Using ERP, MRP or any other system as the enterprise backbone of a company is equivalent to driving out of your rear-view mirror.  It reflects an emphasis on yesterday's strategies and product lines.  Forward-thinking companies are leveraging the 3D / virtual experience afforded from product lifecycle management (PLM), coupled with extended business processes, that provides a unique and superior enterprise foundation.

A PLM enterprise backbone anchors all enterprise systems around a forward view of a company's product and market strategy in ways that are just not feasible in an ERP system, by their very transactional nature. Competitive corporations establish their market strategies based on their portfolio of current and new products, and the manufacturing platforms and supply chain strategies that support them.

As markets recover from today's global economic contraction, companies that position new and innovative products will emerge with advantage over those that simply retrench and rationalize their previous products, manufacturing footprints and supply chains. This really highlights the fundamental difference and opportunity in managing an enterprise backbone from PLM rather than ERP.  There are several areas in which a PLM enterprise backbone can support supply chain activity, including sourcing and procurement, compliance and sustainability and global partner management. 

Sourcing and Procurement
When integrated with PLM, direct materials sourcing and extended enterprise collaboration enhances a manufacturer's negotiation leverage for new and existing supplier contracts and helps resolve supplier and partner performance and design issues. Sourcing, commodity and acquisition integration programs can be globally managed to the latest product attributes and designs. Spend can be more effectively aggregated to the preferred suppliers, optimizing volume pricing, reducing both parts proliferation and material and service costs. By identifying sourced components based on part-reuse and product and manufacturing platform alignment, manufacturers can reduce inventory levels and respond with greater agility to shifts in demand. This streamlines the process of identifying alternate or functionally equivalent parts when standard parts are not available.

There are other benefits such as standardization, which allows every participant in the quoting process (the manufacturer, customer, suppliers and partners) to manage the same version of the product definition, including revisions and program changes. PLM also facilitates cost analysis and supplier negotiations.

Negotiations with preferred suppliers go beyond obtaining best prices and favorable terms. When run on a PLM backbone, these otherwise standardized processes become avenues for harnessing supplier innovation and design alternatives, allowing manufacturers to address market needs quickly and efficiently. Suppliers become true partners by not just providing components and services, but by also proposing new technologies and solutions to meet market requirements.

Managing Global Partners
Establishing PLM as a key enterprise backbone sets competitive capabilities for new product programs by assuring the alignment of engineering to established platform and sourcing strategies. The cost and quality advantages of reusing existing and standard parts, coupled with the ability to negotiate new program costs, based on a manufacturer's total purchasing volume with a supplier, increases the ability to control cost, quality and timing requirements of the new product programs. These sourcing and supplier collaboration competencies are critical for companies to establish and maintain performance improvement capabilities. PLM helps companies apply their engineering resources more uniquely on resolving market requirements and revenue opportunities, and less time having to resolve design and quality issues with their suppliers.

Leveraged these ways, PLM gives visibility to a company's total spend exposure by supplier, and identifies the preferred parts by supplier, as well as enhances the ability to collaborate and resolve design issues in key areas of new technologies.

Compliance and Sustainability
From a regulatory compliance standpoint, PLM needs to be managed as a mission-critical enterprise system.

Product companies can avoid late-stage design changes and explore ways of improving product designs while still meeting compliance requirements. Companies can also reduce or eliminate the use of hazardous materials and substances in their products, thereby avoiding problems such as launch delays, recalls, fines, poor customer satisfaction and a damaged public image.

In addition to regulatory compliance, PLM systems are critical to a company's overall environmental performance. More than 80 percent of the ecological impact of a product across manufacturing, usage, maintenance and repair and end-of-life disposal is determined during initial product design.

Upcoming regulations may even impact the energy efficiency of an entire value chain, as well as its carbon footprint. This will require companies to manage a portfolio of eco-design initiatives for a product's material, energy and carbon impacts, necessitating lifecycle analysis and product management through design, sourcing, manufacturing, distribution and end-of-life processes.

These capabilities are part of the foundational enterprise PLM capability and are critical to emerging from this new economic crisis with renewed global advantage.

Brian Chambers is director of business strategy and development at Dassault Systèmes.

Source: Dassault Systèmes