By Bo Hagler, Forbes Technology Council Member

Throughout my three decades working with manufacturers and supply chain professionals, I’ve seen firsthand how enterprise resource planning systems have created silos — and how they can be exacerbated by many everyday business practices.

Internal organizational silos can lead to inconsistent and undefined processes, disparate or missing data sources and systems, and misalignment across the supply chain. These challenges can drive up costs and negatively impact accuracy and quality, ultimately impacting the health of the company’s bottom line.

As companies struggle with internal silos, many are turning to portals to aggregate the data from these disparate systems, providing stakeholders a single source of truth.

Complex Systems, Complicated Silos

Silos mainly occur due to company culture, organizational structures and technology.

  • Company culture and organizational structure: Larger companies, geographically dispersed organizations, or companies that have grown through merger and acquisition are likely to find departments siloed from each other. In some cases, there may be internal politics or competition driving the silos, but often, it’s simply that each department sees itself as its own operation and doesn’t consider that its information should be shared. Compounding this, layers of hierarchy and management make it more difficult to effectively share information across departments.
  • Technology: Most organizations today collaborate on critical business processes via email, collaboration tools and spreadsheets stored on shared drives — sometimes on the cloud and often on employee laptops. Different departments tend to use different technologies. This often makes it difficult for them to share common information. Customer, supplier, accounting, operations, sales and marketing, and product data are often maintained across a range of platforms. Some of these may have been built in-house as point solutions, and even off-the-shelf products may be incompatible with one another.

This ultimately leads to a vast amount of inaccurate and nonstandardized data. Data silos impact every aspect of the business. They slow down the company, limit communication and collaboration, reduce efficiency, eat storage space, and decrease the quality and credibility of data.

Siloed data makes it impossible to get a comprehensive view of what’s going on within the organization and its operations. When stakeholders only see part of the picture, they can miss out on opportunities to work together toward common goals.
Important supporting data may be left out of financial analyses and reports. Relevant connections can be missed, and resources are wasted. Decentralized data storage drives employees to save their own copies for quick access. This is costly, using up precious storage space and causing confusion as to which copy is the most accurate and up to date. Inconsistent data can lead to miscommunication, lost or inaccurate orders, or other errors that could have negative reputational and financial impacts.

Lastly, simply storing information in a data silo decreases its usefulness. Particularly, it is nearly impossible to aggregate data from multiple spreadsheets and derive meaningful information. Spreadsheets are out of date the moment they are created.

Establishing A Single Source Of Truth

Most organizations recognize this is a problem. However, the prospect of breaking down the silos is daunting. The challenges previously discussed cannot be resolved by simply automating the distribution and storage of data spreadsheets. Sure, it sounds simple enough: Keep one global database for all the organization’s information. That’s simply impractical. Many global organizations have grown through acquisition, resulting in the use of multiple systems and leading to disparate and nonstandardized information.

So how do you begin?

  • Consolidate and aggregate: First, identify the silos, and determine opportunities to consolidate systems. Systems that cannot be consolidated can be aggregated and accessed via a dashboard or portal that allows for a single source of truth.
  • Change company culture: Culturally powered silos must be tackled as part of an internal initiative to drive collaboration across business units, departments and levels of hierarchy. This requires the active establishment of trust and accountability, as well as data sharing, allowing users into systems and setting appropriate permissions.
  • Core strategy: Prioritize breaking down silos as part of the business strategy, reinforcing it throughout stated goals and building collaboration into KPIs. This may lead to not only a cultural transformation, but also a structural realignment of the organization itself.

In the competitive global market, internal organizational silos threaten operations, sales and successful product launches. These threats can impact time to market, drive up costs, and damage quality and performance.

Silos are a challenge for nearly every organization. They accumulate over the lifetime of a company, often without anyone realizing they’ve developed. The task of breaking them down and making sense of disorganized and unstructured data may seem insurmountable. The first step is conducting a clear-eyed audit of internal systems, culture and goals, after which stakeholders can map a clear path toward a single source of truth. Breaking down internal data silos will result in cultural change and better business intelligence that organizations require for improved operations, increased transparency and better profitability.

This article originally ran in Forbes.