Mdm for materials –positive impact of data quality improvement

MDM for Materials – Positive Impact of Data Quality Improvement

Arthur RaguetteExecutive Vice President

Verdantis, Inc.Arthur @ Verdantis.com

1 732 692 3257 (m)1 609 799 5665 ext 225 (o)

MDM for Materials

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Agenda

2:50 – 3:00 Introduction - Positive Impact of Data Quality Improvement

3:00 – 3:30 Customer 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

© 2014 Verdantis Inc. All Rights Reserved.













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

© 2014 Verdantis Inc. All Rights Reserved.© 2014 Verdantis Inc. All Rights Reserved.© 2014 Verdantis Inc. All Rights Reserved.













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

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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

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Material Data Quality Improvement

VERDANTIS AUTOMATED MDM SOLUTION SUITE

GET IT CLEAN

Automated solution

for historical master

data harmonization

AutoClass AutoSpec AutoNorm AutoCrawlClassification 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

VERDANTISHARMONIZE®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

Catalogue Master Data. Optimized for Automated:

- Standardization

- Normalization

- Attribution

- Rationalization

- Enrichment












Agenda







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

MATERIAL ID 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

MATERIAL ID 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 125MMWIDTH 25MM 25MM 24MM 24MM

GROOVE TYPE DEEP DEEP DEEP DEEP

NUMBER OF ROWS 1 1 1 1SEAL/SHIELD TYPE 1 SIDE SHIELDWEIGHT 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















Agenda







MDM for Materials














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, Deduplicate the 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

XXYYZZTOPSOCKET,IMPACT,#07523ML,23MM,DEEP,3/4"DR

IMPACT SOCKETSOCKET,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

XXYYZZTOPGAUGE; PRESSURE:0-100 PSIG,FRONT FLGMNT,

PRESSURE GAUGEGAUGE,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 VALVEVALVE,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,1/8ACIRCUIT PROTECTION DEVICES

FUSE;FAST ACTING;1/8A;125VAC;3/32IN DIAMETER;9/32IN LENGTH;SIZE 1-1/2IN LEAD LENGTH;AXIAL CONNECTION;CERAMIC

XXYYZZTOPSWITCH, DIFF PRESS 0.07-0.15"WC, 15 AMP

PRESSURE SWITCHSWITCH,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 BALL BEARINGBEARING,BALL;RADIAL;45MM INSIDE DIAMETER;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















Agenda







MDM for Materials














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$














Agenda







MDM for Materials














Thank You!

Questions?

Arthur RaguetteExecutive Vice President

Verdantis, Inc.+1 732 692 3257 (m)

+1 609 799 5665 x225 (o)[email protected]

The name Verdantis comes 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















Master Data Solutions

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Mdm for materials –positive impact of data quality improvement

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