PLM's rapid evolution in autodom says something special not only about OEMs and suppliers, but also about an emerging business challenge that's becoming prevalent throughout manufacturing. Its characteristics: increased product complexity, greater reliance on outsourcing, and a growing need for collaboration with a rapidly expanding list of business partners. By reorganizing and restructuring with PLM strategies, the automotive sector is seeking to bring greater revenue vitality to its business model. It is attaining performance improvements with competitive relevance that go beyond mere cost cutting. For example, the time-to-market gains with PLM can benefit customer satisfaction directly and translate into gains in market share. In terms of potential impact on manufacturing, PLM ranks beside Henry Ford's innovations with mass production, says John Moore, vice president and general manager, ARC Advisory Group, Dedham, Mass. But when Henry Ford led the mass production revolution in manufacturing, his dream with projects such as the River Rouge facility was vertical integration. Now, with PLM, the mode is one of horizontal collaboration with a vast array of business partners and suppliers working in concert to design and manufacture vehicles. (Some attempts have even been demonstrated to have suppliers assemble the whole product.) Today's business model is definitely not Henry Ford's idealistic dream of virtually everything in the product, including the steel, being produced by the automaker. Today's reality is a horizontal merging of collaborative effort from both within and without the corporation. ARC's Moore notes that automotive suppliers can be eight tiers deep. That's why PLM, as an information facilitator, has the potential to drive a revolution in all of manufacturing.
First, A Definition How do the experts define PLM (product lifecycle management)? According to the University of Michigan's PLM Development Consortium, "PLM is an integrated, information driven approach to all aspects of a product's life from its design inception, through its manufacture, deployment and maintenance and culminating in its removal from service and final disposal." Simply put, says Michael W. Grieves, the consortium's co-director, "PLM is the integration of business systems to manage a product's lifecycle." Market analysts emphasize that PLM is more than a set of technologies or software solutions. For example, to CIMdata Inc., Ann Arbor, Mich., PLM represents "a business approach to solving the problem of managing the complete set of product and plant definition information and the processes through which it passes. The PLM process includes creating and changing that information, managing it through its life and disseminating and using it throughout the lifecycle of the product." PLM is as much about how a manufacturing company works as it is about what is being created, says CIMdata. Grieves also positions PLM as a step beyond lean manufacturing. He says that PLM is the use of information to minimize the resources of a manufacturing organization while identifying the strategic issues that enable better customer satisfaction. PLM uses information to couple optimized manufacturing with the rest of the product's lifecycle. It's tempting to label PLM as only a cost saving measure. After all, consider one metric from General Motors Corp. "In product development, IT projects like PLM have helped pare a billion dollars of cost over the past three years," says GM's Terry S. Kline, global product development process information officer. GM's PLM provider is UGS PLM Solutions, an EDS company.
More Than Cost Savings While GM was cutting those costs, an even greater benefit of PLM was its significant role in dramatically shortening time-to-market, that key metric denoting the lapsed time from idea to saleable product. Kline says PLM's role in reducing that measure from 48 months to 18 has helped the company gain market share. The PLM gains made in the automotive sector are the result of carefully appreciating the difference between using the technology to add value versus a strategy focused only on minimizing cost, adds Ron Watson, global product data manager, ITT Industries, Upper Saddle River, N.J. He says maximum benefit potential of PLM derives from emphasizing customer value first. Watson stresses the significant strategic difference in investing in customer value versus only chasing cost reduction. "The greatest value is really a function of [delivering] what the customer wants, and cost is just something that you try to drive down. "By restricting the focus to cost reduction, what you're essentially doing is sacrificing the needs and the functions needed by the customer." Watson's conclusion: If you use just cost as an arbitrary determining factor, then you're limiting yourself. Instead, Watson recommends focusing on the process and the customer value that the PLM technology can deliver. "Culturally not everyone understands that or even agrees. Often [their strategies] start and stay with cost reduction. That runs counter to the ultimate value that PLM technology can deliver." At ITT, the PLM strategy is based on industry standard systems that are enterprise wide. "Our goals seek the best capability, the best value and the capability to [easily] change and update." If you use industry standards, you're much more likely to change than if you use proprietary systems, he explains. Why is PLM so important to Watson? He points out that everything has a lifecycle -- not only people but also products, processes and systems -- that underlies business workflow. In turn, workflow determines business system processes, he emphases. "PLM is a critical solution that facilitates access to work flow data and provides information access across our company and throughout the value chain. "In a business sense, the data and information provided by PLM needs to be regarded as being crucial in the same sense that knowledge of inventory levels has always viewed as critical. Inaccessible information has become as much of a disadvantage as inaccessible inventory." ITT's PLM solution comes from Parametric Technology Corp. (PTC), Needham, Mass.
