Thursday 30 June 2016

Best-Practice MRO Product Classification and Coding

As we’ve discussed in previous blog posts and white papers, MRO & Indirect Materials often represent one of the single largest cost reduction opportunities within manufacturing and asset-intensive organizations. One of the greatest cost savings opportunities predominantly comes from the ability to effectively analyze and leverage MRO spend by product group (commodity). In order to do so, MRO purchases must be accurately categorized and visible. But with inconsistent or “corrupt” material master data that is incorrectly classified or worse yet, not classified at all, performing an effective spend analysis can be a difficult task.

To make spend analysis easier and procurement processes more efficient, companies often implement and maintain a product group (commodity) classification system, which is applied to each item that is purchased. The use of such system ultimately facilitates seamless communication, commerce, and compliance between buyers and suppliers.

There are many classification systems available, from internationally recognized ones like UNSPSCand eCl@ss, to industry-specific ones such as Shell MESC designed exclusively for the Oil & Gas industry. In addition, some end users and service providers like IMA Ltd., have developed their own internal classification system based on industry specifications, business processes, and subject matter expertise. While each system has its own unique structure and advantages, all have been designed for one common purpose - to accurately classify MRO products/services for efficient spend analysis, procurement, and ecommerce.

So what makes up a classification system and which one is best suited for your company? Let’s take a look at a few of the most common industry classification systems.

UNSPSC
The United Nations Standard Products and Services Code® is an open, global, multi-sector standard for efficient and accurate classification of products and services. UNSPSC is one of the most widely used classification systems for MRO products and services, enabling enterprise spend visibility and procurement efficiency. The UNSPSC code structure is comprised of 5 levels:

XX – Segment
XX – Family
XX – Class
XX – Commodity
XX – Business Function

When working with UNSPSC, IMA Ltd. typically assigns the 8-digit UNSPSC code according to the fourth level (commodity).

eCl@ss
eCl@ss is another internationally recognized cross-industry product classification system. With 41,000 product classes and roughly 17,000 properties, eCl@ss covers the majority of traded goods and services. Much like UNSPSC, eCl@ss utilizes an 8-digit code structure, comprised of the following elements:

XX - Segments
XX - Main Groups
XX - Groups
XX - Commodity Classes

IMA Product Group Classification
The IMA Product Classification System is an internally developed schema that has been designed as an industry best-practice standard based on project experience and subject matter expertise. Unlike UNSPSC, eCl@ss and other complex, cross-industry classification systems, the IMA Product Group Classification system focuses solely on MRO products and services. As such, the IMA Product Group Classification system provides a high level 4-digit classification code based on a simple category / sub-category schema, which is limited to 7 all-encompassing MRO categories, each having up to 20 sub-categories.

XX – Category
XX – Sub-Category

Using fewer codes that encompass all MRO products and services reduces classification errors, while enabling efficient spend analysis and cost-effective procurement.


ExampleBall Bearing, 6205-2RS

UNSPSC: Ball Bearings – 31171504

eCl@ss: Deep Groove Ball Bearing – 23050801

IMA Product Group: Ball Bearings – 0101

                                               
How will product classification reduce MRO spend?

In the era of big data and electronic commerce, accurate product classification is no longer a “nice-to-have”, it has become a requirement. Implementing a common classification system facilitates accurate spend analysis and visibility, while enabling spend leverage and vendor consolidation opportunities. As a result, procurement teams are able to establish preferred vendor agreements that deliver significant purchase price reductions and overall maintenance cost savings.

So if you’re not currently using a classification system, why not?

In most cases companies have neglected to implement and maintain a standard classification system simply because they do not have adequate resources, time and data quality. While it may seem simple to assign and maintain a basic product code, in reality selecting the correct code from an extensive classification list can be a time-consuming process that requires strong product knowledge. Not to mention, developing an internal classification standard rather than using a pre-existing system can take even more time and resources. For most organizations, it’s much more effective and affordable to implement a pre-existing, proven classification system through a third-party service provider. A quality service provider will typically have internal tools and expertise to programmatically classify and validate MRO materials. What that means is that you can spend less time trying to classify items yourself, and more time saving money.

To learn more about best-practice product classification systems and services for MRO materials, contact info@imaltd,com or browse through the sources provided below.



Thursday 2 June 2016

5 Things to Consider When Formatting MRO Material Master Data for an ERP or EAM System

Proper data formatting is essential when uploading and migrating materials data to an Enterprise Resource Planning (ERP) or Enterprise Asset Management (EAM) system. The challenge is that every system is vastly unique, each offering distinct features and benefits to the end user, which ultimately present much different data formatting and configuration requirements. Improper data formatting during the initial implementation or migration can significantly hinder the functionality of any enterprise system, while creating a ripple effect of inefficiencies throughout the organization.

