| dc.description.abstract | FMC Technologies spends a huge amount of their turnover upstream to their suppliers.
With indirect costs, including those that occur when suppliers have a delivery delay or
deliver products of low quality, it is expected to be much higher. To be able to estimate
these costs, to know the true cost of their suppliers, FMC Technologies would like to
have a tool that could help them quantify and calculate these indirect costs.
To investigate and create such a tool, questionnaires were sent out, discussions with FMC
personnel and in-depth investigation of their ERP (SAP) system were performed to create
a foundation of the Total Cost of Ownership (TCO) model. Further, a pilot study on one
of FMC’s suppliers was supposed to take place in order to perform an in-depth
investigation on how to estimate the TCO. Unfortunately, this task was cancelled due to
lack of readily available supplier specific data in the SAP system. Therefore, no TCO
analysis case study was performed.
Due to this, the thesis changed direction and it started investigating to see, if a TCO
model was appropriate to evaluate FMC’s suppliers. In addition to this, a conceptual
model was created.
When performing this thesis, a framework used in similar approaches was inspirational,
as well as the case study approach. Using the case study approach, an empirical inquiry
that investigates a contemporary phenomenon within its real-life context was performed,
and it is a preferred strategic choice when “how” or “why” questions are posed.
To get answers with high reliability, a triangulation of the results was desired. We
achieved confirmation of our findings, often with triangulation, when concurrent results
were found when either 1) interviewing FMC personnel, 2) investigating SAP, 3)
reviewing answers of the questionnaires, or 4) assessing the theory or other performed
case studies. All in all, using TCO to rate suppliers could be appropriate in some cases, but when
depending on responsive and innovative suppliers, the TCO approach may deliver a too
narrow view, as it focuses mainly on financial measurements, and could therefore deliver
a short term assessment of suppliers.
With the time consuming hard-to-quantify data, more use of subjective rating methods
which also focus on the future could be satisfying alternatives, but to recommend this
requires more investigation.
As there is no use of an activity-based costing system in FMC (which has a critical
linkage to TCO), and no plans of implementing it, perhaps a more simple supplier rating
system would be the solution. This counts especially for an innovative ETO firm, which
produces low volume and customized products.
If FMC decides to use a TCO model (or any supplier rating system which focuses on
historical data) they need to have a system that gathers the data regarding suppliers,
preferably using the already existing SAP system. To have ambition of creating a global
TCO model, without global routines seems extremely challenging | en |
