Master Data Strategy for Smart Manufacturers Now Includes Commercial Management
Your Master Data Strategy Should Start Far Earlier than ERP. Here Is What It's Costing You...
We are having a lot of conversations with manufacturers these days about master data strategy. Manufacturers are waking up to the fact that a true master data strategy starts much earlier than the company ERP system. Optimal master data strategy for the enterprise captures data consistently when opportunities are in their commercial infancy.
Of course, it's difficult to apply a master data initiative where you don't have database software supporting critical day-to-day business activities. For many manufacturers, those are the commercial activities of the business...including opportunity management, costing/quoting, and forecasting. Yep, even today these commercial activities for many are conducted in myriad spreadsheets.
Look familiar? A mapping of "tools" in which manufacturers manage opportunities through phases of the commercial lifecycle.Spreadsheets don't lend themselves to harnessing commercial data to support critical decision-making.
Because spreadsheets have been manufacturers' commercial tools of choice, they have trouble harnessing this valuable upstream data within a master data strategy. Here's a refresher on the ills of managing commercial processes in stretched, disconnected spreadsheets:
- Target opportunities get lost - Initiated as much as 3 or 4 years in advance of Production (and entry into ERP), early opportunities are entered into a salesperson's spreadsheet tracking tool and often neglected, not maintained and forgotten.
- Annual long-range plan/forecast difficult to build - Requires many months to build in spreadsheets...which is why it's conducted only once per year. It typically requires significant diversion of the commercial team's time to update/recompile data on current business and future opportunities, especially pricing and volume assumptions.
- Cost and operational data for costed/quoted opportunities isn't updated - The initial cost model begins years in advance of its start-of-production when it is quoted. Manufacturers render this initial cost model and customer pricing in a spreadsheet loaded with complex lookup tables and macros. The cost model evolves and changes margin over time, but the spreadsheet in which you first costed/quoted the business is static and decays, stored in a customer folder on a corporate drive somewhere, unable to log cost updates and show current margin vs. original business case.
- Spreadsheet "free-form entry" causes errors - Let's not forget that all of this commercial management in multiple spreadsheets lends itself to lots of free-form entry errors, lookup reference errors and massive data inconsistency.
Manufacturers are increasingly adopting database commercial management tools that streamline and harmonize commercial processes, while replacing spreadsheet islands. They manage business opportunities "cradle-to-grave," from their infancy as targets, through detailed costing/quoting, their award, subsequent design changes and ultimately transition into ERP for production tracking. This creates uniform, consistent early commercial data that confidently extends the view of your master data strategy into the future of your business.
The advantages manufacturers have when they harness data during early commercial phases, upstream of Production, includes:
- Tracking margin performance - Opportunities costed/quoted in a database software receive constant updates on changes to costs and price as they evolve. Versions are captured throughout their lifecycle through to Production. Analyzing fulfillment of the original quoted business case for margin achievement on each piece of business becomes a way to learn lessons, plus maintain and/or increase margins.
- Rolling enterprise forecast as single-source-of-truth - Commercial updates are immediately available to the forecast, which is up-to-date everyday for the business. This yields near-term and long-term forecasts for the business that are rolling, or "always on," and a single source of truth for planning/decision-making.
- Cost and operational data content the forecast for spend forecast, capacity utilization planning and margin forecasting - The rolling forecast captures and harnesses cost and operational data for Quoted and Awarded business from costing/quoting system, and from ERP for current Production business. Combined, this is a highly-contented transformative future view of the enterprise that helps:
- Purchasing - Know how much materials and components to buy, and negotiate with forecasted enterprise demand.
- Operations - Knows whether you have capacity for future business, and can forecast CAPEX needs.
- Finance and Commercial - Views anticipated margin on any piece of business, or aggregated by each customer, product type, plant, etc.
- Forecast scenarios - Manufacturers with rolling forecasts have more time available to create multiple market scenarios for risk modeling and contingency planning
Optimal Commercial State: Opportunities - their pricing, costs, win/loss, forecasts and changes over time - are managed in database software tools. This allows the manufacturing enterprise to harness commercial data and clearly see its future.
When commercial management takes place in database software, the more consistent, high-integrity commercial data can be readily connected to the other database applications running your business. Here are some typical connection points that add big value:
- Master cost tables interact constantly with Quoted and Awarded status opportunities/parts - As updates happen within master cost tables (usually ERP or PLM) for materials, components, labor, burden, overhead, and manufacturing assets, this data automatically updates and versions the cost data for all Quoted and Awarded pieces of business. They are tracked/versioned automatically from its inception throughout its lifecycle in the database, showing resulting changes to margin. Coupled with changes to pricing and anticipated volumes, the result is an ongoing margin forecast.
- ERP and the rolling forecast talk to each other and share data - It becomes sustainable for systems to align at finished-goods level and sync often. The rolling forecast for Production business gains data on ship history actuals to validate forecast accuracy, improve forecasted product penetration rates, garner pricing updates. Applied learnings are sent back to ERP in the form of improved production plans that help reduce inventory. This ERP/rolling forecast connection also opens the door to content the forecast with the cost data in ERP for your Production business, going beyond simple revenue/volume forecasting.
- Costing/quoting and forecasting system and PLM/project management tools talk to each other and share data - Commercial costing/quoting system can borrow ideal BOMs from PLM as templates to begin costing/quoting new business opportunities. Subsequently, commercially quoted cost models roll to PLM/project management when business is awarded to kickoff launch management and BOM optimization. BOM cost updates to Awarded BOMs in PLM can also update rolling forecast.
- Rolling forecast connects with budgeting/planning/EPM software - Designate when to "freeze" the version of the forecast that is forwarded to budgeting software to create subsequent enterprise budget and establish ongoing performance tracking.
Uniting your disconnected commercial data is critical, as it is the building blocks of seeing the future of your business. Hacking away at commercial activities in collection of spreadsheets will never let you harness valuable commercial opportunity data as part of an optimal master data strategy. A commercial management system approach that captures master data effectively upstream when it is a commercial opportunity as a Target, and follows each piece of business through to Production, solves the challenges manufacturer the challenge. This not only makes data far more consistent in ERP when business finally makes it to Production, but also unlocks transformative future visibility for manufacturers when accommodated in an overall master data strategy.