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What is Master Data and Why Does It Need to Be Managed?

In order to understand about master data management, it’s important to define what master data is first.

Master data is data that defines business objects such as employee details, customers, parts, products and other physical assets.

A full list of master data or business objects includes:

  • Customer Data.

  • Supplier Data.

  • Vendor Data.

  • Reference Data.

  • Party/Relationship Data.

  • Location Data.

  • Asset Data.

  • Product Data.

  • Ledger Data.

Information about these “objects” needs to be consistent as they are factual and rarely change. For example, an employee’s date of birth will never change. An employee’s name may change (e.g. after marriage) but changes are rare.

The key thing about master data is that it needs to be consistent across an organisation.  As an example, data about an employee can be held in silos such as an HR system, an accounting system and even in sales management systems.

Inconsistent master data can cause significant problems. In a company with thousands of employees, if a change of name is recorded in some system and not others it starts to become impossible to have one complete and accurate view of your staff.

Master Data Management (or MDM) is a set of data governance rules combined with appropriate technology to ensure uniformity, accurateness, compliance, timeliness and consistency of an organisations master data.
Effective MDM requires a data management strategy combined with an effective technical toolset.

An MDM technical solution needs to identify all master or reference data and have the ability to synchronise this data to ensure a single and trusted “source of truth” for all business objects.

There are a number of different approaches to technically implementing a Master Data management System. Some of the more common include:
 
Source of Record – Where a single application or source is identified as the definitive trusted source for a particular data type and all other instances of that record are aligned with that trusted source.

Registry – Where records across multiple data sources are indexed and linked to create a central registry. Records are matched using algorithms then assigned a unique global identifier to ensure a consistent single version of the truth.
 
Consolidated – Master data is consolidated to a single hub where it can be defined as a “golden record” This is useful for analysis but changes to any master data then need to be updated across all original sources.
 
Co-existence – This is similar to the consolidated approach but also ensures that all original sources are updated when the master data record is updated.
 
As is the case with most technology there is no “best” approach to Master Data Management. The starting point is to define what you want to achieve from creating your organisations’ “single version of the truth”, set your data strategy accordingly, then choose the MDM toolset that meets your need.

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