Master Data Management

Why Master Data Management is Important in Trade Compliance

Ned Blinick
June 30, 2021
min read
Why Master Data Management is Important in Trade ComplianceWhy Master Data Management is Important in Trade Compliance

Product and Account master data are foundations on which all organizational activity operate. In most organizations, the ERP is meant to be the repository of the organizations' master data. That is, 'important' data is housed there. However, Master Data Management is seen as a challenge in most organizations. Why is that?

The reason is the operative term, important. Important data is a matter of perspective. And the ERP is typically owned by the Finance organization. As a result, what another person thinks is important might not be important to ERP owner, and since they own the ERP work schedule, your data gets deprioritized. As a result, there is no single system of record for master data. Information is stored in multiple siloed data structures such as tables, spreadsheets, and databases.

The need for MDM has always been important, but with the increasing multi-tiered purchase and sales environments, the need for centralized MDM is becoming even more important. Because MDM is so fundamental to the operations, it is surprising that a company manages master data in a hybrid environment of disparate enterprise databases and spreadsheets.

For certain functions, like Trade Compliance, the need for MDM is critical. MDM is a cornerstone in trade compliance because the information contained in the account and product data records is core to ensuring the products are classified and described properly, and accounts are validated for supporting customs and government agency entry transactions, sourcing and purchase costing decisions, and supporting vendor and service provider validation.

MDM is an even greater challenge for trade compliance than the rest of the organization because of the data specialization. Too frequently enterprise MDM data records do not have the capability to accommodate the level of detail necessary to support the trade compliance activity. If the enterprise does have the MDM record capability, the tables are typically poorly maintained for trade compliance purposes, and the need to maintain spreadsheets is necessary.

Master Data Management - A Trade Compliance Challenge

Concerning trade compliance, MDM is a significant challenge for some very large organizations as the effort required to profile a product or account is intensive within the enterprise solutions. In our list of the 6 Causes of Sub-Optimal Trade Compliance Performance, the top two causes are poor master data management and limited master data visibility and accessibility. The lack of support at the enterprise level results in Trade Compliance managing necessary trade compliance data off-system in spreadsheets, word tables, or in a light-weight Access database.

From a product perspective, the enterprise product master should hold the product engineering details (product descriptions and composition), packing information (weights and measures, package tiers), supplier/manufacturing relationships, country of origin details, etc. At a minimum, the enterprise product master needs to capture the HS code for the product and inputs that it trades.

From an account perspective, account masters should have profiles for every type of account relationship, i.e., customers, suppliers, factories, carriers, 3PLs, customs brokers, DCs, etc. Each account type is unique and capturing the level of granularity necessary to provide an adequate picture for operations is labor intensive. Each account should have the requisite account information, such as address detail, registration numbers, and so on.

Sadly, too often the product and account records are incomplete and not adequately maintained in the enterprise system(s), creating an incredible burden for Trade Compliance. Managing the level of detail on (multiple) spreadsheets is highly problematic and very labor intensive. Because managing the information is not simple there are many inconsistencies and errors in the records.

The Benefits of Trade Compliance Master Data Management

1. Centrally controlled and managed account and product records. Total product and account control.

Accounts should:

  • have a validated company name and associated addresses
  • be screened for business and trade approvals - DPS/RPS, and finance
  • manage and confirm account registration details
  • provide visibility to all associated factories and manufacturers and levels of approval
  • provide visibility to ownership arrangements

Products should:

  • support central management for HS and Schedule B, dual-use or military classification
  • provide license management
  • manage compliance-oriented UoM control
  • provide other government agency (OGA/PGA) product profiling; i.e. FDA, TTB,
  • manage Country of Origin determination, Conflict Minerals, Human Trafficking, RoHS, and other regulatory compliance information

Spreadsheets are powerful tools to manipulate data but are not ideal to support enterprise requirements. Centrally managing account and product compliance is necessary to ensure global trade is managed effectively and with limited regulatory interference.

2. On-demand accessibility.

Sharing trade compliance MDM information with internal associates and with relevant external trade partners enhances communication and collaboration. Accessibility to this information should be on-demand, 24/7, in formats that are meaningful and usable by the consumer of the information. The ability to seamlessly share trade compliance data with product engineers, purchasing teams, transportation, sales, and marketing, as well as suppliers and 3PLs, removes barriers to communication and increases operational effectiveness.

Enabling accessibility to trade compliance MDM by those responsible for the source inputs (i.e., engineers or trade analysts for product classification) improves the validity of the information and impacts the quality of the information for the consumer/user.

3. Accuracy

Centrally managed trade compliance MDM results in greater control and accuracy of the information. Well designed trade compliance MDM enables the delegating of compliance tasks to the logical professionals allowing for the streamlining of work processes whether it be in product development or supply chain execution. The ability to provide access to the master data to those specialists (wherever they sit in the organization) that actually can directly determine the compliance status of a product, from their perspective, is a major determinant of the accuracy of MDM.

4. Document control

Associating, storing and organizing documents is a major challenge for most not-systemized MDM solutions. Being able to capture and store documents in electronic format is a basic need for controlled MDM. When MDM is managed on spreadsheets it is virtually impossible to systemize and relate the correct documents to the account or product masters. Having accessibility to originating documents and certificates is crucial to complying with regulatory agencies.

5. Efficiency

The more orderly data is organized the more efficiently it can be captured, managed, and accessed. Managing MDM centrally, so that those individuals that create or consume the needed information have direct access increases the efficiency of the entire organization. A company that manages trade compliance MDM on spreadsheets reduces its overall effectiveness and efficiency.

2 Steps to Simplify Trade Compliance Master Data Management

1. Eliminate the spreadsheet

  • MDM contains information that is highly confidential and should necessitate control of access, however, spreadsheets are virtually impossible to secure making information privacy and confidentiality highly problematic.
  • Spreadsheets are a difficult platform for automating and synchronizing information from enterprise systems.
  • They require more manual intervention to enter data increasing the rate for errors.
  • The presentation of information is uni-dimensional and lacks context.
  • Documents are difficult to manage.
  • Collaboration is poorly supported.

2. Maintain data in a trade compliance database

  • For complex and voluminous data records a powerful database is needed.
  • As regulatory compliance becomes more pervasive, the need for having a central repository for adding and accessing information increases.
  • To properly manage MDM the design and sizing of the database are important.

Master Data Management - A Solution for Trade Compliance Excellence

Trade compliance is constantly challenged to manage products and account information in compliance with regulatory agencies. Often the basic information required to manage products and accounts effectively from a trade compliance perspective is controlled in other functional areas of the business. Bringing all the necessary information from the disparate sources into a single accessible information platform is extremely hard without the right tools. Enterprise product and account data records too frequently are incomplete or too difficult to maintain to provide trade compliance with the needed information they need to efficiently execute their mandates. Too often trade compliance account and product detail is maintained on non-systematized spreadsheets which compromise completeness, accuracy, and accessibility to needed information.

At 3rdwave, our master data management solution provides total account and product data management. Our MDM tool provides rich data masters that are easily accessible by permissioned users so that true collaboration on product and account trade compliance management is efficient and effective. Not only does 3rdwave MDM support enterprise solutions, but it also enables an organization to extend their master data management capabilities to support the specific trade compliance functions.

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