
tunities in terms of improvement in management and elaborations, the model lacks structure. Without a model
management information. It dealt with aspects such as the or reference, a business case is harder to understand and
reliability of information, lack of innovation in primary relate to concrete examples.    
processes, fines, and missed payments and turnover. On •• Regarding the business case as a final product. Data is
the other hand, it represented the savings that could be flexible and apt to change in character. Particularly in the
made on jobs on a global basis.     case of a long-term project, it is important to keep a finger
on the pulse and verify whether or not the proposed bene‑
Another principle is to avoid data-specific problems and fits remain in line with the current state of affairs.  
jargon with which the management is not familiar. When
drawing up its business case for data management, a large
logistics company was very keen to focus far less on data An extensive review of data for the
than on corporate problems by advancing the proposition, business case
“Either relate the business case for data management to
the business or run the risk of failure.” The fact is that data The case for the logistics company described above demon‑
management as such is considered boring by the majority strates that it is better to have a close look at all relevant
of staff. To demonstrate the added value to the stakehold‑ aspects if one wants to have an adequate support base for
ers in particular, the firm focused on getting to the bottom a business case. This applies to internal as well as external
of all data-related aspects. Time-consuming it is, but they factors.  
made a thorough study of the various data definitions,
objects, ownership, impacts and improvements. The ensu‑ Developments and trends
ing effect was that a good understanding of the impor‑
tance of data management was created at all levels in the Master-data-related problems differ between businesses,
organization. In this way, creating a support base was only and each organization has its own problems, with specific
a matter of time. At the end of the day, this comprehensive backgrounds and causes. Yet they are all rather similar
approach resulted in a balanced data management pro‑ within the context of specific business components or
gram within the organization.   lines of business. In retailing, for example, e-commerce
is a growing market And e-commerce is dependent of
master data management to an even greater extent than
Typical pitfalls the retail trade. In this day and age, with e-commerce
becoming more and more important to companies, it is
In a nutshell, there are a number of pitfalls in trying to essential to provide customers with the correct informa‑
draw up a good business case: tion, especially in aspects such as product price, photos
or even videos. Companies that are able to use the correct
•• A fragmented or limited approach, which accounts for data in the correct way are the true winners in the eyes of
an inadequate support base with a view to the investment the customer. Websites that cannot offer complete infor‑
requested.   mation or visual material (a mortal sin in e-commerce)
•• Different sections of the organization use the same data will find that customers will buy far less from them than
in different ways. This accounts for the fact that the impact from the competitor who can. This is a missed opportunity
on the person at the start of the process (data producer) in an age of growing e-commerce. An additional factor is
differs from the impact on the person at the end (data that companies working with e-commerce, particularly

Compact_ 2013 3 International Edition Optimise and Accellerate: How to get more value out of your ERP system 5
2 EU Food
Information
Regulation  (FIR)
Insufficient master data management
processes usually result in rework
for distance selling
(e-commerce). The law
for e-commerce will
be in force from 2014
onward, and declares
that consumers engag‑
ing in e-commerce retailers, will have to deal with new European laws and
activities have the
Business Process Optimization
regulations as of 2014.2
right to information
covering the charac‑ In the last few years, companies have increasingly organ‑
teristics of a product, In the financial world, there are problems like having to ized their processes in a “lean” manner. The focus has
in the same way and comply with ever-changing laws and regulations, e.g., always been on “waste elimination” rather than on the
to the same extent as Basel and Solvency. But developments such as SEPA also corresponding data logistics. But it is the very (poor)
would apply in a physi‑
cal shopping situation. demand a fully developed master data management situ‑ quality of data that limits the extent of process optimi‑
The information con‑ ation. zation. Workarounds and possibly even rework based on
cerns ingredients and inaccurate data are still quite common in the majority
allergy specifications, Companies participating in the world market seek oppor‑ of companies. This seriously interferes with the further
in particular, with
respect to MDM data. tunities for global reporting. In the field of spending development of process optimization, which makes it
But the product char‑ analysis in particular, there is a strong need for correct and impossible to achieve the intended efficiency. Add to that
acteristics should also unequivocal master data.     the expenses for rework, and making the business case is a
be presented visually piece of cake.    
by means of photo
material, for instance. Efficiency in supplying master data
Sanctions will be Planning, purchasing and stock control
imposed in cases of Insufficient master data management processes usually
non-compliance with result in rework, in creating data and in the workarounds Adequate purchasing and stock management keeps a com‑
the FIR regulations.
that have crept into the production processes. This extra pany flexible and minimizes costs. Yet few companies are
3 “First time right” work can be recognized by supplementary actions when seriously active in improving their data in order to opti‑
is the degree to which
master data is correct
completing and rectifying data – and also by discussions mize purchasing and stock processes. In practical terms,
in the first recording. and consultations that are repeated too often when master this means that increasing effectiveness can be achieved
It is a sign of ineffi‑ data must be used correctly for management information when it comes to purchasing materials and products. But
ciency if changes have or data logistics. A simple overview will suffice to show it also means that it is not always possible to meet certain
to be made to the first
recording (within thir‑
where savings can be made if data are entered on a “first expectations on the part of the customer, such as early
ty days for example), time right” basis.3     delivery. Data management can also help achieve cost sav‑
in order to rectify the ings at the end of a production cycle. Companies that have
master data. a good overview of the (required) materials and products
that are available, including the necessary quantities, are
Strategic
in a position to bring cost cuts into force, provided this is
Governance

