Spinoff drives move from tactical to strategic
Susan Avery -- Purchasing, 4/20/2006 2:00:00 AM
Managing change is one of the biggest challenges purchasing professionals face as a buying operation makes the move from tactical to strategic.
Randall Ellis, chief procurement officer at FMC Technologies (FMC) is meeting that challenge by opening up communication between the company's businesses and offering professional development and training to his staff.
Ellis has been guiding purchasing's transformation from tactical to strategic at FMC since 2001, when FMC Corp. spun off the business. Based in Houston, FMC is a $3.2 billion company that designs, manufactures and services machinery and systems for the energy, food processing and air transportation industries.
Prior to the spinoff, procurement at FMC Corp. was largely decentralized. Each of the company's businesses operated autonomously, following its own purchasing practices and procedures. On occasion, a couple of the businesses would pool buying requirements. But, for the most part, purchasing was mainly tactical.
At the time, Ellis noted an important trend in purchasing practices not only at FMC but at many businesses in the U.S. Companies were becoming less focused on manufacturing, and concentrating more on marketing, designing, assembling and testing products. As a result, purchasing and supply management have taken on more important, strategic roles, as companies strive to beat their competition.
PROCUREMENT. Today at FMC, experienced sourcing directors lead the procurement operation at each of the businesses—Energy Systems, FoodTech and Airport Systems. These sourcing directors make up the company's Procurement Leadership Team (PLT).
Each member of the PLT plays a key role in helping procurement at FMC make the move from tactical to strategic—and in managing change, says Ellis. Because they work within each of the businesses, he looks to the team to help "sell" the value of procurement within the businesses; Ellis does so at the corporate level.
"FMC is taking some significant steps to aggregate and standardize purchasing within the businesses," Ellis says. For now, that standardizing and aggregating is focused primarily on the goods and services the businesses source, but he says the company also is making progress in its adoption of common practices and procedures across its global operation.
For example, within Energy Production Systems, the surface and subsea businesses are adopting common practices and procedures across global operations; they all use the SAP ERP (enterprise resource planning) system and follow similar purchasing procedures. They purchase subassemblies and components both independently of each other and together when it makes sense to do so.
"Once the businesses agree on global sourcing, we have a very high commitment from the plants to purchasing through the supplier they've selected," says Ellis. That's because global operations managers and sourcing managers from each of the plants not only have input early on in selecting the supplier, they also are consulted throughout the process, which is led by a member of the PLT. A key skill here is developing and managing long-term supply agreements.
Early on, Ellis communicated the distinction between tactical purchasing and strategic sourcing to the procurement operation. Tactical activities should continue to reside in operations, managed with materials planning, he says. "They are really close to the heartbeat of the plant."
SOURCING. Ellis promoted staffing for the sourcing side of the procurement operation with what he calls "nontraditional manufacturing purchasers." Specifically he hired individuals with strategic sourcing experience and new graduates armed with engineering degrees. In addition to traditional engineering, new graduates hired to work at FMC now are exposed not only to marketing and manufacturing but also sourcing as well.
Within the procurement organization, FMC provides both new hires and long-time employees with training opportunities in both buying and sourcing through The Mpower Group of Oak Brook, Ill. The Mpower Group assisted the PLT in developing 11 world-class competency standards, gap analysis of the current staff (comparing their skills with those of the world-class procurement standard) and training programs to address gaps in competencies that include change management, consulting and supplier relationship management. Ellis says that by 2007, 120 of the 180 procurement professionals at FMC will have completed either buyer or sourcing training provided by Mpower.
The training is interactive, with about 20 people attending the two-day (buyer training) and two-week (sourcing training) courses. For these classes, Ellis and the PLT aim for a mix of purchasing professionals from different businesses and geographies.
By providing the training, "I'm looking to set a standard for a higher level of performance," says Ellis. He's also working towards more consistency in procurement practices and processes across the company's 32 manufacturing sites in 17 countries.
To gauge that performance, Ellis is working with the PLT and representatives of the human resources organization to put in place an annual leadership development review of the procurement function. This review includes FMC's senior line officers. Long a staple in other disciplines at FMC, the review provides a basis for discussing professional development of procurement professionals.
"It raises the bar," says Ellis. "It's a big change for us as we continue to transform procurement from tactical to strategic."
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