Over time, no amount of after-sale service or customer care can compensate for less than superior products. Whether product superiority is measured primarily by innovation, customization, price point or overall quality, manufacturers must understand market requirements and be able to rapidly develop and launch the products customers want.
This challenge is made more difficult by shrinking product life-spans, a concomitant rise in new product launches, increased outsourcing of design and manufacturing, and business consolidations that often look good on paper but that create organizations incapable of sharing information.
"Many existing business processes that manufacturers currently use are simply not responsive enough to grapple with these rapid changes," says a recent ARC Advisory Group report titled Product Lifecycle Management: A Manufacturing Directive. "The need for speed, agility and flexibility requires a much more adaptive, non-linear process, a process that allows for secure yet ad-hoc collaboration, distribution of information, and interaction among any number of partners within a given value chain."
As indicated by the report title, these processes and the emerging technology supporting them are known as Product Lifecycle Management. PLM is an enterprise solution that takes a number of pre-existing elements, such as product data management and computer-assisted design and engineering, and adds new elements like internet-based collaboration and visualization. It integrates these into a structured framework that enables a company to consolidate, manage, align and share all information about a product throughout its life, from initial conception to eventual retirement. Benefits are numerous and include better product input from customers and suppliers, fewer engineering changes, faster time to market and lower overall cost.
PLM encompasses a wide range of applications or functions. PTC, one of the largest PLM vendors, sums them up as the three Cs: create, collaborate and control. More broadly, they typically include:
• Customer Requirements Management - gathering data from point-of-sale and customer relationship management systems to figure out what products, features and functions will sell to what customer constituencies;
• Collaborative Product Design - authoring tools and collaborative applications that enable designated users to view and comment upon product designs, suggest alternatives and make changes in a secure, virtual workspace;
• Direct Material Sourcing - applications for working with suppliers to engineer and acquire necessary parts and components;
• Product Portfolio Management - project management tools and decision support;
• Product Data Management - The foundation database that aggregates and updates product information and documents, creates bills of material, and manages change orders and product configurations. It also archives information on past products and makes it available for reuse.
ARC Advisory Group, Dedham, Mass., likens PLM to DNA. "Both provide a very accurate description or map that enables others to act," it says. "Much like DNA, PLM contains all of the vital information necessary for defining how a product will look, act, feel and function within its chosen environment."
Others view PLM as the latest evolution in a roster of enterprise solutions. "We have had ERP [enterprise resource planning] focused on resources, SCM [supply-chain management] focused on the supply chain and CRM [customer relationship management] focused on customers," says Chris Kelley, vice president of marketing communications for EDS PLM Solutions, Plano, Texas.
"Now we add PLM, which is focused on products. If a company is looking to have innovative products, have the best portfolio of products and have these products come to market faster than its competitors' do, it is going to look to PLM as one of its core enterprise systems," says Kelley.
"As companies get down to really thinking about their product development strategy, they almost always realize they need to change some of their processes and rethink how they do things."
And it is going to need to have those core systems work together. "A PLM system has to go out and touch a company's manufacturing and ERP systems, its SCM systems and its CRM systems," says Kelley. "To realize the full upside potential of PLM, all those things need to be integrated into a single view." EDS uses SeeBeyond's integration platform for this purpose. "Our agreement with SeeBeyond shows our commitment to having an XML-based integration strategy that allows us to integrate with existing systems and with ones we can't now anticipate," he says.
SAP, the Germany-based leading provider of enterprise resource planning software, similarly sees PLM as providing the third of the three corporate pillars of success: customer intimacy, supported by CRM; operational excellence, supported by SCM; and product leadership, supported by PLM. What is critical, says Stephan Schindewolf, vice president of product management, is that these three systems be completely integrated, so that they can all feed into a common data model. "SAP is one of a very few solution providers able to provide an integrated set of solutions that address all three of these areas relevant to corporate success," he says. The SAP solutions are all built to sit on top of its core enterprise platform.
Despite potential bottom- and top-line benefits, making the case to implement PLM at an individual company level can be difficult. Part of the problem is that PLM does touch so many parts of the enterprise. As a result, it typically has many adherents, but often no powerful champion. "With PLM, sponsorship is much more diverse than with other solutions, and it is harder to find that guy who is going to jump in front of the bus and say, 'we absolutely have to do this,'" says Charles W. Downey, global lead partner for the Collaborative Product Commerce practice at PwC Consulting.
