PLM Primer: The Enterprise Portfolio's Newest Imperative

Looking for ways to wring additional costs from your business operations? Then look no further than product lifecycle management to streamline production processes, improve design and retain customers.

In a global economy defined by intense competition, ever-changing consumer preferences and financial fluctuation, nobody accepts the status quo as a permanent condition. Cost, quality, margin and market-share have been constant concerns for many corporate leaders, causing them to rivet their attention on operational issues. The most common response has been for corporations to deploy various IT software initiatives, including enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM) solutions.

However, companies are finding it increasingly difficult to wring additional surplus cost from their business operations. Many companies are therefore looking for new ways to increase their top-line revenues, which requires them to meet customer expectations for better quality and captivating features while charging premium pricing for their product offerings. Just as important, companies want to target their highest revenue-related priorities first  without having to incur all of the costs associated with implementing an entire enterprise-wide system. In short, they are looking for solutions that can be adopted in bite-sized chunks. To address these issues, today's product makers are adopting a new enterprise imperative called product lifecycle management (PLM).

All four of the above-mentioned enterprise initiatives are essential in today's dynamic manufacturing environment, but PLM is different from ERP, SCM and CRM. While those three systems excel at addressing business issues that influence a company's operational costs, PLM manages the lifeblood of business  the product offerings that determine a company's ability to generate revenue, capture market share and ensure competitive advantage.

Good Question: What Exactly is PLM?

The term PLM itself was broadly adopted in 2001, defining the application footprint and business process of PLM as everything from ideation and initial design to engineering, direct material sourcing, ramp-up of manufacturing and asset lifecycle management. What does that boil down to? PLM enables companies to solve strategic issues that influence the success of the product lifecycle from beginning to end. Companies are adopting PLM to manage entire product portfolios and expedite the digital transformation of their manual business processes.

Just as ERP, SCM and CRM did not appear over night, PLM has its roots in other technologies  notably computer-aided design (CAD), computer-aided manufacturing (CAM), computer-aided engineering (CAE) and product data management (PDM). Like these early investments, PLM gives companies the ability to practice concurrent engineering, follow-the-sun product development and supply chain collaboration.

PLM also enables companies to capture and re-use knowledge about their products, processes, resources, suppliers and customers so that the value of their product portfolios can be increased, their lifecycle costs minimized and their revenues maximized.

Where PLM Fits in Today's Digital Enterprise

Managing a product lifecycle in a global economy is a daunting proposition. Most companies have multiple products in different lifecycle stages, and all with related dependencies and the potential opportunity to reduce redundancies and establish synergies.

However, lifecycle participants frequently reside in different time zones, employ different application systems and work for different companies. Product makers often combine and recombine their value chain from one business opportunity to another. To meet the rising demands of dynamic markets, companies have to rapidly change, and continually improve, their product content. It is no wonder that today's product lifecycles need better planning, better communications and more effective business processes.

According to The Forrester Report's survey of Fortune 500 companies, as cited in "Development Portals Emerge," today's most frequent product development problems include:
" Not enough upfront planning
" Misalignment of expectations
" Communication silos
" Insufficient resources
" Poor supply chain coordination
" Technical problems

Prospering in a global economy requires companies to embrace their suppliers, business allies and trusted customers in an extended enterprise that addresses the unmet issues of today's product makers.

Companies can start their PLM initiatives by identifying their product and marketing requirements. PLM traces these requirements to ideas, concepts, prototypes, parts, product definitions, bills of materials (BOMs), process models and after-market service definitions. The end result is a body of product knowledge that every lifecycle participant  and every mission-critical application in a company's value chain  can use for synchronizing product assumptions, collaborating and making business decisions.

Business Value

Corporations are finding that the open, collaborative environment PLM creates, as well as the revenue generation that often follows, is generally worth the time and effort required to research and select PLM solutions. PLM's top-line revenue-enhancing benefits stem from its ability to foster time-to-market compressions, product innovation and quality improvement. Bottom-line benefits emanate from PLM's ability to cut rework, as well as material, structural and warranty costs.

First, PLM allows downstream players (from concept through service and maintenance organizations) to participate in the earliest stages of product lifecycle, which can determine up to 80 percent of a product's development cost and alter a company's bottom-line results. Here are a few examples:
" One high-tech company implemented PLM to develop new engines, and now its design cycle times have been cut by 50 percent;
" a large aerospace company put PLM in place to change the way it sells and manufactures airplanes, and it now delivers products at one-tenth the cost in half the time;
" and finally, a manufacturer in aeronautics and renewable energy products deployed PLM and cut its design errors by 88 percent.

Next, while PLM addresses the product introduction phase of the lifecycle in many ways, its capabilities go beyond the impact of CAD, CAM, CAE and PDM in other lifecycle stages. For starters, PLM solutions manage all of the intellectual capital that extended enterprises use to support the entire product lifecycle, including product, process, resource and supplier information. Enterprises use PLM to integrate their product knowledge with operational information gleaned from ERP, SCM and CRM. Every entitled lifecycle participant can share and exchange this knowledge once it is in place. PLM also is distinguished by its ability to automate and streamline processes across every stage in the product lifecycle.

Additionally, PLM addresses a company's need to increase annual and long-term product revenues. PLM has time-to-market acceleration, which gives companies that are first-to-market the ability to establish pricing premiums that can be sustained until lagging competitors catch up. It also lets companies expand the size of their product portfolios and offer more new products in a given year. As for the long-term revenue, PLM can be used to lengthen the lifespan of product platforms. PLM enables companies to re-use the intellectual capital associated with a cornerstone platform. This strategy facilitates more frequent product enhancements, product derivatives, niche offerings and add-ons. PLM's support for systems engineering, information re-use and configuration management drives this top-line benefit.

There are other business values as well. For instance, PLM can influence the manufacturing/production stages in the product lifecycle, which enable companies to digitally optimize and validate manufacturing facilities and production processes for product configuration. It can provide connected portfolio management to balance customers' requirements and preferences with how potential lifecycle decisions will affect a product's design content, cost, validation test, quality, reliability, maintainability and safety. Also, PLM's in-service capabilities demonstrate its after-sales impact. Companies that generate significant revenue from servicing and maintaining products are able to supply their service providers with the complete product information needed to support a widely dispersed customer base. And in the final stages of a product's lifecycle, PLM's ability to facilitate information re-use enables companies to "harvest" maturing products by offering simplified enhancements at greatly reduced costs.

Bringing It All Together

PLM is for companies that are ready to manage product lifecycles from the cradle to their grave. Aberdeen Group says that early PLM users are already achieving a competitive edge in their markets, and use of the applications will become a prerequisite for survival in manufacturing. In fact, AMR Research has estimated that U.S. manufacturing alone could achieve $106 billion in incremental annual operating margins with fully deployed PLM technologies.

It's clear that PLM technology can provide strategic and financial impact. However it is not a one-time, one-size-fits-all proposition. With open PLM systems, companies can address their highest priorities first and expand their deployment to suit the dynamics of their evolving requirements. In addition, many of today's PLM suppliers are providing solutions that are tailored to specific business needs, providing fast time-to-value so virtually any company can begin achieving the competitive advantages of PLM.

Tony Affuso is president of EDS PLM Solutions.