When Supplier Performance Management Met Spend Analysis

This post is based on research, analysis and commentary contained in the following Spend Matters Perspective and case study: Where Spend Analysis Meets the Supply Chain: Putting Big Data in a Procurement Context (a free download in the Spend Matters Research Library). Authored by Spend Matters Principal Analyst, Thomas Kase, the paper explores FMC Technologies’ experience applying a spend analysis framework to supplier performance management.

Good performance management approaches have to rest on good data – data that is indisputably referenced by business units, corporate leadership and suppliers alike. The spend analytics field has matured to the point where leading solutions (such as Spend Radar/SciQuest, Zycus, BravoSolution and others) can process complex data sets from a broad range of ERP solutions and provide consolidated dashboards and reports with drilldown to the lowest-detail levels within hours of designated close time. Near real time spend analysis is possible, of course, but it’s rarely a business need.

In contrast, SPM (supplier performance management) often involves manual work such as entering information in balanced scorecards, which obviously makes timely reports difficult. It is an even greater challenge to roll out traditional SPM in a global organization across many business areas without creating “apples to oranges” comparisons, which may result from the different definitions and data points.

How do you uniformly define concepts like "quality" and "on-time delivery” (to cite two examples)? The question is as much centered on process and definitions as it is focused on the ability to execute the measurement of these areas in a unified application. One approach is to shift the paradigm of spend analysis to supplier performance management. Said another way:

What if we applied a spend analysis solution and processes to supplier performance management?

This idea came to FMC Technologies’ German Torres, who is responsible for the analysis, process and systems function for sourcing and procurement within his organization. He was faced with a global SPM rollout challenge, which is no small feat for such a specialized manufacturing organization. For those who don't know the firm, FMC Technologies is an oil and gas industry company with over 18,000 employees, $6.5B in revenue and a $13B market cap. It is known for manufacturing the so-called “Christmas Trees” (control equipment assemblies that sit on top of oil and gas wells) as well as a long list of other energy industry related equipment.

For further analysis of the topic and to explore FMC’s experience putting a new type of SPM solution into practice, read the entire paper: Where Spend Analysis Meets the Supply Chain: Putting Big Data in a Procurement Context.

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