Executive Briefings

Five Essential Things to Know About PLM

While product lifecycle management (PLM) solutions have been deployed more frequently among retailers over the past 15 years, there is still widespread confusion about what constitutes PLM.  This confusion is compounded by the fact that the PLM market is maturing, which means that a wider range of solutions are offered under different umbrellas. Retailers and manufacturers would be best served if they clearly understood the fundamentals of PLM. What follows is a comprehensive definition of PLM with the goal of simplifying the process of defining requirements and selecting a vendor.

1. What is PLM?

Product lifecycle management is the process of managing the entire lifecycle of a product from an idea, through design, manufacture and delivery to the retail shelf.  All types of product data and information are managed centrally through the PLM system which creates a framework for continuous process improvement. PLM evolved from the automotive and aerospace industries where it is widely adopted and used in conjunction with CAD, CAM and PDM technologies.  While PLM mostly refers to software implementation, it is actually also a tool which improves workflow process and business execution and requires a sound change management strategy to function effectively.  PLM usually covers the following processes:

Product Data Management (PDM) and Specification Management

This includes data-centric processes that facilitate management of product, material and component data required to build a bill of material (BOM) thereby creating an all-inclusive specification package for the manufacturer. Specification management incorporates measurements and grading, manufacturing details, computer-aided design (CAD), or sketch files, and also includes cost information.

Line planning

This defines the templates for styles to be created for each product category. Line planning forms the base for organizing products across functional teams. At the same time it provides a view of the critical financial elements for products and their linking to the assortment planning process.

Collaborative product design

Creating an electronic version of themed storyboards of future design styles in a CAD or illustration application, allows designers and trading partners to review and comment on images in a collaborative manner without endangering the original file.

Development process management

This includes critical development activities and approvals that must occur before the completion of a specification. PLM applications provide version control and dynamic process visibility, and reduce risks associated with e-mailing excel files.

Workflow, critical path and event management

The critical path and event management functionality helps in tracking and displaying the status of each product at any point of time. Workflow functionality defines the role ownership for each task or event and allows for routing alerts and notifications in the case of completion or revision of a particular event.

Trading partner collaboration

This functionality enables secured access to data and includes the entry of material or product data, review and receipt of product specifications, collaboration on requests for quotation, and the ability to support joint development activities.

2. Why Implement PLM?

Retailers have adopted PLM technology for several reasons. According to Kurt Salmon Associates, "The three biggest reasons are: responding to fast-changing consumer needs, matching other retailers' shortening product lifecycles and managing a global product development process." The increase in private-label products has also driven a need for PLM. As private-label products are taking market share from branded offerings, retailers need to gain efficiencies in the way they design and develop their private brands. PLM can integrate and optimize the activities of merchants, product designers, technical designers, sourcing teams, suppliers, logistics and finance.

PLM emerged to fill a space that was not covered by ERP systems, desktop applications such as Outlook and Excel, CRM systems and design software. It enables a range of different systems and processes to work together in a smooth flow and consolidate information centrally.  The need for PLM accelerated with globalization as sourcing and buying teams needed to share and synchronize information internally and with their suppliers.

Of course there are many other practical reasons to adopt PLM, including reducing margin pressure, implementing efficiency and enhancing communication, visibility and collaboration both internally and externally. The argument that PLM, a process originally designed for industrial production, does not apply to retail is no longer valid as niche software providers have developed solutions specifically for retail as well as other verticals.

Specific reasons to adopt PLM:

• Helps manage increasing product complexity, variety and quantity

• Delivers more efficient design and development

• Supports better internal and external collaboration

• Improves relationships with suppliers

• Accelerates product cycle times

• Reduces data errors, production delays and associated costs

• Drives cost savings and margin improvements

• Improves visibility, planning and ability to manage by exception

• Ensures product quality and regulatory compliance

• Improves communication between design, merchandizing, sourcing, production and delivery

Industry figures show that PLM can help companies increase revenues by up to 10 percent and profits by up to 100 percent.