An Enterprise-wide View
Kevin O'Marah, head of PLM research at AMR Research, Boston, agrees. "A PLM strategy requires a corporate view," he says. "Most pitfalls can be traced back to approaching PLM from a parochial, engineering-only perspective." Top executive attention to PLM is justified, given the impact it can have on corporate financials, O'Marah says. Based on surveys with around 100 companies that have implemented these solutions, AMR estimates that if PLM were deployed across all U.S. manufacturers, the cumulative margin increase would be in the neighborhood of $106bn.
These savings come from many areas, however, giving PLM a "complex" return-on-investment profile. "There are both cost savings and revenue gains to be had from a PLM implementation, any one of which could be the basis for a respectable business case," says O'Marah. But because these gains are so dispersed, he says, it is difficult for an initiative to develop necessary momentum or for proponents to even know where to begin.
"I find that most of my major customers are schizophrenic on this issue," says Downey. "They really want the solution set because of the top line opportunities and the new value proposition it creates, but they want to justify it based on productivity savings. They talk about transitioning the whole product development area into a more contemporary and agile environment so they can do lots of different things, but they want a six-month payback. This is probably the Achilles heel of PLM."
"A lot of people think most product costs are in manufacturing, but the R&D, design and engineering aspects represent a significant portion."
Vendors are aware of these issues and are addressing them with versions of their software that are easier and faster to implement. PTC, Needham, Mass., recently introduced Windchill PDM Link, a packaged, web-based version of its proven product-data-management application. As the data storehouse on which all other functions rely, PDM is considered the foundation of PLM solutions. "PDM provides the control," says O'Marah. "All the other parts of PLM come to nothing if they can't reference back to PDM's single version of the truth."
"With PDM Link we have hit a new breakthrough," says Jim Heppelmann, executive vice president for software solutions at PTC. In the past, companies typically have viewed PDM as a "necessary evil - something they need to have but that is really difficult to put in place," he says. "So we set out to take our Windchill PDM technology and package it up in a way that is much easier to digest."
PDM Link is a pre-integrated, web-based solution that is ready to be dropped in and turned on as a way to knit together all the different parties and systems involved in product management. It includes a whole series of workflow-driven product development processes, many of which are built around best-practice CMII standards published by the Institute of Configuration Management. It interfaces easily with other systems including ERP, says Heppelmann, and because it is web-based it can be opened up to a broader community outside the enterprise. "Each product team has a personalized work space and woven throughout is the idea of pervasive visualization," he says. "It doesn't matter if what you want to view is a document, schematic, mechanical drawing, or 3D design, if all you want to do is look at it, all you need is a web browser."
PTC'S Quick Start program promises to have the PDM Link technology up and production ready in a "world record" five weeks. Heppelmann is quick to point out, however, that this timetable does not include process change. "As companies get down to really thinking about their product development strategy, they almost always realize they need to change some of their processes and rethink how they do things," he says. "That in and of itself can be a big effort."
MatrixOne, a PLM vendor based in Westford, Mass., last month unveiled its "MatrixOne Business Value Program", which is aimed at dramatically reducing the time, uncertainty and risk of planning a product collaboration solution. MatrixOne says the program will give customers a much fuller view of all potential returns from such a solution and a far lower risk of missing opportunities or failing to make an adequate business case for the investment.
"MatrixOne's product collaboration solutions deliver substantial returns from the earliest stages of a product's lifecycle, and span across global value chains," says Mike Segal, senior vice president for customer success. "However, these returns can be complex to capture and describe in the comprehensive manner demanded by executive level decision makers. To get executive level support of a program, ROI must be comprehensively described and clearly communicated."
With a supportable projection of achievable returns, companies also can use this program to quantify the costs of inaction, a figure that MatrixOne says would run in excess of $1m per month at the average company.
The "MatrixOne Business Value Program" is based on actual, quantifiable results achieved by real-world customers. One large, U.S.-based high-tech manufacturer involved in the research broke even on its $2.3m software investment in just five months, MatrixOne says, and had a three-year ROI of 628 percent.
