Cleaning Supplier and Customer Master Data Just Became Faster and Cheaper Thanks to the Development of a New ISO 8000 Standard for Authoritative Legal Entity Identifier (ALEI)
ECCMA (Electronic Commerce Code Management Association) is the project leader for ISO 8000 - the international standard for data quality
BETHLEHEM, Pa., June 4, 2018 /PRNewswire/ -- ECCMA [US-DE.BER:3031657], the international not-for-profit master data quality solutions association headquartered in Bethlehem, Pennsylvania, announces today a new low-cost process for cleansing trading partner master data that leverages the new ISO/CD 8000-116 Authoritative Legal Entity Identifier (ALEI).
A successful supplier onboarding process results in the creation of the all-important Supplier ID, a mandatory field for purchase orders, invoices and, most important, payment authorizations. Behind every Supplier ID is the supplier master data created during the onboarding process, but it is not always stored as a single, easily viewed record. More frequently, supplier master data is distributed across many systems and maintained by more than one department. This lack of visibility or coherent view is often the reason why maintenance of supplier master data is sporadic and inconsistent. Of course, added to the fact that the master data is distributed across multiple systems and departments, the supplier master data itself is dynamic, and it changes as suppliers open and close offices, change banks and change their relationships with other companies. Keeping track of all these changes is a real challenge: The ALEI is designed to make this easier internally, but probably more important, to make it easier to improve how third-party data can be used in the process of onboarding and validating supplier master data.
Commenting on the new ECCMA process for cleaning supplier and customer master data, Peter Benson, the executive director of ECCMA and the project leader for the new ISO standard, said: "Sometimes a solution to a fundamental problem is laying in plain sight. An ALEI is created by simply adding a jurisdiction prefix in front of nationally assigned identifiers. ALEIs are ideal for identifying supply chain trading partners. They are globally unique, authoritative, permanent identifiers assigned by law, and they are free! With the ALEI, the process of cleansing supplier and customer master data can be streamlined, saving time and money but, more importantly, delivering a dramatically better-quality result."
The solution is as elegant as it is simple: There are fewer than 700 government agencies worldwide where legal entities are registered. What is common across all agencies is that they maintain a public record containing the date of formation and the legal name of the company to which they assign a file or record number. All that was required was to assign prefixes to these agencies to create an ISO 8000-115 quality identifier. ISO/CD 8000-116 describes how these jurisdiction prefixes are created to deliver a globally unique and permanent "authoritative" legal entity identifier or ALEI.
Commenting on the ALEI, Justin Magruder, the president of Noetic Partners, a charter member of ECCMA and a designated expert to the ISO standards development committee, said: "As the banks and the finance industry work together to implement the legal entity identifier (LEI) they overlooked an obvious and low-cost solution for the authoritative identification of companies and individuals - the Authoritative Legal Entity Identifier (ALEI). The LEI is a proxy identifier, an identifier assigned by an organization that is not the authority that created the object. Like many other proxy legal entity identifiers such as tax identifiers, DUNS numbers, NATO CAGE code or even the GS1 company prefix, the LEI is a 'value-added' proxy legal entity identifier. Proxy identifiers typically include other data relevant to a specific purpose, hence the 'value-added,' but they can never replace the authoritative legal entity identifier issued by the government agency that in fact created the 'legal' entity itself. Let us not forget the very definition of the word 'legal' implies compliance with laws, and laws are the prerogative of national governments. It is probably safe to assume that national governments are not yet ready to hand their jurisdiction over the creation and recognition of legal entities to a bank-sponsored legal entity registry."
One of the key benefits of the ALEI is that it is in the public domain, there are no license fees or restrictions on how the ALEI can be used, and no fees required to obtain an ALEI as, by definition, if a company is a legal entity, it has an ALEI.
ECCMA recently demonstrated the power of the ALEI in a test of its new process for cleaning a supplier master. The process consisted of researching the ALEI for all suppliers using data extracted from the supplier master file. The results of the test were as follows:
| Number |
% |
|
| Active suppliers extracted from supplier master file (from 81 countries) |
24,250 |
|
| Supplier master data allowed the ALEI to be independently verified |
17,111 |
71% |
| Contact with the supplier will be required to verify the ALEI |
7,134 |
29% |
A verified ALEI provides the jurisdiction of the authority under which the legal entity is recognized and the date of formation as well as the legal name.
The 71 percent hit rate is impressive. The fact that 29 percent of the supplier records contained insufficient data to confirm the legal status of the supplier should be a concern but resolution simply requires an email or telephone call to ask the supplier for confirmation of their jurisdiction and legal name to allow ALEI verification. Records where it was not possible to verify ALEIs were identified as potential risks.
ECCMA has made available the website eALEI.org, where companies can search for their ALEI and add it to a convenient searchable database to make it more accessible to their trading partners.
What was probably the most interesting result of the test was that of the 17,111 supplier master data records that allowed the ALEI to be independently verified, there were 7,060 (41 percent) supplier records that were discovered to have an existing ALEI in the file. Those entries are, strictly speaking, duplicate legal entity records. There may be a good reason for these "duplicates" to exist in the supplier master data file, most commonly, different operational addresses or trade names, but they clearly need to be linked to the master legal entity record. The ALEI allowed this to be done easily. The immediate result of the test was the ability to consolidate spend and supplier data.
ECCMA charges its members between $1 and $10 per verified ALEI (price varies by country). ECCMA can also provide value-added supply chain data as illustrated in the diagram. All data researched by ECCMA complies with ISO 8000-120, the international standard for quality data with provenance.
Media Contact
Peter R. Benson
Executive Director, ECCMA
Email: [email protected]
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SOURCE ECCMA
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