case study fei

7/28/2019 Case Study FEI

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For FEI Company, enterprise success will always be measured — first and foremost —in terms of scientific discovery. The Hillsboro, Ore.-based company is a world-leadingproducer of electron- andion-beam microscopesfor nanoscale research.Its products can befound throughoutindustrial andinstitutional researchlabs, semiconductor

fabs, forensics labs,and many otherfacilities around theglobe that are pushingthe bleeding edge ofscientific exploration.Small wonder, then,that when it comesto procurement-driven performanceimprovement and

spend management, FEIis charting a course that looks quite different from what many other companies havedone in the past.

Even the name FEI has given to its core enterprise sourcing team — the ValueEngineering Group — signifies a departure from the well-worn path of procurement

FEI Company Taps Zycus toDeliver Procurement PerformanceImprovement Efficiently

The world-leading producer of electronic microscopes wantsprocurement-led performance improvement, but not at risk ofbecoming distracted from its core mission.




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transformation and business performance improvement. Clearly, this is not a companythat intends to pursue short-term cost savings at the expense of important supplierrelationships and technological innovation.

According to Paul Flamend, the Netherlands-based Global Manager of FEI’s nascentValue Engineering Group, key tenets in the company’s procurement transformationcourse are to,

Introduce enterprise spend-management and relateddisciplines in the shortestpossible timeframe (versus takingan incremental, multiyear route),

Avoid building a large,permanent infrastructure andcore competencies in strategicsourcing and specific spendmanagement processes (such as

spend analysis, sourcing event-creation and execution and soforth) and

Automate and/or outsourceboth tactical and strategicprocurement and supplymanagement processes whereverpossible.

In keeping with these tenets, almostimmediately following the ValueEngineering Group’s formation in 2009,Flamend says a decision was taken toautomate spend-data classification and analysis using the world-leading Zycus SpendAnalysis Solution. “Timing was critical. When we decided to go forward with our globalspend-management initiative, we wanted to move very rapidly.”

“We opted to outsource to a company that isalready capable of doing the work better and moreeconomically than we could ever do.”

—Paul Flamend, Global Manager, Value Engineering Group for FEI Company

FAST FACTS ABOUT FEI

• World-leading producer of electron- andion-beam microscopes for nanoscaleresearch

• More than 1,800 employees

• Greater than $800 million in annual

revenue

• Greater than $380 million in annualspending

• Three manufacturing facilities — U.S., theNetherlands, and Czech Republic — andsome 50+ sales and service facilitiesaround the globe.




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FEI’s decision to invest in an automation solution for spend analysis was driven by twoseemingly immovable obstacles that might have slowed the company’s procurementtransformation considerably.

“First,” Flamend says, “our transaction data is distributed among nine ERP systemsaround the world. Second, our spending data exists in multiple languages, including

English, Dutch, Czech, Japanese, and Chinese. In an ideal world, we would have begunby aligning our ERP systems — that is something we should have been doing all along— but we knew we could not accomplish such an alignment quickly. A different optionwould have been to dedicate a great deal of time and resources digging into ourdatabases, translating and compiling our spending data manually. But, we did not wishto invest in that because it is not a core competence we are trying to develop at FEI.Instead, we opted to outsource to a company that is already capable of doing the workbetter and more economically than we could ever do.”

“Also important,” Flamend adds, “is that we wanted to professionalize our approach tocreating and maintaining spending visibility going forward. In a corporate environmentthat is dedicated to science, one must always have rigorous facts and figures,

versus hunches or emotions, if one is looking to promote behavioral change. We sawautomation as a means for ensuring both accuracy and consistency through eachiteration or periodic refresh of our consolidated spend database.”

Zycus, no contestWhen it came to selecting an automation solution provider for spend analysis, Flamendsays FEI already knew who it wanted. “There were people inside our organizationwho had first-hand experience in selecting and working with Zycus. We also haveconnections to people in our former parent company, Philips, who provided strongpositive references as well. We wanted the spend classification, supplier normalizationand aggregation work done quickly and Zycus has already gotten us to a point where

our visibility into spending appears accurate and is being refreshed on a monthlybasis.”

Flamend says Zycus was also attractive for its combined flexibility and considerableexpertise and experience working with companies with similar spend-data challenges.“We buy components for electron microscopes; these are very far from being

“We wanted to professionalize our approach tocreating and maintaining spending visibility goingforward.”





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commodities, so the standard UNSPSC taxonomy was not a feasible option forclassifying our bill-of-materials — or BOM — spending. We have found Zycus to beflexible in helping us to manage around this constraint and also highly knowledgeablein guiding us through important decisions around how to structure our spending data.For example, we did not necessarily know going into our initiative that we would wantto filter our data according to supplier payment terms. For a company that is newto enterprise spend management, working with an experienced partner gives youimmediate access to ideas you might not come to so rapidly on your own.”

Promoting adoption & useNow that Zycus has helped FEI to move around two significant obstacles to enterprisespend visibility, Flamend says FEI’s Value Engineering Team is gearing up to driveextensive adoption and use of the Zycus iAnalyze tool throughout its global sourcingorganization.

On the BOM/direct side,where FEI’s annualspending is already largelyconsolidated with preferredsuppliers and negotiatedglobal pricing, Flamendsees the Zycus iAnalyzesolution being used moreas a tool to gain deeperinsight into global supplymarkets. So, for example,commodity strategists may

track spending increasesor decreases in context ofmarket pricing or changesin suppliers’ underlyingcost structures (which canbe tracked and related to

“We have found Zycus to be flexible in helping us tomanage around [our constraints] and also highlyknowledgeable in guiding us through important

decisions around how to structure our spendingdata.”