Other vendors also are taking a modular approach. "SAP has a good handle on that because its whole ERP approach has been modular," says Downey, which is an integration partner for SAP, PTC and MatrixOne. Kelley of EDS says its PLM solution also is designed to allow customers to identify the areas with the highest or quickest return for initial implementation. "Then they can sort of bootstrap their way to solving their lower priority problems, and in the end you have additional benefits because all these pieces work together."
The benefit most companies want first to attack, according to an AMR survey, is to improve their handling of engineering change orders, which directly impacts product cost and time to market.
"A lot of people think most product costs are in manufacturing, but the R&D, design and engineering aspects represent a significant portion," says Joe Marino, vice president of presales consulting at Mapics, Alpharetta, Ga. Mapics targets mid-sized high-tech and complex manufacturers with its PLM and other enterprise solutions.
The early design phase of a product generally represents between 60 percent and 80 percent of its final cost, creating what AMR calls an "innovation window." This is when incorporating new concepts is most efficient and when getting early input from customers and suppliers can have big returns. "With PLM collaboration tools, you can really start communicating with customers about potential changes in a product," says Marino. "At the same time you can be talking with your suppliers. They might suggest that you do things a little differently so the design doesn't affect their component as much or so you don't add as much cost," he says. "We call that practical innovation."
Once a product passes through the innovation window to the engineering and production phases, changes become more costly and time consuming and it is imperative to have a structure for managing them. "A lot of change is OK in the early phases, but the amount of change has to decrease dramatically as you move toward release and production," says Hepplemann of PTC. "Then you need to lock down the process and add some formality, because it is easy to change an engineering design the day before a product goes into production, but very expensive to change it the day after. So we need to make sure that as we near and move into production we add formality, so we have a process to study changes, make sure we fully understand both the positive and negative impact, and know how and when we will incorporate the change into the pr
Just being able to get information in a single, common database that is accessible to all employees can save a customer "tons of money."
"If there is a change order, you need to be able to determine if you can do the change at all, the cost of the change, the schedule and timing impact of the change," says Schindewolf. "These things require a common data model that can access information from the manufacturing side as well as from the engineering side."
A centralized data model also is needed for another benefit that O'Marah says is "a very popular issue" with many companies - cost reduction through design reuse. If a company can easily find work that was previously done and reuse a design for parts or components that performed well, time and money is saved. In addition, says O'Marah, the success of that particular product launch is more certain and warranty costs go down.
Just being able to get information in a single common database that is accessible to all employees can save a customer "tons of money," says Paul Gilmartin, vice president of product management at MatrixOne. "What happens is large companies that have either grown through acquisition or grown with lots of walls internally can't get a common look at information across the enterprise." When MatrixOne helped one large consumer packaged goods customer get a common "vault" of specifications, the company was able to aggregate purchases of common parts across divisions and gain greater economies of scale, he says.
Similarly, the seemingly simple ability to locate documents can have a big cost impact. Siemens Medical, an SAP customer, reported a 60 percent reduction in the cost of administering its document archives and an 80 percent reduction in the time it took to search and access documents.
Kellie Christensen, technology director at Banner Engineering, a PTC customer, says the inability to find specific drawings out of the tens of thousands stored in filing cabinets was a big frustration for the company before recently implementing PDM Link. As that solution is rolled out, "I'm sure we will find many cases where we have spec'd out multiple parts that are essentially the same because we didn't know we already had it."
Providing a virtual workspace for workers that may be globally dispersed is another benefit companies seek, says Kelley. EDS offers a collaboration/visualization tool that allows real-time teaming and that can be implemented in 30 days with almost immediate payback, he adds. "These virtual teams can form on an ad hoc basis and, through the use of this tool, be able to extract all the intellectual property that sits throughout their company relative to their design problem. If this results in eliminating every three or four engineering change orders down the road, it will pay for itself."
"Ultimately, for folks who are trying to do a better job managing the process of bringing new products to market, whether complex products like vehicles and machine tools, or much less complex and higher volume products, the problem essentially is the same," says O'Marah: "How do I coordinate across the different constituents in my organization to try to take advantage of that innovation window and do something about costs, attractiveness and ultimate price point?" That's what PLM is all about.
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