3. Stages of PLM Adoption

There are different ways to implement PLM, with the phased approach generally considered less risky than doing a complete revamp at one time. With the phased approach a company would implement their PLM system in modules based on areas of greatest need and compatibility. With this approach, PLM modules might be tested in one department or with a certain number of users, taking the lessons learned into subsequent phases. In the phased approach, companies can proceed at their own pace, better managing costs and resources, and measuring their success as they proceed.

A phased approach would typically include the following steps:

Phase 1: Strategic Planning

In this phase a company would typically define what they need. Based on these planning requirements, a company would establish benchmarks to measure their PLM system's performance. Spending sufficient time in this phase will support selecting the right PLM vendor who can match their requirements.

Phase 2: Go Live With Off-the-Shelf Functions

To save time and costs it makes sense for a company to map their processes and functionality to functions available in an off-the-shelf PLM solution. This would speed up the implementation and the go-live date. During this phase, users would typically come up with new requirements which can be worked into later phases.

Phase 3: Identify Custom Requirements

Once the off-the-shelf solution is implemented, custom requirements would be identified. These requirements can be tested prior to full commitment. Consultation is required between the vendor and the client about the costs and implications of each change.

Phase 4: Integrating the System

One of the reasons for implementing PLM is to establish "one version of the truth." This means consolidating different versions of data and making it available in a central location across the organization. It is critical to integrate the PLM system with other applications as the ERP system, so that data can be easily shared across systems.

Phase 5: Managing Change Requests

Inevitably changes will be required as the requirements are refined. It is important that different users buy into the system in order for the implementation to be successful. In this process changes should be identified and prioritized based on feedback from individual users.

4. Key Functions Your PLM System Should Have

To seriously consider a PLM system, it should have the following minimum requirements:

Ease of use: The system should easily integrate with other systems and should present no barriers for users to adopt with an intuitive user interface.

Web-Based: Be accessible through a modern web-based user interface, with a robust offline mode to cover certain requirements (e.g. import/export spread sheets for low-tech vendors).

Industry-Specific Functionality: Given different industry requirements, PLM systems should match criteria of specific industries which might prioritize different features.

Scalability: It should be possible to implement the system in phases, starting with an off-the-shelf solution and moving to customized requirements as the needs grow.

Open-Ended Visibility: Provide visibility and control across the entire end-to-end product lifecycle, from planning to product design, sourcing, order management, logistics and finance.

Configurable workflow: This should allow you to tailor the solution to your business environment and unify business process across both internal and external functions.

• Provide seamless access to information, offering a single version of the truth, through a single database and one master data model.

Critical Path Management: Functionality should include roll-up functions providing live business intelligence and the ability to manage critical milestones by exception.

Best Practices: Leverage best practices relevant to your business model and product type, with proven success in implementing these in the past.

Standards-based systems integration: Should have proven experience in integrating with existing systems in the organization.

5. The ROI of PLM

IDC found that the use of retail PLM reduced new product cycle times by as much as 80 percent, decreased product costs by 2 to 5 percent, and improved product quality by as much as 40 percent by eliminating product defects. Shifting to a direct sourcing model relying on PLM leads to savings of more than 12 percent. Leslie Hand, IDC research director for Retail Insight, said, "Retail PLM/MLM applications deliver on both accounts - facilitating continual innovation, faster cycle times, shorter lead times and higher accountability for quality and compliance while reducing the costs to design, make, ship and sell products."

Just prior to the economic downturn, analysts were predicting a 30- to 40-percent annual growth rate of retail PLM through 2015.  While that rapid rate of growth hasn't been realized, sales have been particularly strong across China, India and Asia Pacific where economies are averaging 7-percent annual growth rates.  But despite a slower growth rate than predicted three years ago, retail PLM is growing quickly, closer now to a 20-percent annual growth rate through 2015.

In the planning phase of the PLM implementation, a company would establish performance metrics to measure the success of the PLM system. Such metrics, based on typical performance of PLM systems, depending on the industry, might include:

• Increase the value of the product portfolio by 20 percent

• Increase profit by 100 percent

• Increase annual revenues by 10 percent

• Increase revenues, through faster product introduction, by 15 percent

• Increase revenues, through wider product range, by 20 percent

• Increase revenues, through extended product life, by 25 percent, and

• Increase revenues, through new services on existing products, by 40 percent.

