FMC Technologies centralizes procurement tools and team
By William Atkinson -- Purchasing, 7/16/2009 2:00:00 AM
When a global manufacturer makes the decision to centralize its procurement practices and operations, it requires more than manpower and a successful strategy. It also requires relevant technology.
FMC Technologies designs, manufactures, and services systems and products, such as subsea production and processing systems, surface wellhead systems, and high-pressure fluid control equipment for the oil and gas industry. It currently operates 19 manufacturing facilities in 14 countries. When Houston-based FMC Technologies was spun off from FMC Corp. in 2001, its procurement was largely decentralized. Each of the company's business units had its own purchasing department, and most of these departments operated tactically (three bids and a buy).
"Prior to the spinoff, FMC Corporation was a diversified conglomerate that was focused on each division and plant as a standalone profit center," explains Randall Ellis, now chief procurement officer and CIO at FMC Technologies. "As such, there was limited incentive for these businesses to work together on processes such as procurement and IT."
Following the spinoff, being a more focused business, FMC Technologies saw a real business reason to aggregate its requirements for direct production material, especially energy, as well as for software solutions. From his perspective, Ellis realized the need to shift to centralized and strategic procurement for products and IT requirements.
One of Ellis' first steps towards that goal was creating the Global Supply Chain Leadership Team, whose members included top procurement and supply chain directors. The team, created in 2002, works with each business unit to help it manage change, to promote the benefits of standardized sourcing processes, and to encourage the aggregation of products and services. To facilitate end-to-end procurement (from product development through the whole product lifecycle), Ellis also arranged for the involvement of representatives from operations, manufacturing, and engineering on the team.
Once the personnel structure was in place, the next step was to set up the technology structure. "We realized that we needed the ability to share information across the businesses, so we adopted some standard platforms," he continues. FMC Technologies uses SAP as its ERP system but it also adopted Teamcenter (a software product offered by Siemens PLM Software) as its standard for PLM. Teamcenter software connects Team members with the product and process knowledge they need to make appropriate decisions throughout the product lifecycle.
"We also introduced a common platform for online bidding," says Ellis. For FMC Technologies, online bidding includes more than reverse auctions. It is also used for competitive bidding events that may be open for one or two weeks and provide opportunities for suppliers to update their competitive positions and understand where they are throughout the bidding process.
"This has improved the productivity of our procurement organization," Ellis says. "We don't spend so much time negotiating terms and conditions." One of the first things a supplier does when it signs on for a competitive event or a reverse auction is to accept the T&Cs, and then offer a price at which they accept those T&Cs.
Overall, the people and technology structures for procurement at FMC Technologies have led to aggregated forecasting and sourcing strategies that have enabled the company to realize lower cost positions. "Just as importantly, they have enabled us to reduce leadtimes, in some cases as much as 30%," he concludes.
Now Playing: 
