What is Master Data Management? Why You Need It 

As we continue to grow into this digital age, many companies find themselves looking for systems to streamline their business processes. Long gone are the days of poor communication and isolation between departments. This has become especially true for companies dealing with supply chains and a society that has only become faster with the advent of smartphones and an attachment to immediacy. 

Just as we all strive to be connected, businesses must also make use of their data to work more efficiently with tighter time constraints. For your own peace of mind we’ve broken down what master data management (MDM) is and how it can best serve your growing business, no matter the industry. 

Capella Covers: Master Data Management (MDM)

  • What is Master Data?
  • What is MDM?
  • What does MDM do?
  • How to set up your MDM

Industries and Master Data

Nowadays it’s probably less of who doesn’t use master data, and more who does use master data and MDM. Manufacturing companies are often top of mind when it comes to this matter, mainly because they are challenged by the rigors of supply and demand. That’s where data becomes king, especially when looking to improve efficiency and reduce costs. 

We should also look at master data as something to keep organized, but also something worth putting an effort into interpreting. This is where MDM becomes vital for a manufacturer to stay alive even in uncertain times. 

“A centralized MDM system serves as the information hub for manufacturing, providing data about products and processes that drive improvements in machinery, automation, and scheduling.”

What is Master Data?

Think of master data as a business’ core - basically what  the company boils down to when you look at the bottom line. It is the data that is meant to be shared and serve as the one truth throughout all other facets of your organization. There are other types of business data like transactional data which is generated through daily operations. There is also analytical data which is generated through analysis and by looking at transactional data. This type of data yields better insights for future projections and is a bit higher-level than the daily ongoings with transactional data.

At its core, MDM works to identify shared data between various departments and then unifies that data into a single source. This single source of data can then be accessed throughout the entire organization. Consistent and accurate data become the most important aims no matter the industry. This ensures that employees are dealing with and receiving accurate data all the time. 

It’s also an incredible time saver for many departments, especially ones dealing with a great amount of data, sales, and trend progressions. Imagine you’re working for a company that doesn’t have an MDM, your job is probably significantly more stressful merely because you spend so much time looking for accurate, up-to-date data. 

What is Master Data?

Different Types of Master Data

Master data can be broken down into whatever suits your company’s needs, but there are four general types to consider.

Customers - This can include a top level overview of basic customer information. But it can also be further broken down into other groups depending on customer type or other sales-related data.

Products - Your product master data can also be broken down depending on the type or sector that it is housed within. You can get as granular as possible, which is helpful if you provide a variety of products or services throughout an organization. 

Locations - This is a great place to break down data if you have multiple locations, branches, stores, and facilities. It’s especially useful to breakdown for manufacturing purposes by organizing data based on physical location. 

Miscellaneous - If data doesn’t fit within one of the above categories, you can use an “other” or miscellaneous section to capture data related to any other pertinent information within your industry. Some companies use this to house data related to policies, warranties, accounts, or other financials. 

What is Master Data Management (MDM)?

MDM is all about having a single source of truth. This single source of truth refers to a concept in data management revolving around a central, authoritative, and trusteed source of information for important entities like customers, vendors, products, items, and assets. 

A single source of truth is often used in MDM to provide a single version of each entity (such as a customer) that is most accurate and up-to-date. 

What is Master Data Management

Master Data Management Best Practices

Your master data is probably one of, if not, the most crucial components to your company’s success. And just as you aim to streamline your data with the appropriate tools, there are some best practices to keep in mind.

  • Organize More Data, Not Less - It doesn't make sense to streamline one section of your data but not the others. So let’s say you have master data for customers, but not for your product inventory. This becomes a problem quickly, especially if you’re looking to scale services. You might have the customers’ data down, but without having master data on your transactions or product, you’re really not set up for long term success that way. 

You should always think about streamlining your efforts for peace of mind, but also to leave room to scale properly. A good MDM is built around the prospect of scalability and oriented towards change. As your business changes, your data will too, so it’s crucial to keep flexibility top of mind as well. 

