A Retail Perspective on MDM
Retailers are increasingly paying closer attention to the customer data to analyze consumer behavior. Consumer behavior is not the only reason to start maintaining enterprise data in a better way. Master Data Management is an approach of holistically identifying enterprise-wide key entities and maintaining them in a centralized manner. This post identifies some key areas for this approach for retailers.
Retailers are relative newcomers to the ERP bandwagon. For years, they made do with mainframe-based systems. After all, to get a Retail system going, one main focus was on the Point-Of-Sale applications and they were cash registers at best. So as long as you could ring the sales in, the front office was taken care of. As far as the back office was concerned, a host of mainframe/AS400-based warehouse management systems were implemented. Retek was the de facto system for maintaining the store level information, be it items, store transactions or item categories. It is only lately that retailers have embarked on migrating financials, GL, AR and AP, expense procurement onto ERP and with Oracle buying Retek, there has been a consolidated move towards establishing an integrated ERP for retailers. Some of the key entities that are gaining favor in being maintained through the Master Data Management aspect are:
1. Items - For retailers, this entity poses the most complex problem, with multiplicity of channels and supplying relationships, the same item can be called with many different names depending on which channel it is being sold or which supplier it is being sourced from. From a channel perspective, online and in-store items often pose unique challenges, since the classification of items online can be different from how the retail store departments are organized. Some of the common brands are manufactured outside the U.S. and exported through agents and brokers. This creates a complex network of item sourcing resulting in multiple items for the same essential item.
And there is item classification/category, more than the individual items, it is this classification that is key in management reporting. Categories such as frozen, perishable or meats for grocers, women’s outerwear, men’s shoes or cosmetics for apparel merchandisers are a few examples. Often, this classification is also part of the financial reporting/structure.
This data is needed by both financial, procurement, store management as well as warehousing systems, which further prioritizes the need to manage the creation, approval, maintenance, retiring process through Master Data Management.
2. Customers - Retailers often have a very high amount of customer data, with millions shopping through its stores. Most retailers are only now beginning to mine this precious data and understand the customer buying behavior better.
This data is needed in financial systems as customers are typically part of the receivables system - there are customer refunds that are often processed through such systems. It is of course, also part of the store management system.
3. Suppliers - Large retailers can have as many as 40,000 active suppliers, and that too is not a static figure. The supplier base keeps shifting depending on the popularity of the items they supply. Since this is needed by the payables system, the procurement system as well as the store management system, there is a great need to manage the supplier base through a defined MDM approach.
I think these three key entities need immediate attention through a well-defined MDM approach. What do you think are the entities that are being managed through this approach at retail companies? Let me know.
1. Items - For retailers, this entity poses the most complex problem, with multiplicity of channels and supplying relationships, the same item can be called with many different names depending on which channel it is being sold or which supplier it is being sourced from. From a channel perspective, online and in-store items often pose unique challenges, since the classification of items online can be different from how the retail store departments are organized. Some of the common brands are manufactured outside the U.S. and exported through agents and brokers. This creates a complex network of item sourcing resulting in multiple items for the same essential item.
And there is item classification/category, more than the individual items, it is this classification that is key in management reporting. Categories such as frozen, perishable or meats for grocers, women’s outerwear, men’s shoes or cosmetics for apparel merchandisers are a few examples. Often, this classification is also part of the financial reporting/structure.
This data is needed by both financial, procurement, store management as well as warehousing systems, which further prioritizes the need to manage the creation, approval, maintenance, retiring process through Master Data Management.
2. Customers - Retailers often have a very high amount of customer data, with millions shopping through its stores. Most retailers are only now beginning to mine this precious data and understand the customer buying behavior better.
This data is needed in financial systems as customers are typically part of the receivables system - there are customer refunds that are often processed through such systems. It is of course, also part of the store management system.
3. Suppliers - Large retailers can have as many as 40,000 active suppliers, and that too is not a static figure. The supplier base keeps shifting depending on the popularity of the items they supply. Since this is needed by the payables system, the procurement system as well as the store management system, there is a great need to manage the supplier base through a defined MDM approach.
I think these three key entities need immediate attention through a well-defined MDM approach. What do you think are the entities that are being managed through this approach at retail companies? Let me know.
