This post is based on content contained within the following Spend Matters paper: P&G: A Case Study of Supply Management’s “Non-Invisible Hand” in 10 Easy Lessons. The paper is free to download in the Spend Matters Research Library.
Lesson #2 – More Complexity Means More Rocks for the Invisible Hand to Look Under
P&G is a big company. With roughly 100K suppliers in 160 countries being used by over 50 major brands, there is a lot of complexity to master – not to mention significant opportunity.
But we all know the flip side of opportunity. Complexity is also a driver of risk. More “moving parts” imply a higher probability of things breaking down. This makes modeling and reducing/managing complexity a key competency to staying lean and aligned across the value chain.
For example, Motorola drove a fair amount of change based on their complexity index, and Deloitte did a terrific study on supply chain complexity that’s definitely worth reading. For P&G, reducing supply base complexity has certainly been a driver in procurement, saving over $1B a year repeatedly for a decade. There is also a corollary in terms of master data complexity. Primary research that I have conducted shows a clear correlation between supplier master data complexity and supplier data management costs. P&G too has spent time on improving its master data management capabilities.
Supplier master data management is an increasingly critical topic to examine. In a post by our guest contributor Hackett Group, The Importance of Master Data, the author suggests that “Strong Master Data Management governance can drive greater consistency and accuracy of data, which can be an asset in driving world class operations, providing the ability to use data as a competitive advantage, and reducing unnecessary waste. In contrast, without proper governance, there is limited accountability and ownership of data, which creates compliance risk as well higher expenses and lost revenue.”