From the Community, Technology
January 14, 2016

Supplier master data remains an issue in the automotive industry

Matching themes: Master data management, Supplier master-data

Automobile manufacturers were as conspicuous as never before at this year’s Consumer Electronics Show (CES) in Las Vegas. Yet the focus was not on the industry’s traditional attractions, such as design or performance, but on infotainment systems that are integrated in the interior and implemented in the form of flat screens fitted in the cockpit: “The car is the ultimate smartphone on wheels and as such rightfully deserves a place at the world’s largest electronics show,” said Gary Shapiro, President and CEO of CES, in Las Vegas.

For IT departments at automobile manufacturers, as well as at suppliers, that means: Interaction with service providers is a growing focus alongside traditional tasks. That’s a challenge that begins with long-familiar issues such as supplier master-data management.

Supplier master-data management: A challenge for IT at the company

For a long time, the focus was on internal processes, but now it has to shift to collaboration with suppliers. Companies in the automotive industry have worked on optimizing processes with their suppliers and partners for many years now.

That’s no surprise given that processes within the company have been optimized as far as possible, at the latest following the PPC/ERP wave that gripped the industry between 1990 and 2005. Paired with Industry 4.0 capabilities for automating processes or big data to analyze data better and more quickly, they offer additional potential to optimize these internal processes even further. It goes without saying that optimization has to keep on working in future.

On the other hand – and far more remarkable – is the fact that purchasing volume achieved with suppliers makes up about roughly 50-80% of total revenue. This trend will continue to intensify with the increase of value creation by means of add-on services or new operating models. There are still some things that are seriously wrong when it comes to IT-aided collaboration with suppliers.

The last two mega trends, supplemented by a topic that is growing in importance, namely the “Internet of Things and Services” (IoT), instead raise the relevance of processes with suppliers and service providers to a completely new plane.  Without IT-aided interaction, backed by sustainable functionality and partnerships with automotive manufacturers and suppliers, future trends like autonomous driving, e-mobility and concepts like car sharing can’t be implemented.

In short: The potential the industry wants to leverage in the future is increasingly found in interaction with partners, be they traditional suppliers or new potential partners whom the IoT age brings as new players to the market.

Supplier master-data management is carried out in parallel at several places in a company. Does that make sense?

If you break down the above-mentioned mega trends to the reality as can be experienced at companies, you soon realize that there is often a lack of end-to-end consistency and quality in the supplier master data:

  • Purchasing maintains the supplier master data in databases – which are even sometimes independent of the ERP system – in order to have them as the basis for transparent supplier relationship management (SRM).
  • To enable cost-effective supply chain management (SCM) and transport management (TM), logistics needs transparency on suppliers. The focus here, however, tends to be on geographical data, such as delivery or collection addresses and data on contact persons, so that escalation procedures can be mapped.
  • The accounts payable department requires correct information on bank details in the ERP and therefore invests quite a bit of maintenance work here in mapping payment or crediting processes.
  • Risk management is growing in importance and in turn requires supplier master data that, in addition to data used for purchasing, logistics and accounts payable operations, provides a clear view of corporate structures and equity investments, which can be mapped only inadequately with existing approaches (such as DUNS as classification concept). That in turn results in standalone solutions at companies.
  • For management meetings, all this data is compiled manually and often consolidated in a spreadsheet program.

And suppliers? They are asked to store their master data for each customer in Internet-based portal applications – in some cases multiple copies of the same data.

In practice, that causes a lot of redundant retrieval and maintenance work, resulting in data inconsistencies, and all that reduces the key element of master data to a minimum, namely reliability. Or to put it another way: Because no one really trusts the data, customers and suppliers need to put in a lot of manual work to cope with what should really be the simple issue of master-data management.

The key to the solution: Central supplier master-data management for the automotive industry

The industry has already been trying for years to master this task, but fails due to the differing interests of the companies involved: Customers naturally wanted the greatest possible transparency on data, structures and responsibilities at suppliers, but the latter are still afraid that too much transparency can make them replaceable or worsen their position in concrete order award processes or negotiations.

But if you take a closer look, the data involved is really completely non-critical: Name, address and form of the company, locations and contact persons. If the industry can’t agree on standards here, the previously outlined future perspectives will be difficult to achieve.

It remains to be seen which way the industry will decide. However, if you talk to the key players in the industry on this subject, it seems clear that there is a growing conviction across the board: A solution to this issue must be reached. And the only way it can have a central character is if the above problems are to be resolved long term. That would then mean that, from the IT perspective, there would be nothing standing in the way of achieving the visions shown at CES – at least as regards collaboration among companies.

thomas huebsch

Thomas Hübsch

Sales Manager

What are the main characteristics of the automotive industry? In addition to the capacity for innovation and the high market value of the products involved, the processes employed are often used as the benchmark for the manufacturing industry and as a shining example for other industries. I find that fascinating and I see it as my job to promote this kind of process excellence. In my posts, I try to cover the potential behind cross-company collaboration beyond phone calls, faxes, and e-mails. With well over 20 years’ experience in the automotive and IT industries, I’ve got plenty to share with you.

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