FMC’s Total Cost of Ownership Equation: Safety, Quality, Delivery and Price

FMC Technologies’ four business drivers are: safety, quality, delivery and price. They use these to create a total cost of ownership model. With the deployment of a hybrid supplier performance management and spend analysis solution (Spend Radar – SciQuest), FMC Technologies’ initial challenge was centered on definitions (i.e., how to ensure that the same report would generate results that were equally robust and well-defined regardless of area of operations). If FMC Technologies could not achieve this, it would be impossible to benchmark across areas or have meaningful discussions with business owners and suppliers around why there were dips in performance in certain areas.

In order to avoid end-users creating a Babylonic babble of terms and definitions, FMC Technologies cleverly and quickly decided to lock down the reporting and dashboard functionality. The 100+ users of the solution can freely choose among the many reports and dashboards available, but they can’t create further fragmentation. Such an approach was critical in order not to create a system where users would come up with different answers to the same questions.

Process extends past systems in this regard. Change requests have to go through a procurement executive’s group of “standards keepers.” And few users are now requesting unique reports – something that has been a direct bottom-line benefit with the solution. Earlier, this group had four analysts occupied with reactively pulling custom reports for business owners. At the current time with the deployment steaming ahead, the number is down to two analysts and they rarely get any requests for special reports.

Rather, the system meets their needs with existing reports and dashboards. This enables the procurement leadership team to focus on proactively leading the analysis effort and delivering far more value to FMC Technologies rather than simply pulling customized reports for business users. Moreover, getting all users to standardize not just on measurement but how they look at outputs has created a shared language among different groups on how they approach areas like continuous improvement, supplier development and risk management in a common manner.

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.

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