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Master Data Management – Implementation Challenges in a Large Manufacturing Industry*

CASE STUDY, OPERATIONS MANAGEMENT
ET Cases - GSMC, 14 Pages
AUTHOR(S) : Mr. Jitendra Pratap Singh Chauhan and R. Sreenivasan

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Master Data Management – Implementation Challenges in a Large Manufacturing Industry

 

The Corporate Apex Committee of Steel Authority of India Limited (SAIL) met on 2nd March 2005 in the Chairman‘s room to discuss conference and review the Enterprise Resource Planning (ERP) implementation proposal of Bhilai Steel Plant (BSP). It was a special meet headed by SAIL Chairman, Mr V.S. Jain along with all the Directors of SAIL, together with Mr R.P. Singh, Managing Director, Bhilai Steel Plant and Mr V.P. Moudgil, General Manager (IT), Bhilai Steel Plant. The Apex Committee deliberated at length on the policy guidelines for IT projects implementation in SAIL and finally approved the implementation methodology for ERP implementation along with a key decision regarding standardization of codes across all steel Plants. The committee noted that:

“Coding is a critical element in any computerized project. In SAIL, the coding structure is different in different plants vis-à-vis supplier codes, customer codes, contractor codes, asset codes, item codes etc. It is agreed to generate standard codes for SAIL to be used across plants/units. The activity of generating standardized codes for various items is to done by BSP and may be outsourced, if required. ERP at BSP is to be implemented using these new codes and the other plants shall follow the same standard codes.”

That day was a red-letter day for the IT fraternity of BSP as they had being privileged to have the first mover advantage among the SAIL units to experiment with an  enterprise wide IT solution. The whole team was at cloud nine......................

Steel Authority of India Limited, a ‘Maharatna’company of Government of India

Steel Authority of India Limited (SAIL), the largest producer of steel in India and one of the leading steel players worldwide. With an annual production of 13.5 million metric tons (as on 31-Dec- 2013), SAIL is the 26th largest steel producer in the world. SAIL operates and owns 5 integrated steel plants at Rourkela, Bhilai, Durgapur, Bokaro and Burnpur and 3 special steel plants at Salem, Durgapur and Bhadravati..........

Computers & Information Technology (C&IT) at Bhilai Steel Plant

The business of Bhilai Steel Plant has been driven by IT for the past fifty years. From a humble beginning in 1964 with the ¯IBM 402 Unit Record Machines to the IBM 1401 Auto Coders to the Burroughs 5900 Mainframes and to the servers of different hues (Sun Solaris SPARC range), the IT department’s name too ought to have been rechristened from IBM..........

ERP Journey

BSP has been a staunch user of IT for supporting its manufacturing and business processes. There were a multitude of home-grown IT systems spread over the entire business domain of the plant operations. There was a one for every distinct business functions—OASIS - Order processing and Sales Invoicing system for the order-delivery-billing cycle; MMIS- Materials Management Information System for material management functions; FMS- Financial Management System for financial accounting functions.............

Master Data Management (MDM) Initiative

According to glossary of Gartner, Master data management (MDM) is a technology-enabled discipline in which business and IT work together to ensure the uniformity, accuracy, stewardship, semantic consistency and accountability of the data is the consistent and uniform set of identifiers and extended attributes that describes the core entities of the enterprise including customers, prospects, citizens, suppliers, sites, hierarchies and chart of accounts.............

Raw Materials and Stores and Spares Materials

Materials costs constitute about 30-45 per cent share in the cost of production in a steel industry. Also the typical inventory carrying cost for a steel industry 10-15 per cent of its turnover. Development of standards is a vital tool for reducing costs and controlling inventory. Hence concerted efforts had been exerted for standardisation of specifications to optimize purchase of materials across various units of SAIL...............

Customer and Vendor Data Integration

Supplier (Vendor) master data in SAIL was maintained separately by the individual business unit in their IT systems. There were multiple agencies with business units—Materials management, services management, projects management and mines cell— which had their own set of vendor master. It was possible that the same supplier was involved in various supplier transactions with multiple agencies with a separate identity with each of the agencies. For example, a particular vendor having a separate identity in the Materials Management system would have got an order for................

Services Activity Codes

Due to rapid expansion of the businesses, an increasing number of companies no longer have the capacity to cover all requests for maintenance and service through in-house resources. Even where the capacity exists, the specialized technical knowledge required to service a wide range of requirements, both technical as well as non-technical, are seldom available under one roof. Many companies, including SAIL, have found that it is more cost-effective to outsource at least part of their service requirements to third party suppliers of services...........

