Achieving profitable growth requires converting market-driven innovation into actual business benefits. The growth side of this equation is driven in a number of ways, including internally developed new product introduction (NPI) and acquired intellectual property or businesses. Meanwhile, achieving profit margins during this growth requires efficient execution across the development and delivery of products throughout all phases of the lifecycle. The strategy of NPI, globalization and growth through acquisition is a top concern of leading manufacturers across industries.
Indeed, Motorola's successful launch of the RAZR cell phone contributed to a 51% sales increase, elevated the company to No. 2 in market share and lifted the stock price 34%. Qualcomm sees global design teams as a necessity to meeting world demand, adding engineering teams in North Carolina, Texas, Germany, India and the United Kingdom to provide complete system solutions to an expanding worldwide marketplace. Johnson & Johnson has long seen acquisitions as a key ingredient in its strategy and continues to seek new opportunities in the market to improve sales in areas such as pharmaceuticals.
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A recent AMR Research survey found that 32% of respondents defined "products late to market or missing demand" as the top reason for new product launch failure. However, product information is managed at all phases of lifecycle maturity and is used by multiple organizational roles for a variety of business initiatives. PLM provides the backbone to help achieve many of these goals. Manufacturers seeking to understand where PLM may benefit their business should first look at where the business is struggling to gain a better understanding of where an investment in PLM may bring benefits.
The following questions provide a diagnostic for investing in PLM:
- Is new product time to market a top strategic concern? Margins and market share are quite often a function of being first to market.
- Do you take orders for products or configurations you cannot make? Success requires configuration rules in sales-order systems to be in agreement with engineering definitions of product structure.
- Are bad product-development projects hard to kill? Rational assessments of resource availability and expected project value versus risk must be available to decision-making bodies to prioritize investments.
- Do new products take full advantage of existing parts, designs or technology or other intellectual property? Innovation must be balanced against the cost of supply to ensure sustainable business benefit through consistent and profitable product delivery.
- Is product warranty expense a problem? Product performance must be validated across the lifecycle with closed-loop information flow-back to product design for corrective action.
- Is communication on designs with manufacturing partners and other key suppliers a clumsy manual process? Global partnering requires a clean and secure exchange of product information and ideas to reap the benefits of this extended relationship.
- Are acquired companies slow to deliver their synergistic value because product lines are hard to merge? Mergers and acquisitions are a growth strategy that requires rationalization of products and the integration of valuable development resources.
- Are there any major regulatory burdens now or in the foreseeable future that will require electronic product traceability? Rigid control of product information is fundamental to satisfying compliance requirements, including the FDA's CFR 21 Part 11 for consumer packaged goods; Transportation Recall Enactment, Accountability and Documentation in automotive; and Restriction of Hazardous Substances in high-tech.
- Is value engineering of existing products critical to reducing manufacturing cost and supply chain performance? As complex products continue to be outsourced, it becomes more important to combine in-house and supplier engineering expertise to improve product design.
- Is there a disconnect between actual customer needs, marketing requests and product enhancements under development? To capture and meet the voice of the customer, timely and consistent data must be shared between marketing and development.
Answering yes to any of these questions opens the door for getting value from a PLM investment.
Defining PLM
But what is PLM? And which components are applicable to the specific challenges of your business? AMR Research defines five core components of PLM for manufacturers to consider:
Product Data Management (PDM) A generic term for the repository that manages revision and configuration of specifications to provide a single version of truth.
Collaborative Product Design (CPD) Online conferencing and design or visualization applications that support distributed development teams.
Direct Material Sourcing (DMS) Automates request for quote and supports part or supplier re-use to reduce downstream design complexity in the supply chain.
Customer Needs Management (CNM) Captures and manages customer requirements through development to ensure the voice of the customer is heard.
Product Portfolio Management (PPM) Provides visibility to the NPI pipeline status and supports the business decisions to prioritize product funding.
The primary strategic value of PLM is to give manufacturers a competitive edge through faster time to market, often resulting in premium pricing and increased market share. While strategic benefits should always be emphasized in any business case, they are difficult to stand alone and must be complemented by more tangible operational benefits.
Manufacturers are deriving value from their PLM investments and the most common areas where they realize this value include:
Infrastructure savings -- General Motors has attributed more than $1 billion in savings to PLM, which allowed the company to simplify its IT infrastructure.
Internal efficiency improvements -- GE Aircraft credits a 33% improvement in engineering cycle time to using digital design.
Supplier-facing cost reductions -- Procter & Gamble's rationalization of global product specifications has led to hundreds of millions of dollars in supply chain savings.
Customer-facing benefits -- Sony Ericsson achieved significant time-to-market reductions by modeling the cost benefits of product features versus customer value.
Industry Adoption Of PLM Varies
PLM adoption differs across industries, and discrete manufacturers -- including aerospace, automotive, industrial and high-tech -- are the more mature users. Emerging industries include retail and apparel where initiatives around fast fashion and global sourcing are driving demand for better visibility to the NPI process. Process industries using formulated products are an emerging area for PLM, with its own unique set of requirements that are influencing the speed of adoption.
For process industry manufacturers, protecting brand equity is a top priority that translates into making and delivering products that perform consistently, in spite of wide variations in production capabilities and raw materials. These manufacturers lag behind their discrete counterparts in PLM adoption, particularly where biological processes are involved or the end product is directly influenced by the mechanics of manufacturing. Food and beverage manufacturers worry about uniformity and compliance, and large CPG manufacturers seek cost containment through global specification management.
PLM applications for process require technical architectures designed to manage this complexity. While aware of PLM's full potential, process manufacturers will focus initially on global specification management to consolidate product and process definitions.
PLM serves a function for manufacturers seeking profitable growth in evolving market conditions. Among these conditions are global competition and regulatory requirements, and meeting these needs demands management of critical product information across supplier networks. Manufacturers will serve themselves well to look at their own business requirements and consider how PLM fits into their technology strategy for supporting business success. IW
Mike Burkett, vice president of research at AMR Research Inc., co-authored the first industry publication that defined the PLM market.
Alison Smith, senior research analyst at AMR Research Inc., has more than 25 years of manufacturing software development, support, marketing and sales experience.