based on correct information. Experience has shown that

Ownership having one’s own data in working order always results in a
Guiding principles
Governance win-win situation.    
MDM Policy & Strategy

Tactical
How to arrive at a solid business case for
Process

Common process descriptions

master data management

Common role descriptions
Organizational embedding
Common tools

Operational
Data rulebooks The complexity of the circumstances and various pitfalls
Conversion plan
may all too easily frustrate one’s efforts to arrive at a good
Content

Data object sheets

Data quality routines
Data validation checks
business case for master data. It is advisable to generate an
Migration rules (incl. Cleansing & Normalization) organization-wide support base by means of a structured
comprehensive approach, which is based on the four layers
System & data landscape
of master data management (MDM): Governance, Process,
Systems

Master data mapping across system

Synchronization rules Content and Systems. These layers are connected at opera‑
Interface automation
Data cleansing tional, tactical and strategic levels (see Figure 2,[Jonk11]) in
such a way that they create the opportunity to construct a
Figure 2. The four layers of MDM. broadly based and complete business case.

6 Master Data Management

Approach tify issues per la Solid business case
Iden yer
MD issue not quantifiable in terms of
When drawing up a business case for data management, money: perform a risk and impact analysis
s to express the value of these issues.
a number of pros and cons need to be considered in terms

De
lys
Go/No go decision: if the issue cannot be

te
na
of pitfalls, problem-solving and risk avoidance. At all reduced to MD, it adds nothing to the

rm per i
ta
MDM business case.

ine
pac
times, exactly how detailed and complete this deliberation Governance Content

the c e
Risk & im
should be depends on the business or even the business

ssu
onsequences
component. Whatever the situation, the case should
Businesscase
always focus on the consequences of poor data quality. In
this context it may well be worthwhile looking at projects
for which solid master data is a prerequisite, in addition to Process Systems

Ex p
merely considering the frustrations ensuing from regular

res e r m

e? he
st so
activities. It frequently happens that the targets of a proj­
t

su of t
M

he
D se

)
ect cannot be achieved for the very reason that the master f m iss au
on u e in t h e c D is
ey e M
data is not functionally sound. If MDM is established as a D e t e r m i n it a n
s
precondition, the MDM program can join in with and sup‑ is s u e (i
port the business case of the project. It may be advisable, in
fact, to join in with an important project in order to get the
business case for master data fixed up.     Figure 3. Business case model on the basis of the four MDM layers.

Recognizing master data problems as a cause of corporate

problems is a prerequisite for a data management business mented and incomplete business case, or presenting a case
case. This requires a systematic approach.   that is exaggeratedly oriented toward data and IT, or is
lacking a broad support base. In Table 1, for each layer we
This approach comprises five steps.     have listed a number of examples that could be used as a
basis for a business case.    
Step 1. First of all, the corporate issues need to be identified
at every level, per MDM layer (Governance, Process, Content
and Systems), as described in Figure 3. Conclusion
Step 2. Then the problems need to be related to possible
implications, the impact on management, and risk avoid‑ Usually an organization first notices problems with data
ance. At this stage, a first assessment can be made of the management in actual practice when dealing with pri‑
costs and the organization-wide consequences ensuing mary processes, decisions based on incomplete reports, or
from these issues.       fines imposed by supervisory bodies. The ability to relate
Step 3. Directly afterwards, the relation with master data and quantify these aspects on the basis of risk mitigation
(management) needs to be examined. If there is no relation and removing obstacles constitutes the basis of a good
between the master data (MD) and the issues found, the business case for data management.
problem cannot be part of the master data management
business case. See also Figure 2. Both the retailer and the logistics company described in
Step 4. If a relation is found to exist, a link should be made this article received support and funds for their business
with a cost-and-impact analysis.     cases. However, there was a difference in approach. In the
Step 5. If the master data and the company are so closely first case, the scope was more limited. From the beginning,
interwoven that it is impossible to determine the direct the logistics firm aimed at realizing a comprehensive data
costs and the consequences (because the risk has not management program. The difference lies in the long-
yet presented itself), the fifth step in Figure 3 will be term objective. In the long run, a case based on cost-saving
necessary, in order to make the business case stronger. in data processes will limit the desired efficiency and
It involves a risk analysis, so that the issues can be made innovation. Companies directing effort to master data
more concrete and expressed in terms of money.     management do well to compile a list of data-related issues
and any current improvement projects or initiatives for
It is important to apply this approach to all MDM layers. which master data is a precondition. For the sake of com‑
It reduces the risk of encountering pitfalls such as a frag‑ pleteness, it is a good idea to use the four MDM layers as