Product Data Integration

Product Definition Challenge in Metals industry

Modelling of product codes in the metal and mills industry is quite different from other industries because the production structure looks like an inverted tree. From a single lot of liquid steel, a multitude of different intermediate, semi-finished and finished products can be produced (Exhibit VII). All this requires a high number of parameters/characteristics to describe a material which is produced in a process industry..............

MDM Governance Initiative

A web based system named eString‘,build using ASP.Net and C# technology, was put in place by the M/s PIPL at a Bhilai in February 2009 just two months before the proposed go-live in April 2009. The presence of a state-of-art data centre and given the fact that Bhilai was the first plant in SAIL to implement the UCS codes, resulted in putting up the UCS server at Bhilai. It was still not decided what will be the final place for this central server after all the SAIL units have implemented the UCS codes in their respective ERP systems..........

Mid-course Corrections

Almost half a decade into the new journey, the sheen of the master data management governance seems to be waning. Issues related to consistency, completeness, duplicity have slowing but surely crept into the codification process...........

Way Forward

Change is the only constant thing in this world no exception to this universal principle. The aim of change is to bring about continuous improvement in the competitive world. All the Stakeholders- the core-team and IT team— should work together to identify troublesome, data-dependant processes and build out an MDM strategy from these specific targets.............

Exhibits

Exhibit I: Existing IT System

Exhibit II: Major Master Data Domains

Exhibit III: Volume of Codification

Exhibit IV: Size of the New Codes

Exhibit V: Standard Modifier

Exhibit VI: Number of Codes outside SMD Classification

Exhibit VII: Material Flow of Bhillai Steel Plant

Exhibit VIII: PQD Coded

Exhibit IX: Quantum of Codification Done by M/s PIPL

Teaching Note Preview

Master Data Management – Implementation Challenges in a Large Manufacturing Industry

 

Importance of Customer and Vendor Data Integration

Business information on vendors and customers degrades quite rapidly. This means that a large quantum of our information on suppliers and buyers may be  inaccurate and hence ineffective for purchasing and marketing functions. These statistics from Dun & Bradstreet are further indicators of the volatility of business data - a new business opens every minute, a new business files for bankruptcy every 8 minutes, a business closes every 3 minutes, a CEO changes every minute, a company name change occurs every 2 minutes. Add to this the additional complexities of a B-to-B database, where not only do you need basic information like postal address, phone and email addresses, but also data on multiple contacts within a company -- purchase decision makers, purchasing agents etc., company site information, not just an headquarters address and more. And this doesn’t account for other valuable data such as purchase history, competitive product  installed etc. Your customer and prospect lists are the foundation of your marketing efforts. 50-70% of your marketing campaign success is dependent upon your list. (Source CISCO Blog)........................

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Abstract

Master Data Management (MDM) is the focal point for large business organizations whose business is driven by information technology. Bhilai Steel Plant (BSP), the  flagship unit of Steel Authority of India Limited (SAIL), is one such organization which embarked upon its ambitious ERP journey in April 2009. To complement the new IT initiative, a master data management program named Uniform Codification System (UCS) was initiated at SAIL which was akin to laying a new foundation for codification of materials, products, services, customers, suppliers and a host of other master codes.

The challenge of deciding the perfect material code for purchased materials like raw materials and stores and spares materials as well as for the saleable products,  semi-finished products and intermediate codes for a manufacturing industry like steel, was a herculean task which had serious ramifications for efficient working of the production processes. A substantial amount of master data related to materials, customers, suppliers and services were to be cleansed, unified and de-duplicated. The problem was compounded all the more because these codes were to come from multiple legacy applications in a variety of formats.

Almost half a decade into the new journey, the sheen of the master data management governance seems to be waning. Issues related to consistency, completeness, duplicity have slowing but surely crept into the codification process. Business process reengineering with respect to the intermediate product codes has to be done to manage the redundant material codes which were clogging the business operations.

The case provides an overview of the master data management initiative, the major challenges of the master data governance program and the decisions taken for a smooth implementation of the project resulting in a quantum jump in operational efficiency of the business processes. The cases also touches upon the business process reengineering initiatives and ends with a discussion on the mid-course corrections needed to keeping the MDM initiative on track.

* GSMC 2014, IIM Raipur

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