Source: Core Solutions

While product lifecycle management (PLM) solutions have been deployed more frequently among retailers over the past 15 years, there is still widespread confusion about what constitutes PLM.  This confusion is compounded by the fact that the PLM market is maturing, which means that a wider range of solutions are offered under different umbrellas. Retailers and manufacturers would be best served if they clearly understood the fundamentals of PLM. What follows is a comprehensive definition of PLM with the goal of simplifying the process of defining requirements and selecting a vendor.

1. What is PLM?

Product lifecycle management is the process of managing the entire lifecycle of a product from an idea, through design, manufacture and delivery to the retail shelf.  All types of product data and information are managed centrally through the PLM system which creates a framework for continuous process improvement. PLM evolved from the automotive and aerospace industries where it is widely adopted and used in conjunction with CAD, CAM and PDM technologies.  While PLM mostly refers to software implementation, it is actually also a tool which improves workflow process and business execution and requires a sound change management strategy to function effectively.  PLM usually covers the following processes:

Product Data Management (PDM) and Specification Management

This includes data-centric processes that facilitate management of product, material and component data required to build a bill of material (BOM) thereby creating an all-inclusive specification package for the manufacturer. Specification management incorporates measurements and grading, manufacturing details, computer-aided design (CAD), or sketch files, and also includes cost information.

Line planning

This defines the templates for styles to be created for each product category. Line planning forms the base for organizing products across functional teams. At the same time it provides a view of the critical financial elements for products and their linking to the assortment planning process.

Collaborative product design

Creating an electronic version of themed storyboards of future design styles in a CAD or illustration application, allows designers and trading partners to review and comment on images in a collaborative manner without endangering the original file.

Development process management

This includes critical development activities and approvals that must occur before the completion of a specification. PLM applications provide version control and dynamic process visibility, and reduce risks associated with e-mailing excel files.

Workflow, critical path and event management

The critical path and event management functionality helps in tracking and displaying the status of each product at any point of time. Workflow functionality defines the role ownership for each task or event and allows for routing alerts and notifications in the case of completion or revision of a particular event.

Trading partner collaboration

This functionality enables secured access to data and includes the entry of material or product data, review and receipt of product specifications, collaboration on requests for quotation, and the ability to support joint development activities.

2. Why Implement PLM?

Retailers have adopted PLM technology for several reasons. According to Kurt Salmon Associates, "The three biggest reasons are: responding to fast-changing consumer needs, matching other retailers' shortening product lifecycles and managing a global product development process." The increase in private-label products has also driven a need for PLM. As private-label products are taking market share from branded offerings, retailers need to gain efficiencies in the way they design and develop their private brands. PLM can integrate and optimize the activities of merchants, product designers, technical designers, sourcing teams, suppliers, logistics and finance.

PLM emerged to fill a space that was not covered by ERP systems, desktop applications such as Outlook and Excel, CRM systems and design software. It enables a range of different systems and processes to work together in a smooth flow and consolidate information centrally.  The need for PLM accelerated with globalization as sourcing and buying teams needed to share and synchronize information internally and with their suppliers.

Of course there are many other practical reasons to adopt PLM, including reducing margin pressure, implementing efficiency and enhancing communication, visibility and collaboration both internally and externally. The argument that PLM, a process originally designed for industrial production, does not apply to retail is no longer valid as niche software providers have developed solutions specifically for retail as well as other verticals.

Specific reasons to adopt PLM:

• Helps manage increasing product complexity, variety and quantity

• Delivers more efficient design and development

• Supports better internal and external collaboration

• Improves relationships with suppliers

• Accelerates product cycle times

• Reduces data errors, production delays and associated costs

• Drives cost savings and margin improvements

• Improves visibility, planning and ability to manage by exception

• Ensures product quality and regulatory compliance

• Improves communication between design, merchandizing, sourcing, production and delivery

Industry figures show that PLM can help companies increase revenues by up to 10 percent and profits by up to 100 percent.