  • Update Often and Monitor Security - Your customers’ information should be valued and protected over time. But just as you scale, so does the potential risk for hacking. However, you can work to avoid that issue by doing regular security checks and updates for streamlined data. A lot of this comes down to organization and systems. By staying organized with data and by setting up regular checkpoints you can play a role in monitoring your company’s safety. 

  • Prioritize Data Governance - Data governance essentially boils down to managing your data in an organized and ethical manner so as to grow your company, but not infringe on data privacy regulations or skew data. A good data governance plan involves managing data but also prioritizing the planning of what to do with that data. Companies can grow fast by streamlining data management and by properly using that data within the appropriate regulations. No matter the size, all organizations must now strive to balance data collection practices with the current user privacy regulations. 

  • Pivot Quickly and Expect Change - The beauty (and fear) of scaling your business often revolves around your ability to pivot from one problem to the next. That’s not to say that you should forget one to move on to the next one. You can use your master data to inform and inspire change. A good MDM system is built to reflect and manage inevitable changes within your organization. And just as you update your system, you should also learn to adopt a flexible mindset toward growth. Be on top of the trends that your data is demonstrating and work to stay ahead of the curve. This attitude will certainly help you to adapt to a constantly changing data landscape. So much so that change becomes your only constant. 

team effort

What does Master Data Management do?

Think of MDM as a discipline that weaves together best business and IT practices to ensure that client’s master data is accurate, uniform, and consistent among other important tenets. MDM also works to break down existing, and inefficient, silos within an organization. In the past we’ve seen tasks regulated by specialty or department, but with the rise in data capabilities that’s no longer the case. 

Master data is now used across departments to focus on the overall goal of the organization, which is most often well-managed growth. Now, someone in the finance department probably works closely with someone in IT to forecast and manage stored data. 

Why do you need Master Data Management? 

You need MDM for a variety of reasons to ensure that customers, and the market, stay focused and execute objectives efficiently. However, the goal is more than simply data governance, especially as we continue to deal with millions of pieces of information in this highly digital age. 

For example, MDM aids us in accounting for all of that information to then categorize it for later use. Without having a streamlined system for master data, you could wind up with more issues such as:

  • Incorrect information which will skew reports and potentially lead to inaccurate sales reports. 
  • Inventory issues from missing products to packaging errors.
  • Duplicate records in the database, which only confuses and undermines the goal of a single source of truth. 

Getting Started With Your MDM Program

Before getting started with an MDM program/system you should consider your goals as an organization. This includes thinking about how managing data will work to break down ineffective silos, improve data-based decision making, and emphasize rapid efficiency. 

You should also consider how your organization will break up master data based on type and function. Below we’ve highlighted some data to consider managing as master data going forward. 

What data should you manage as Master Data? 

There are many examples of what constitutes master data, but below are a few common uses including:

  • Customer Data - This is probably the most common type of master data simply because it informs so many other important metrics for a business’ success. Different departments also use this data regularly to figure out sales projections and marketing campaigns so it is crucial to keep track of this data in a unified system that does not differ from department to department.

  • Product and Transactions Data - It’s best to keep track of daily product inventory and daily transactions to ensure that your supply chain is running smoothly. Companies that don’t use an MDM for this data probably run into shortages and potentially unreliable transactional data. However, these issues can be solved by streamlining the approach to data collection through the implementation of a master data management tool. 

  • Employee Data - No matter if a company is small or large, it’s important to keep track of employee data whether it be financial material for payroll or more complex data for those in sales departments. Your life will be so much easier once you implement an MDM system to handle your external and internal data. 

Benefits of MDM

MDM not only transforms the quality of your data by streamlining it, but it can help to automate data processing along with:

  • Reducing the risk of redundant data
  • Increasing security measures
  • Increasing efforts toward data compliance 
  • Eliminating slow, inefficient silos 

Challenges of MDM

What’s a plan without some challenges? Challenges to a new MDM system are inevitable, but they more so become things to watch out for. Just as you would scale your business anyway, keep track of how your MDM is working for you and troubleshoot/brainstorm solutions to avoid some of the challenges listed below.