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spend using the Zycus advanced iCost feature). Flamend also sees iAnalyze as a tool formanaging compliance both to approved and preferred supplier listings and to pricing,payment and other commercial terms embedded in negotiated agreements with

preferred suppliers.

Meanwhile, on the indirect or nonproduction-related (NPR) side of FEI’s spend, which isabout one-third the size of its direct spend and comprises spending for such categoriesas IT hardware and software, energy, and telecomm services, Flamend expectsiAnalyze to produce entirely new opportunities for demand aggregation, productstandardization, SKU simplification, supplier consolidation, competitive bidding andstrategic negotiations with suppliers. “For FEI, the focus has always been on directrather than indirect spending. That will change now that the Zycus iAnalyze solution isgiving us clear visibility into these NPR spend categories.”

But, while Flamend has very big plans for iAnalyze, he suggests that FEI may not yetbe using the tool to its fullest potential. “Change management is a challenge for everycompany and we are no different from the rest. We have seen people adopt the toolsimmediately and use them a great deal but there are always a few who are reluctant tochange.”

To drive to full adoption and usage of iAnalyze, Flamend says he will pursue a two-sidedapproach, intensifying mentoring on the one hand, while also making greater use ofmonthly usage reporting from Zycus to step up compliance monitoring and reporting.“We can only realize benefits and ROI from our procurement automation technologywhen people use it. So, we will continue to offer communication and training, but willadd metrics and reporting to ensure the various tools we implement get used when

they need to be.”

A particular training approach, Flamend says, will be to ask power users on his teamto demonstrate specific use cases at meetings and other instances where commoditymanagers and lead buyers are assembled. “Training is absolutely vital and we are goingto be presenting some very concrete lessons. For example, we may demonstrate a

“We can only realize benefits and ROI from ourprocurement automation technology when peopleuse it. So, we will continue to offer communication

and training, but will add metrics and reporting toensure the various tools we implement get usedwhen they need to be.”





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variation we have discovered in payment termsamong top suppliers at a particular location.Or we will show how we discovered one of our

facilities purchasing — off contract — a veryexpensive component through a distributorat prices significantly higher than ones wehad negotiated directly with our componentmanufacturer.

Looking aheadAlso on deck for FEI is a widespread deploymentof the Zycus e-Sourcing Solution for managingcompetitive bidding events efficiently andeffectively with suppliers.

FEI’s BOM spending breaks out fairly evenly intothree large commodity groupings: mechanical,electronics, and what FEI calls ‘third-party’(the latter of which Flamend led himself beforehe went on to form FEI’s Value EngineeringGroup). While FEI’s global strategic sourcingteam is centralized organizationally, Flamendnotes that it is not centralized physically. “Ourlead buyers may be located in any of our threemanufacturing locations — Hillsboro, Oregon

(USA), Eindhoven, the Netherlands, and Brno,Czech Republic. Those lead buyers report up tocommodity managers who set global strategy.”

The Zycus e-Sourcing Solution, which canbe accessed securely by Web browser from

“We want the people in our organizations to use thesolutions as tools that drive business performanceand deliver all the benefits of disciplined spend

management while leaving us free to focus on ourcore competency, which is developing and producingelectron microscopes.”





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anywhere in the world, will make it easier and faster for those teams to collaborativelydevelop and execute competitive bidding and e-Auction type events with suppliers(where appropriate), Flamend says. However, as FEI’s business, by nature, demandsstrong collaborative relationships with relatively few innovative components suppliers,FEI is choosing to proceed slowly and cautiously, ensuring strong training for its teamsin the use of such tools.

“Our primary objective for Zycus iSource,” says Flamend, “is that our people get tospend more time focusing on strategic things — like ensuring supplier quality and

performance, understanding supply market dynamics, and managing supply risks — andless time making charts and graphs and analyzing suppliers’ bid data. We want ourpeople always focusing on value added work and strategy.

“Our longer-term vision,” Flamend continues, “is that we continue to connectmore modules — Contract Management, Financial Savings Management, SupplierManagement, and so forth. We think that adopting the complete suite of Zycussolutions makes a great deal of sense and we have the same essential vision for eachmodule. We want the people in our organizations to use the solutions as tools that drivebusiness performance and deliver all the benefits of disciplined spend managementwhile leaving us free to focus on our core competency, which is developing andproducing electron microscopes.”

“Our people should spend much more time onanalyzing and using data instead of creating it.”




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At Zycus we are 100% dedicated to positioningprocurement at the heart of business performance.For more than a decade we have been theworld’s most trusted leader in Spend Analysis.With our spirit of innovation and a passion tohelp procurement create even greater businessadvantages, we have evolved our portfolio to afull suite of Procurement Performance Solutions —

Spend Analysis, e-Sourcing, Contract Management,Supplier Management, and Financial Savings Management. Behind every Zycus solution standsan organization that possesses deep, detailed procurement expertise and a sharp focus on beingresponsive to customers.

We are a large — 600+ and growing — company with a physical presence in virtually every major regionof the globe. We see each customer as a partner in innovation and no client is too small to deserveour attention. With more than 200 solution deployments among Global 1000 clients, we search theworld continually for procurement practices proven to drive competitive business performance. Weincorporate these practices into easy-to-use solutions that give procurement teams the power to getmoving quickly — from any point of departure — and to continue innovating and pushing business andprocurement performance to new heights.

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ASIA PACIFICZycus Infotech Pvt. Ltd.Plot No. GJ — 07, Seepz++, Seepz SEZAndheri (East), Mumbai India 400 072Tel : +91 22 66407676Fax : +91 22 26850580

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