In order to ensure maximum system functionality and ROI, there are several variables that must be taken into careful consideration when formatting and/or converting materials data. In this blog, we will discuss five of the most integral factors, which will help to define the optimum data format for your enterprise system.

1. Data Fields

Manufacturer Name, Part Number, Short Description, Long Description, PO Text… These are just a few of the fields you may have come across throughout your experience working with various ERP/EAM systems. Since each platform is so unique, it is important to understand the fields that are available within the chosen system, and which will be most valuable in the business process. Just because a system offers several fields doesn’t mean it is necessary to populate and use every single field. Remember, more is not always better. Carefully select the fields that pertain to your business processes, can be migrated from your legacy dataset, and offer the greatest benefit to your organization. From here, you have established the foundation for your data formatting template.

2. Character Limitations

Once you’ve selected which fields will be populated and used, you must consider character limitations. Various ERP/EAM systems have very strict character limitations, which can present additional complexities during the formatting process. For instance, in SAP the Material Description (Short Text) field has a 40-character limitation, which greatly restricts data contents, however, this is often used as the primary search field within SAP. Similarly, JD Edwards presents another unique formatting challenge with its 30-character limitation for Search Text, Description, and 2nd Description. As such, character limitations must be carefully taken into consideration not only during the data formatting process, but also during the initial ERP/EAM selection process. Character limitations will become the primary factor that defines which contents can and will be populated in each field.

3. Search Capabilities

While there is often a misperception that every field in an ERP/EAM system is searchable, they certainly are not. As such, it is important to understand which fields within your enterprise system offer search capabilities, what their limitations are, and which will best suit your organization. Going back to the SAP example, the Material Description (Short Text) field is one of the primary search fields within the system; however, its 40-character limitation restricts the amount of contents that can be populated. On the other hand, the PO Text field offers much more space for contents with its 2000-character limitation, but the down side is that it is not searchable in a standard “out-of-the-box” SAP environment. Since search functionality is one of the most important features to maintenance personnel, it’s important to find out what their search process and requirements are so that you can build the most useful and efficient work environment.

4. Contents and Arrangement

According to the fields, character limitations, and search capabilities that you’ve already determined, it’s now time to consider the data contents and arrangement to be populated within each field. If there are strict character limitations on the search field(s), it is important to ensure that the primary data components are populated first to ensure efficient search ability for end users. For instance, if maintenance personnel habitually search by part number and/or Noun, you must be sure to include these at the priority data to be populated within the search field.

Based on the 40-character limitation for Material Description in SAP, you may consider populating data as follows:

Material Description:                 
Noun, MFG Part Number, Attributes (up to 40-characters)
BEARING,6205-2RS,25MM ID,52MM OD

OR

Noun, MFG Part Number, MFG Name (up to 40-characters)
SEAL,13812,CHICAGO RAWHIDE

*Note: Removing spaces between comma separators saves valuable characters, which can allow for more contents
                                                              
PO Text:                                          
Noun, Modifier, Attributes, MFG Name, MFG Part Number
BEARING, BALL, 25MM ID, 52MM OD, 15MM WD, CONRAD, SINGLE ROW, LIGHT DUTY, 2 SEALS, STEEL, SKF, 6205-2RS

Noun, Modifier, Attributes, MFG Name, MFG Part Number
SEAL, OIL, 2 LIPS, MIXED SPRING TYPE, OPEN CASE, 1.375IN ID, 2.445IN OD, 0.313IN WD, NITRILE, CHICAGO RAWHIDE, 13812

5. Material Relations

Finally, it is important to understand the material relationship capabilities within your ERP/EAM system and determine how they will best be utilized within your organization.

a) Will you maintain a Corporate (a.k.a. Global or Client Level) Material Master, with each material record extended to their respective Local (Plant Level) Material Master(s)? Or will you create a new material record for each plant/site in which the part resides?

b) Will the same part number have a different Material Record (Item Number) for each manufacturer or will a list of manufacturers be related to a single Material Record?

These are just a couple of the questions you may want to discuss with your implementation consultant and/or integration team prior to data formatting and migration.

In summary, data formatting and migration is one of the most complex and time consuming tasks within an ERP/EAM implementation, data migration, or cleansing initiative. Fortunately, IMA Ltd. has over 27 years of industry expertise and project experience, which has allowed us to develop best-practice formatting recommendations for all of the leading ERP, EAM and CMMS platforms. It is our commitment to support customers in their effort to achieve the most useful and efficient dataset, while enabling maximum system functionality, operational efficiency, and ROI. For more information on IMA Ltd. Material Master Data Cleansing and Conversion services, visitwww.imaltd.com/mrodatacleansing or contact info@imaltd.com.