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Team 9Brian Eaton * Amalia Vera * Kyle Maresh

Nayab Momin * Jeng Tcheung

Safety Moment: Beat the Heat

Did you know?● Severe heat has caused more deaths than all types of natural disasters

combined.● Once the body reaches 40.5C°(104.9F°), it will suffer a heat stroke

which can result in death if not treated immediately.● Injuries from severe heat are preventable!

What can you do?1. Stay hydrated2. Proper Clothing3. Take breaks4. Utilize shade5. Limit activity in direct sunlight6. Avoid caffeine and alcohol

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Market Analysis

Data Analysis

Supplier Evaluation

Make/Buy Recommendation

Sourcing Strategy

Implementation

Conclusions

Agenda

 

EVDT

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Market Analysis

Buyers Power: Strong

- Gas market is down

- Low gas $ leads to less drilling

- Demand for components are down

- Suppliers desperate to move product

Threat of Substitution: Weak

- Dry Trees- shallow or medium depth

- Simple Trees- shallow or medium depth

- Aker deep-water dry tree platforms in R&D

Supplier Power: Weak

- Gas market is down

- Low gas $ leads to less drilling

- Demand for components are down

- Suppliers desperate to move product

Threat of New Entry: Weak

- High entry barriers

- Complexity of product

- R&D Cost

- Technical capability

- Patent and trademark

Competition within Industry: Moderate

GE Oil & Gas

Cameron

Aker Solutions

Dril-Quip

Opportunity: The market for Oil should recover by 51% of today’s value by the beginning of Q1 of 2016 Threat: Lower oil prices would immediately constrain FMC to a low revenue growth - Geopolitical risk

Porter’s 5 Forces

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Data Analysis

* Indicates a part with a criticality of 8 or above

Capacity Analysis

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Supplier EvaluationSupplier Grading Metrics Supplier Performance Strategy

Suppliers Requiring SDEs

# o

f S

up

pli

ers

Scorecard Grade

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Make/Buy Recommendation

Total Variable Cost + Cost of Purchasing Additional Capacity = Total Component Make Cost

Make Components With a Competitive Advantage

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Sourcing Strategy - Machining

Sourcing Strategy

Spend Breakdown > $6M = 16% discount

Sure Clad Offer- REJECT THE OFFER- Would throw off local sourcing

requirement- Sure Clad isn’t $ competitive for

every component- 85% of demand is too much to give

to 1 supplier- Sure Clad will cost more long-term

with increased $ and shipping charges

- Only reason to accept offer is PO-1 for Gate Valve

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Sourcing Strategy - OEM

Sourcing Strategy

Spend Breakdown

> $6M = 9% discount

> $3M = 6% discount

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Sourcing Strategy - Fabrication

Sourcing Strategy

Spend Breakdown > $3M = 12% discount

What-if Analysis

- Increase Offshore Solutions spend to over $6M

- Increase volume discount to 20%- Save $4,000 on total category

spend- Increase inventory for future

customer orders

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Implementation Strategy

Phase 1(Short term)

• Supplier Score Card

• Determine preferred supplier list

• Resend RFPs for Gate Valves

Phase 2 (Mid Term)

• Reevaluate suppliers for Gate Valves and decide supplier

• Maintain Supplier Relationship

• Finalize Contracts (reevaluate contracts yearly)

• Add any new information into FMC System

Phase 3 (Long Term)

• Continuous Supplier Benchmarking

• Continuous Review of Market

• Get quality statements from suppliers. Include “supplier responsibility” clause in contract. If issues or damages occur, a third party is brought in to determine the cause. If the cause is linked back to poor quality of a suppliers product, the supplier is obligated to compensate FMC and any involved parties.

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Conclusions

Spend By Category