Transforming material master data from liability to asset

The typical company in the oil, gas and chemical industry has a material master system for maintenance, repair and operations (MRO) that includes hundreds of thousands of parts. Valves, gaskets, hoses, piping and other critical components – in multiple sizes, configurations and pieces – are needed for safe, reliable operations. Downtime is expensive and can often cost upwards of half a million dollars in lost production for every start/stop – so accessibility to those parts is vital. Managing that inventory is a major endeavor that many companies don’t handle well. With vast enterprise-wide records; siloed functional groups; and various field operations locations, equipment and personnel, data is generally inaccurate, disconnected, and often becomes an operational liability.

Even with governance efforts in place, setup is often spotty, with employees making multiple entries of the same part with different nomenclature, permissible by open text entry. To avoid redundancy, a material data entry should only be created once in the system and assigned a unique description code and taxonomy. With no standards for how materials are identified, the system easily becomes unwieldy and inefficient.

“In a perfect world, field and maintenance workers would go right to the system, search for a part, find it and be on their way. However, many have a hard time locating what they need,” said Robbie Thompson, EY Americas Energy Supply Chain and Operations Leader. “Along with employee frustration and time lost, the lack of controls leads to excess inventory, obsolete parts and diluted capability for targeted buys. When employees can’t find what they need, they often request that procurement buy parts in ones and twos, rather than leveraging the purchasing power of the company at a significant discount. The company pays the most expensive price for parts again and again.”

After a detailed review of its internal enterprise resource planning (ERP) systems showed a significant number of duplicate entries for the same parts, leading to wasted working capital, one international oil and gas company recognized the need to gain better control of its MRO material master data and teamed with Ernst & Young LLP (EY US) to transform its data from a liability to an asset.

With a data-driven and industry-template approach, EY US is helping enforce standardization and governance into the material master process, enhancing productivity and managing costs.

Leveraging a proven approach to material master data management, the EY team helped the company to streamline and standardize its MRO system, reducing standing inventories, decreasing user frustration and maximizing its pricing power. To tackle the challenge and accelerate transformation, the project relied on three unique elements to get started:

• Technology capable of analyzing and processing large amounts of data using artificial intelligence (AI) and machine learning to classify thousands of parts by specification quickly and thoroughly. This upfront process flags duplicates and identifies opportunities for further master list consolidation.
• Governance systems that guide material creation using common standards and specifications. The EY US data and analytics practice is skilled at structuring and standardizing data entry and ongoing management to allow all materials to be identified via common taxonomy. The end result is a system with the proper blend of structure and flexibility for ease of use.
• Hands-on expertise from knowledgeable subject-matter resources create data entry templates based on real-world oil and gas, refinery and chemical plant operations. The EY US approach helps clients structure their data for today and tomorrow, including the potential acquisition of new businesses and merging of databases. It also supports the unification of data across different computerized maintenance management systems (CMMS).

With these guideposts, the project began with the creation of an industry standard template for MRO materials that worked with the company’s existing ERP system and established a pathway for future growth opportunities. Once that was approved, the company gave the EY team more than 100,000 data sets to run through the AI software to clean up and standardize.

The team produced a sample list of “before and after” material master entries to showcase how the process worked and demonstrate the value of moving forward. From there, the client provided more than 1 million records to analyze using the EY proprietary taxonomy approach. A skilled team of researchers created business rules around keywords and pattern recognition to help train the machine learning model.

Roughly 80% of the entries fit into eight major categories of materials. This process allowed the EY team to assign specific subject-matter teams with specific knowledge to review the new material master items for accuracy and quality.

“EY US has been a leader in building digital solutions across the energy value chain. We have an increased focus on building tools for our clients that can be adopted by the end user in a way that enables them to drive change vs. building a solution or framework that is not integrated into the work they do,” said EY Americas Oil & Gas Digital Operations Leader Swapnil Bhadauria. “In other words, we aren’t focused on Band-Aids that fix one ache, but instead we come alongside companies, and their field workers and procurement, to create a healthier environment and more effective decision-making throughout the organization.”

By leveraging uniquely developed dictionaries, algorithms and code, as well as deep industry knowledge, the team was able to build a quality material master and apply a standard methodology and governance to the client’s database. Now, maintenance workers, field personnel and procurement can work together in a systematic and efficient way and realize the value of their current inventories and comfortably rely on the cleansed data to make better decisions. 

From the beginning, it was clear that MRO master data management was a major pain point for this energy company (and many others). By working with the EY team to take control and prioritize its master data, the company continues to improve its operational resilience in existing assets and increase its flexibility to efficiently allocate capital from savings realized – with more enhancements to come as the project evolves.

With a streamlined, efficient and accurate system in place, the client expects to save as much as 10% of annual MRO spend over the next three years through cost avoidance, reductions in inventories, streamlined bills of materials, improved leverage on pricing and long-term purchase agreements, and enhanced productivity.

By cleansing its MRO master data, redefining industry taxonomies and applying an autonomous governance process, the company is seeing a reduction in user frustration and an acceleration of maintenance schedules now that needed parts are easy to locate.

To add, this process is allowing the company to cleanse and enrich its material master data sets prior to migration to SAP S/4HANA® so it can maximize the value of its investment and migrate with clean material ledger capability.

As one element in a larger, more significant digital transformation, this strategic relationship has given the client a material master system that works for the company, rather than against it — and turned its data from a liability into a valuable, digitized asset.