Why Taxonomy is Critical to Master Data Management (MDM)

Organizations are paying more and more attention to Master Data Management (MDM). MDM comprises a set of processes and tools that consistently defines and manages the non-transactional data entities of an organization .  According to Gartner, two-thirds of Fortune 1000 organizations will have deployed 2 or more MDM solutions by 2014.

MDM promises not just greater control over consistent reference data; but an ability to manage the relations between data entities in order to generate more effective business knowledge. From this perspective,  MDM requires an understanding and agreement about the meaning of terminology.   Hence, the natural role of taxonomy.

Taxonomy is about "semantic architecture" - it is about naming things and making decisions about how to map different concepts and terms to a consistent  structure.   One challenge to an MDM data architecture is ambiguity.  The same term can have different meanings.  Taxonomy includes mechanisms for understanding context and making meaning precise.   Another challenge is consistency - it is also very difficult to get complete agreement on what terms to use or people will use terms inconsistently if given a choice (or prior to the effort, different terms were used and for various reasons the data could not be re-tagged).  A thesaurus can map terms together to account for these inconsistencies.  Taxonomies can also represent related concepts (technically also part of a thesaurus) that can be used to connect processes, business logic, or dynamic/related content to support specific tasks.



Master Data Management programs need to leverage taxonomy and taxonomy should make use of MDM initiatives.  Although taxonomy is typically applied to unstructured content, it is increasingly supporting structured and transactional content.  Similarly, master data plays an essential role in making unstructured information consistent, findable and valuable.

The following provides a brief example of key concepts and the role of taxonomy.  Note that the transactional data is on the left, the non-transactional persistent reference data on the right.



Let's look at the product master.  We have two different manufacturers who both offer mechanical pencils.  In our product master, they are called the same thing.  However the original product manufacturers do not necessarily use the same terms to describe their products.  The original bills of lading might have contained the following:





There are a couple of observations - one is that the description uses abbreviations that are not user friendly.  The other is that the attributes are not consistent.  One manufacturer classifies their product as Home Office and the other as Stationary.  The attribute of color is abbreviated as Bl from one supplier and Blk from the other.

Master Data Management fixes these inconsistencies.  Each supplier has a way or organizing and describing their products that may or may not be aligned and consistent, however the retailer needs to drive a consistent user interface and experience.

An MDM strategy defines the process for cleansing the data, harmonizing the attributes, and ensuring that all required information is present.  The approach also includes the following elements:

• A centralized repository where "the source of truth" exists
• Governance processes for fixing inconsistencies or providing feedback to suppliers
• Rules for automating remediation of predictable inconsistencies
• Tools for cleansing and normalizing the data (running scripts and converting the data)

For more on this topic download the webinar recording for Taxonomy & Master Data Management.