Compact_ 2013 3 International Edition Optimise and Accellerate: How to get more value out of your ERP system 7
 References
guiding principles. In this way, the retailer might be able
to identify existing projects for e-commerce, including [Donk05]  J.A.M. Donkers RE, R. Oudega RE and S. van der Meijs,
“Commitments: het realiseren van de baten van projecten
the relevant laws and regulations, in advance. Organizing
(Realizing the Benefits of Projects),” Compact 2005/4.
fully developed e-commerce activities could result in a
[Jonk11]  R.A. Jonker, F.T. Kooistra, D. Cepariu, J. van Etten and S.
case for increased turnover, better customer relations, and
Swartjes, “Effective Master Data Management,” Compact 2011/0.
meeting the compliance aspects. In this way, securing a
[Jonk13]  R.A. Jonker, J.A.C. Tegelaar, J.M.B. Geurtsen, “Enterprise
support base for the required investment will run far more
Data Management: Value and Necessity,” Compact 2013/1
smoothly than a business case that is solely data issue-­ International Edition.
related, with a limited scope.                            
[Unen12]  C.W.J.A. van Unen RE, A.S.M. de Goeij MSc RE, S.
Swartjes MSc and A.J. van der Staaij MSc, “Master Data
Management: Dos & Don’ts,” Compact 2012/2.

MDM layers Issue Cause Consequence About the authors

M.A. Voorhout  has a background in Master
Governance Incorrect management Incorrect and incomplete Decisions made on the basis Data Management as well as Enterprise Content
reports data of incorrect information
Management. As manager within the KPMG Risk
Incorrect strategic No central overview of data Increased risk of incorrect Consulting (IT Advisory) practice, she has been
decisions and wrongly placed roles and decisions based solely on IT
responsibilities
involved in many international data management
projects.  
Decision-making process No decision-making Data logistics do not link up
with regard to data is at structure with the company's vision, A.J. van der Staaij MSc RE  is consultant within
operational level innovation and strategy the Risk Consulting (IT Advisory) practice. He is
Content No unequivocal view of Data object can be found in Missed chances of sales and a specialized consultant in the field of SAP SD.
customer different formats in different process optimization He has particular expertise in Enterprise Data
systems Management and master data management issues,
Contracts cannot be Data are not synchronized Missed turnover and has been involved in several MDM projects, as
traced back to the and integrated well as in several risk and control-related projects
customer in different ERP environments.  
Products with incorrect Data are incorrect or not up Missed turnover and claims
selling price to date for compensation S. Swartjes MSc RE  is consultant within the Risk
Consulting (IT Advisory) practice and is a certified
Process Workarounds (repairs) Incorrect or incomplete data Extra costs due to manual SAP FI consultant. He directs particular effort to
repairs
issues in Enterprise Data Management and master
Double entries of sales Incorrect or late data Extra costs and loss of data management, and has been involved in sever‑
orders customers al MDM projects.  
Lead time of process Incorrect or incomplete data Inefficiency in process and
increased risk of missed
turnover due to delays

Systems No “plug-and-play” No data synchronization System implementations are

(SOA) extra labor-intensive and miss
deadlines
Problems during No data synchronization or Rationalizing IT landscapes is
migrations integration delayed over a long period of
time
Links between systems Inconsistencies in master Constant repairs of system
are running less and less data across different systems links to resolve recurrent
smoothly problems

Tabel 1. Businesscasevoorbeelden per MDM-pijler.

8 Master Data Management