Monday Nov 12, 2012

Spotlight on Reference Data Management

Reference Data Management

Oracle Data Relationship Management (DRM) has always been extremely powerful as an Enterprise MDM solution that can help manage changes to master data in a way that influences enterprise structure, whether it be mastering chart of accounts to enable financial transformation, or revamping organization structures to drive business transformation and operational efficiencies, or mastering sales territories in light of rapid fire acquisitions that require frequent sales territory refinement, equitable distribution of leads and accounts to salespersons, and alignment of budget/forecast with results to optimize sales coverage. Increasingly, DRM is also being utilized by Oracle customers for reference data management, an emerging solution space that deserves some explanation.

What is reference data?

Reference data is a close cousin of master data. While master data may be more rapidly changing, requires consensus building across stakeholders and lends structure to business transactions, reference data is simpler, more slowly changing, but has semantic content that is used to categorize or group other information assets – including master data – and give them contextual value.

The following table contains an illustrative list of examples of reference data by type. Reference data types may include types and codes, business taxonomies, complex relationships & cross-domain mappings or standards.

Types & Codes

Taxonomies

Relationships / Mappings

Standards

Transaction Codes

Industry Classification Categories and Codes, e.g.,
North America Industry Classification System (NAICS)

Product / Segment; Product / Geo

Calendars (e.g., Gregorian, Fiscal, Manufacturing, Retail, ISO8601)

Lookup Tables
(e.g., Gender, Marital Status, etc.)

Product Categories

City à State à Postal Codes

Currency Codes (e.g., ISO)

Status Codes

Sales Territories
(e.g., Geo, Industry Verticals, Named Accounts, Federal/State/Local/Defense)

Customer / Market Segment; Business Unit / Channel

Country Codes
(e.g., ISO 3166, UN)

Role Codes

Market Segments

Country Codes / Currency Codes / Financial Accounts

Date/Time, Time Zones
(e.g., ISO 8601)

Domain Values

Universal Standard Products

and Services Classification (UNSPSC), eCl@ss

International Classification of Diseases (ICD) e.g.,
ICD9
à IC10 mappings

Tax Rates



Why manage reference data?

Reference data carries contextual value and meaning and therefore its use can drive business logic that helps execute a business process, create a desired application behavior or provide meaningful segmentation to analyze transaction data. Further, mapping reference data often requires human judgment.

Sample Use Cases of Reference Data Management

Healthcare: Diagnostic Codes

The reference data challenges in the healthcare industry offer a case in point. Part of being HIPAA compliant requires medical practitioners to transition diagnosis codes from ICD-9 to ICD-10, a medical coding scheme used to classify diseases, signs and symptoms, causes, etc. The transition to ICD-10 has a significant impact on business processes, procedures, contracts, and IT systems. Since both code sets ICD-9 and ICD-10 offer diagnosis codes of very different levels of granularity, human judgment is required to map ICD-9 codes to ICD-10. The process requires collaboration and consensus building among stakeholders much in the same way as does master data management. Moreover, to build reports to understand utilization, frequency and quality of diagnoses, medical practitioners may need to “cross-walk” mappings -- either forward to ICD-10 or backwards to ICD-9 depending upon the reporting time horizon.

Spend Management: Product, Service & Supplier Codes

Similarly, as an enterprise looks to rationalize suppliers and leverage their spend, conforming supplier codes, as well as product and service codes requires supporting multiple classification schemes that may include industry standards (e.g., UNSPSC, eCl@ss) or enterprise taxonomies. Aberdeen Group estimates that 90% of companies rely on spreadsheets and manual reviews to aggregate, classify and analyze spend data, and that data management activities account for 12-15% of the sourcing cycle and consume 30-50% of a commodity manager’s time. Creating a common map across the extended enterprise to rationalize codes across procurement, accounts payable, general ledger, credit card, procurement card (P-card) as well as ACH and bank systems can cut sourcing costs, improve compliance, lower inventory stock, and free up talent to focus on value added tasks.

Change Management: Point of Sales Transaction Codes and Product Codes

In the specialty finance industry, enterprises are confronted with usury laws – governed at the state and local level – that regulate financial product innovation as it relates to consumer loans, check cashing and pawn lending. To comply, it is important to demonstrate that transactions booked at the point of sale are posted against valid product codes that were on offer at the time of booking the sale. Since new products are being released at a steady stream, it is important to ensure timely and accurate mapping of point-of-sale transaction codes with the appropriate product and GL codes to comply with the changing regulations.

Multi-National Companies: Industry Classification Schemes

As companies grow and expand across geographies, a typical challenge they encounter with reference data represents reconciling various versions of industry classification schemes in use across nations. While the United States, Mexico and Canada conform to the North American Industry Classification System (NAICS) standard, European Union countries choose different variants of the NACE industry classification scheme. Multi-national companies must manage the individual national NACE schemes and reconcile the differences across countries. Enterprises must invest in a reference data change management application to address the challenge of distributing reference data changes to downstream applications and assess which applications were impacted by a given change.

About

This blog is intended to discuss how Oracle Hyperion Data Relationship Management can address an enterprise's master data management needs in the face of change driven by business events over the enterprise life cycle. Bookmark this blog if you care about the following topics: enterprise dimension management, reference data management, Enterprise MDM, Financial MDM, Analytical MDM, master data management, MDM, RDM, hierarchy management, chart of accounts, reporting reconciliation, regulatory compliance, mergers, acquisitions, reorganizations, re-statements, financial transformation, business transformation, performance management, financial alignment, BI alignment, sales territory mastering, organization alignment, approval groups, purchase authorization limits, corporate B2B hierarchies, et al.

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