If you are currently considering implementing master data management (MDM) in your organization, you may have come across the topic of reference data. In this short ‘MDM 101’ post, we explain what reference data is, how it differs from other data types and why you should care.
What is Reference Data?
Reference data is a specialized subset of master data that is used to classify and provide additional context around the data throughout the enterprise. While your core master data domains like customer, product and location data typically change infrequently, reference data can change rapidly over time.
Reference data lists exist in multiple places and are referenced by multiple domains. This includes complex hierarchies, mappings and more.
What Are Examples of Reference Data?
Common examples of reference data include:
- Postal or zip codes
- Cost centers or other financial hierarchies
- State or country abbreviations
- Internal organizational information like sales regions or departments
- Lists of languages
- Customer or marketing segments
What are the Different Types of Reference Data?
Reference data commonly falls in two distinct categories: multidomain reference data and real-time reference data.
Multidomain Reference Data
Multidomain reference data spans multiple functional areas such as finance, risk, compliance, human resources and more. It is critical to multidomain MDM because it connects multiple domains and applications together by enforcing consistent values and semantics to classify or categorize other data.
For example, a manufacturing organization can ensure own production facilities and their customers’ receiving addresses adhere to a consistent set of country and state codes to expedite order fulfillment and reduce shipping delays.
Real-time Reference Data
While not as prevalent as multidomain reference data, real-time reference data is critical for business and data users in the capital markets industry.
In this example, traders may use multidomain reference data such as an individual security’s symbol, ISIN code or other facet of the stock in order to help make sense of the real-time reference of the bids, asks and trades that happen in real time on the stock exchange.
Reference Data and Master Data Management
Whether they are embarking on a digital transformation or other strategic initiative, some organizations decide to master their multidomain reference data before their customer, product or other master data.
By consolidating the hundreds of spreadsheets and utility tables an organization may have spread across department and regions, they are able to create a trusted golden record of their reference data that can be enforced across all other data domains. In this approach, trusted reference data is a helpful prerequisite for implementing MDM across more complex domains.
Benefits of Reference Data Management
Most successful MDM implementations manage reference data in addition to reference data to give businesses a more complete, holistic view of their enterprise data.
Reference data management allows organizations to centralize and standardize these different business lists used throughout the enterprise. While reference data is often smaller in quantity than transactional and other data, the quality of reference data has a significant impact on revenue, operational costs, reporting and governance.
Because reference data helps categorize other data throughout the organization, it affects every part of the business. Even small variations in reference data across domains or source systems can lead to significant data quality challenges later.
Benefits of managing reference data include:
- Reducing costs: By centrally managing and storing reference data in the MDM hub, organizations eliminate the costs of storing and maintaining reference tables in other systems.
- Streamlining updates: Data stewards can easily make updates to reference data in the MDM platform and publish changes to source systems and downstream applications.
- Improving analytics & reporting: Because reference data informs and provides context around analytics and business intelligence (BI) reporting, high-quality reference data directly improves the quality of reporting and insights.
Interested in learning more about reference data? Read the other parts of our ‘MDM 101’ series below:
- MDM 101: What is Master Data Management
- MDM 101: What is Master Data
- MDM 101: What is a Domain
- MDM 101: What is Multidomain MDM
And be sure to catch up on the Profisee blog for the latest on building a business case, driving stakeholder engagement and managing a successful MDM Implementation.