3. Stages of PLM Adoption

There are different ways to implement PLM, with the phased approach generally considered less risky than doing a complete revamp at one time. With the phased approach a company would implement their PLM system in modules based on areas of greatest need and compatibility. With this approach, PLM modules might be tested in one department or with a certain number of users, taking the lessons learned into subsequent phases. In the phased approach, companies can proceed at their own pace, better managing costs and resources, and measuring their success as they proceed.

A phased approach would typically include the following steps:

Phase 1: Strategic Planning

In this phase a company would typically define what they need. Based on these planning requirements, a company would establish benchmarks to measure their PLM system's performance. Spending sufficient time in this phase will support selecting the right PLM vendor who can match their requirements.

Phase 2: Go Live With Off-the-Shelf Functions

To save time and costs it makes sense for a company to map their processes and functionality to functions available in an off-the-shelf PLM solution. This would speed up the implementation and the go-live date. During this phase, users would typically come up with new requirements which can be worked into later phases.

Phase 3: Identify Custom Requirements

Once the off-the-shelf solution is implemented, custom requirements would be identified. These requirements can be tested prior to full commitment. Consultation is required between the vendor and the client about the costs and implications of each change.

Phase 4: Integrating the System

One of the reasons for implementing PLM is to establish "one version of the truth." This means consolidating different versions of data and making it available in a central location across the organization. It is critical to integrate the PLM system with other applications as the ERP system, so that data can be easily shared across systems.

Phase 5: Managing Change Requests

Inevitably changes will be required as the requirements are refined. It is important that different users buy into the system in order for the implementation to be successful. In this process changes should be identified and prioritized based on feedback from individual users.

4. Key Functions Your PLM System Should Have

To seriously consider a PLM system, it should have the following minimum requirements:

Ease of use: The system should easily integrate with other systems and should present no barriers for users to adopt with an intuitive user interface.

Web-Based: Be accessible through a modern web-based user interface, with a robust offline mode to cover certain requirements (e.g. import/export spread sheets for low-tech vendors).

Industry-Specific Functionality: Given different industry requirements, PLM systems should match criteria of specific industries which might prioritize different features.

Scalability: It should be possible to implement the system in phases, starting with an off-the-shelf solution and moving to customized requirements as the needs grow.

Open-Ended Visibility: Provide visibility and control across the entire end-to-end product lifecycle, from planning to product design, sourcing, order management, logistics and finance.

Configurable workflow: This should allow you to tailor the solution to your business environment and unify business process across both internal and external functions.

• Provide seamless access to information, offering a single version of the truth, through a single database and one master data model.

Critical Path Management: Functionality should include roll-up functions providing live business intelligence and the ability to manage critical milestones by exception.

Best Practices: Leverage best practices relevant to your business model and product type, with proven success in implementing these in the past.

Standards-based systems integration: Should have proven experience in integrating with existing systems in the organization.

5. The ROI of PLM

IDC found that the use of retail PLM reduced new product cycle times by as much as 80 percent, decreased product costs by 2 to 5 percent, and improved product quality by as much as 40 percent by eliminating product defects. Shifting to a direct sourcing model relying on PLM leads to savings of more than 12 percent. Leslie Hand, IDC research director for Retail Insight, said, "Retail PLM/MLM applications deliver on both accounts - facilitating continual innovation, faster cycle times, shorter lead times and higher accountability for quality and compliance while reducing the costs to design, make, ship and sell products."

Just prior to the economic downturn, analysts were predicting a 30- to 40-percent annual growth rate of retail PLM through 2015.  While that rapid rate of growth hasn't been realized, sales have been particularly strong across China, India and Asia Pacific where economies are averaging 7-percent annual growth rates.  But despite a slower growth rate than predicted three years ago, retail PLM is growing quickly, closer now to a 20-percent annual growth rate through 2015.

In the planning phase of the PLM implementation, a company would establish performance metrics to measure the success of the PLM system. Such metrics, based on typical performance of PLM systems, depending on the industry, might include:

• Increase the value of the product portfolio by 20 percent

• Increase profit by 100 percent

• Increase annual revenues by 10 percent

• Increase revenues, through faster product introduction, by 15 percent

• Increase revenues, through wider product range, by 20 percent

• Increase revenues, through extended product life, by 25 percent, and

• Increase revenues, through new services on existing products, by 40 percent.

Source: Core Solutions