  • Data governance is something that many companies are still working on. Yet this will probably always be an ongoing struggle as we improve data collection and tighten privacy safeguards as well. It’s best to keep a positive attitude and an even more organized approach to collecting data in an ethical manner. 
  • Data integration may be a time consuming task as you streamline older applications with a new system. You should take steps to set up policies and communication around data integration; and stay organized throughout the process.

Final Thought: MDM For My Business 

Your MDM is meant to revolutionize not only data, but the choices you make as a result. As the nature of data analytics and data in general swiftly changes, you can too. Efficiency is key for any business. Getting there is sometimes the issue. 

However, at Capella we understand that, so we work to unify technology and expertise to help businesses get the most out of their data. We strive for platforms that are easy to use, open and extensible, and actionable to help you act on data and run your operations. 

To get started tracking your data with ease, let us help by sending us a message about your needs and goals. We always love hearing about the different ways we can help you succeed. It’s your company, why not choose something that is built with and for you?

Frequently Asked Questions

What Does Master Data Management Do?

MDM is the process of creating a single, unified view of critical data within an organization. This process involves collecting data from various systems, cleaning and standardizing the data, and then storing it in a centralized repository. By creating a single source of truth for critical data, MDM ensures that all departments within an organization have access to accurate and consistent information.

The Four Types of MDM

MDM can be classified into four different types based on the type of data it manages:

  1. Customer MDM: Focuses on managing customer data, such as customer names, addresses, and purchase history.
  2. Product MDM: Focuses on managing product data, such as product names, descriptions, and prices.
  3. Location MDM: Focuses on managing location data, such as addresses, geolocation, and maps.
  4. Employee MDM: Focuses on managing employee data, such as employee names, job titles, and salaries.

The Three Types of Master Data

Master data can be classified into three different types:

  1. Reference Data: Data that is used as a reference, such as a list of countries or a list of product categories.
  2. Transactional Data: Data that is generated from transactions, such as customer purchases or product shipments.
  3. Hierarchical Data: Data that is organized in a hierarchical structure, such as a product hierarchy or an organizational chart.

Master Data Management with Examples

Let's take an example of a retail company to understand how MDM works. The company has multiple systems storing customer data, such as the customer's name, address, and purchase history. Without MDM, the company would have multiple inconsistent and inaccurate views of the customer data. MDM helps the retail company create a single, unified view of the customer data, so that all departments within the organization have access to accurate and consistent information about the customer.

Master Data Management vs. Data Management

MDM is a specific type of data management that focuses on creating a single, unified view of critical data. Data management, on the other hand, encompasses a broader range of activities, including data storage, data security, and data analysis.

Why is Master Data Management So Important?

MDM is critical to the success of any data-driven organization because it ensures the accuracy and consistency of critical data. Without MDM, organizations risk making incorrect business decisions based on inaccurate or inconsistent data, which can have significant consequences. By creating a single source of truth for critical data, MDM helps organizations make informed business decisions and drive better outcomes.

MDM is an essential aspect of data management that helps organizations create a single, unified view of critical data. It ensures the accuracy and consistency of this data, so that organizations can make informed business decisions based on it. If you're looking to leverage your data to drive better business outcomes, consider partnering with a technology partner like Capella. With their expertise in data integrations, Data Hubs, Master Data Management, Data Quality, and Data Warehousing solutions, Capella can help you make the most of your data. With a highly experienced talent pool and modern approaches, they can help technology directors and senior leadership address their business imperatives with efficiency.

In today's fast-paced business environment, having accurate and consistent data is more important than ever. Master Data Management provides the foundation for making informed decisions and driving better outcomes. So, if you want to stay ahead of the competition and make the most of your data, consider implementing MDM today. With its ability to create a single source of truth for critical data, MDM can help you achieve your goals and take your business to the next level.

Rasheed Rabata

Is a solution and ROI-driven CTO, consultant, and system integrator with experience in deploying data integrations, Data Hubs, Master Data Management, Data Quality, and Data Warehousing solutions. He has a passion for solving complex data problems. His career experience showcases his drive to deliver software and timely solutions for business needs.

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