The Hillman Group Inc., which distributes fasteners and other hardware items nationally and internationally, has grown rapidly in recent years. Too rapidly, in fact, to keep up with a ballooning product catalog that through growth and acquisitions topped 70,000 SKUs spread across four data sets. Then big box customers, such as Wal-Mart Stores Inc., began pushing for global data synchronization, requiring suppliers to standardize product...
information. Suddenly, the Cincinnati-based company found itself using spreadsheets to create a master product list.
"It became a nightmare," CIO Jim Honerkamp said. "We had no single truth for item information. We were using spreadsheets, which introduced a fifth data depository. There was no consistency between the data. We decided we needed a master data management approach as the ultimate solution."
The Hillman Group, which does about half a billion in sales a year, is a typical example of the burgeoning interest in MDM among midmarket companies.
Last year, New York-based management consulting firm Accenture Ltd. surveyed 162 CIOs and found that only about a quarter had any sort of real MDM program -- although the survey also found CIOs were almost unanimous in planning to beef up MDM over the next three years.
Honerkamp said Hillman didn't have the luxury of time.
"There was no way to physically meet the demand," he said. "We'd have to hire a bunch of people to maintain a massive amount of spreadsheet information. This was something that we had to do."
In January 2007, Honerkamp proposed to Hillman's top executives that the company create a data management group, with a director-level position reporting to the CFO. By March the concept was approved and a director named.
Honerkamp said that from the beginning, he thought the department should not be part of IT, which has a staff of 27 people.
"I didn't want people to think I was trying to build an empire," he said. "It was done for political reasons. Since it was my idea to create the department, I didn't want people to think it was a move to increase the influence of IT. We took that issue off the table right away. It made for an easier approval process."
By June the department was staffed with half a dozen people and began to work on an MDM solution.
"We looked at a couple of packages," Honerkamp said. "IBM had a good package, but it was very expensive. We couldn't afford it."
So the company partnered with consultants to build its own tool, which it began deploying in fall 2007. The project was finished by the following summer.
"I think we actually have a better product than we could have off the shelf," Honerkamp said. "We have a very flexible, agile environment. We're ahead of the curve. We can very quickly respond to demand from a big customer."
Called iSPOT (item, single point of truth), the system contains all SKUs and attributes of the company's product line, which feeds into the transactional systems.
"As our customers become more demanding for more selective information, we can very quickly respond to that," Honerkamp said. "That puts us at an advantageous position versus our competitors. What we've done is definitely the exception for the industry."
The MDM program works in sync with a business intelligence margin reporting application, which ranks each SKU on its profitability and signals the company when it needs to adjust its prices.
"This makes our lives much simpler," Honerkamp said. "We sell steel -- nuts and bolts. The cost of raw materials is going up dramatically; it forces us to get very good at passing along price increases. We've become very efficient. We no longer have to wait to see the bottom line before knowing where our exposure is and when to change prices."
The CIO said the company didn't bother to run ROI calculations on the project.
"It was always justified as a cost of doing business," he said. "We've embraced the idea of making business decisions based on data. It's a paradigm shift for us."
Data management was part of a larger program to overhaul the way the company uses IT, said Honerkamp, who was hired four years ago to oversee the transformation.
"I don't have a large staff, but we're using some pretty sophisticated tools," he said. "We have 1,200 user IDs and 700 of them are remote, connected via an internal portal. We use BI, collaboration tools. We have a new ERP platform. We didn't have any of that four years ago. We've totally reinvented IT."
Michael Ybarra is a monthly columnist for SearchCIO-Midmarket.com and a former senior writer at CIO Decisions magazine. He is also the author of Washington Gone Crazy. Write to him at email@example.com.