Anaheim, CA May 2, 2003 EDS and A.T. Kearney this week unveiled a new software solution that integrates product lifecycle management (PLM) functionality with e-sourcing capabilities as a way of giving purchasing practitioners early input into the product development process.
The providers' Lifecycle Sourcing solution integrates the recently released 5.0i version of the eBreviate e-sourcing suite of technologies from the A.T. Kearney Procurement Solutions unit into Teamcenter, EDS PLM Solutions' flagship solution, and adds A.T. Kearney's sourcing consulting services for good measure.
EDS and A.T. Kearney point to the fact that, according to different studies, some 70 to 80 percent of a product's cost is fixed by the time the design process concludes. And yet a survey e-sourcing practitioners by technology consultancy Aberdeen Group revealed that just 12 percent of sourcing groups are involved in the development process before the design pilot or prototype stages. "At these late stages, engineers have typically assigned part specifications and suppliers for a product, all without insight into design manufacturability, supplier capabilities, true product costs or alternatives," wrote Tim Minahan, vice president of supply chain research at Aberdeen.
The new offering from EDS and A.T. Kearney, planned for availability beginning in the third quarter, is intended to create a linkage between the engineering and procurement functions, integrating data and processes across the design-to-source cycle. Using the solution, procurement professionals can provide input to product design data via Teamcenter with the goal of helping a company reduce time-to-market cycles and achieve product costs savings.
The two providers said that Lifecycle Sourcing can improve the negotiation process between engineering, purchasing and suppliers because the solution makes the intellectual assets in the design process, including specifications and requirements, visible to the entire enterprise, ensuring that all parties have access to the information they need. Additionally, pre-determined workflows can trigger cross-organization events as a way of ensuring that development project move along smoothly and with all necessary parties duly engaged.
The joint solution targets direct material costs designed into products in the development phase, and the two providers are focusing on industries where engineered materials drive a significant portion of product costs, including automotive, consumer packaged goods (CPG), aerospace and defense, and high-tech. The potential savings from using this type of solution could be significant, according to Minahan. "Aberdeen's e-Sourcing Index found that companies engaging sourcing in the concept and development stages of design can achieve cost savings of up to 20 percent," Minahan said, referring to the consultancy's quarterly survey of e-sourcing practitioners.
Aberdeen has similarly estimated that incorporating purchasing earlier in the design process could help companies reduce time-to-market cycles 10 percent to 20 percent. That's a key benefit, according to Mike Sorenson, vice president of sales and marketing for A.T. Kearney Procurement Solutions, because it transforms e-sourcing from a means of driving cost reductions into a tool for boosting revenues. "We can now assist organizations in shortening their innovation process so that they can get new products to market quicker, thereby increasing the top line," Sorenson said.
Raj Khoshoo, vice president for strategic initiatives at EDS PLM Solutions, explained that the joint services and solutions offering allows EDS and A.T. Kearney to offer companies a phased engagement that begins with spend analysis and the development of commodity strategies before moving into the use of e-sourcing tools and, subsequently, the integration of those tools into the product design process.
The ultimate goal is an integrated development-sourcing process allowing for sustainable business transformation, but the providers assert that each along with way offers value on its own, so customers derive returns on their incremental investment while building toward the integrated process.
While the spend analysis and commodity strategy services, as well as the e-sourcing tools, are largely available now, the integration capabilities between PLM and e-sourcing will be available in the third quarter, and the functionality allowing for sustainable business transformation is due for delivery by the end of the year or in the early first quarter of 2004.
That latter functionality will include predictive spend analysis in PLM, supplier performance measures and "lights out" surveys intended to move purchasing executives out of the business of managing transactions with suppliers on behalf of engineers into the more strategic role of managing the relationships with suppliers while allowing engineers more direct access to the suppliers. "In the engineering space, where there is heavy collaboration, we do want to use a common pipeline with purchasing to deal with suppliers, but we don't want purchasing to be a bottleneck either," Khoshoo explained.
Minahan predicted that the joint offering would pique the interest of current EDS and A.T. Kearney customers. But the analyst noted that the new solution would likely see competition from the likes of PLM player Dassault Systemes, which is partnered with IBM Global Services; from collaborative design players Matrix One and PTC, which have been expanding the sourcing capabilities of their respective offerings; and from Agile Software and Tradec, which have been developing their own PLM capabilities. "Even ERP giants such as SAP and Oracle are converging on PLM and sourcing," Minahan adds.
Still, the analyst admitted, for the moment, EDS and A.T. Kearney have "a stacked deck" in their favor. "By combining EDS' Teamcenter, eBreviate sourcing solutions and A.T. Kearney's consulting services, EDS has drawn a strong hand for product cost management," Minahan writes. "Although proof of integration will come in real-world deployments, each component of the Lifecycle Sourcing solution has strengths of its own."
For more information on the PLM market, see the Global Enabled Supply Chain Series article "Product Lifecycle Management" in the October/November 2002 issue of iSource Business.