Alternative Spend Analysis Approaches: Performance Management at FMC Technologies
Unlike many organizations that use spend analysis as a tool to drive supplier rationalization, FMC Technologies is not looking to reduce its supply base. Rather, their focus on building visibility into spending and supplier performance centers on standardizing and deepening relationships with their strategic suppliers worldwide.
Some of the data points they leverage in this hybrid spend and performance analysis include:
• On-time delivery
• Open purchase orders (POs)
• Supplier risk information (e.g., D&B data – so far the only third-party data point considered in FMC’s deployment)
One advantage FMC Technologies had in its approach to supplier performance management and spend analysis was starting out with fairly clean data at the ERP level. FMC Technologies was already using a single instance of SAP worldwide for their four regions (headquartered in Norway, Singapore, United States and Brazil). These regions had been merged into one global organization around the same time the SPM solution was rolled out.
In contrast to FMC Technologies, the majority of the Global 2000 manufacturers that Spend Matters interviews and works with do not have access to the same high level of quality data at the start of deployments. Specifically, ERP proliferation, data entry errors and a lack of common terms and standards, especially on a global basis, can consume substantial amounts of deployment time to overcome.
In other words, the quick turnaround that FMC Technologies realized in its implementation is not something that any provider can or should promise to a customer unless they have a good understanding of the systems and data quality environment at hand. A proven solution provider (like SciQuest) can help overcome data challenges in more “normal” organizations, but clients should be ready with additional budget and time allocations.
All too often, especially when tied to vendor master information, specific line items and cost elements, organizations face an epidemic of dirty data.
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.