Born In CIM Ask the PLM industry leaders, and you can conclude that PLM grew out of the CIM (Computer Integrated Manufacturing) movement of the 1980s. At that time, computers were beginning to permeate the functional silos of manufacturing organizations and forward-thinkers began to see how information flow might be facilitated throughout an enterprise and beyond. Design software vendors saw how product data had a key operational significance throughout a manufacturing environment, says Stas Tarchalski, director, strategic development, IBM Corp.'s Product Lifecycle Management Sector, White Plains, N.Y. As a consequence, a strong design software presence is coincident with three top PLM providers: IBM/Dassault, PTC and UGS PLM Solutions. Boston-based AMR Research sizes the 2003 market at $2.3 billion, a total that is being shared by a rapidly growing list of entrants such as SAP AG, MatrixOne, Agile, Aras, Framework Technologies and Arena Solutions Inc., some of whom have no authoring (CAD) tools. Each brings unique features and diverse backgrounds to bear on the challenges of product lifecycle management.. For example SAP comes with a strong ERP heritage, and Mountain View, Calif.-based Arena offers a PLM solution with a Web-native architecture that pared time-to-market by more than 50% for one of its customers. At Dell, an Agile implementation dropped $125 million to the bottom line, says Chris Wong, executive vice president, corporate strategy and development. Don't think that the automotive sector is only interested in PLM providers with the traditional engineering software (CAD) background. For example, last December SAP announced that the Volkswagen Group is globally implementing its SAP AE portfolio of automotive solutions that includes PLM. More than 10 legacy systems will be replaced with mySAP PLM, says Detroit-based Greg Mekjian, vice president of automotive and service parts. VW's savings begin with inventory improvements and better plant utilization. The solution makes information instantly available so that the dynamics of the manufacturing enterprise are instantly transparent to the participants. That greatly increases business velocity via a customer service advantage, says Mekjian. As seen by IBM/Dassault, PLM growth is the result of a lot of customers looking at the concept as the banner under which to integrate engineering deeper into enterprise operations. The reasons: one is the ever-increasing need to shorten cycle time. In some industries that metric has a tremendous impact on market share, notes John Squire, vice president, Enovia Corp., Charlotte, N.C., a subsidiary of IBM's Dassault Systemes partner. He says that in aerospace, for example, taking six months out of the development cycle can increase market share as much as 8%. Another PLM adoption factor is the rapidly growing integration of new mechanical, electronic and software technologies into products, notes Squire. "For example, it is not unusual for the latest automobiles to have several local area networks and possibly more electronics than a TV or PC." He says PLM can augment a manufacturer's ability to include even more product complexity. The reason: "PLM eliminates a manufacturer's need to develop a core competence in every technology it incorporates into its products." Squire's conclusion: PLM will grow rapidly with the inevitable continuing surge in product complexity. "With PLM, increased technological content can proceed without costly investments in growing new core competencies. PLM provides the collaboration tools to rapidly and easily connect and communicate with the technology partners and suppliers. Another factor is the fast growing popularity of outsourcing. In automotive, Tarchalski notes that 20 years ago the outsourced content of an automobile was approximately 20%. "Today it is closer to 80%." Adds PTC's Bill Berutti, senior vice president, strategy and product marketing: "In automotive as much as 70% of the design content, not just the manufacturing content, occurs in the supply chain." The aerospace sector serves as an even greater example of factors necessitating PLM, adds Tarchalski. "Boeing is trying to develop its new 7e7 at 40% of what it cost to develop the 777 and do it in a much shorter time frame." Squire describes the ambitious outsourcing strategy for the new plane: "While each 777 requires Boeing to assemble approximately 2,000 parts, the total for the 7e7 is under a hundred. Think of all those huge sub-assemblies coming together at a Boeing plant. And think of the collaborative challenges in exchanging data and synchronizing business processes." While the aerospace and automotive sectors' need for PLM is dramatic, the business case is equally compelling for the rest of manufacturing -- even small firms, says PTC's Berutti. He cites the case of one small customer, a maker of picture frames, that uses PTC's PLM solution to coordinate a Chinese manufacturer, the U.S. marketing partner and Wal-Mart. PLM's major premise is collaboration, which can be challenging, especially in terms of achieving easy CAD interoperability, data sharing and visualization across the extended enterprise. The latest industry solution is JT Open, a common data format initiative launched last November by UGS PLM Solutions with the support of the Automotive Industry Action Group (AAIG). The intent is to make it possible to view and share product data and dynamic images worldwide, in real-time and throughout all phases of the product lifecycle, says Cincinnati-based Chris Kelley, vice president marketing for PLM Open and Alliances. Initial industry members include GM, Ford Motor Co., Mazda Motor Corp., PTC, UGS PLM Solutions, Intel Corp., Hewlett-Packard Co., SAP, Tecnomatix and Theorem. Kelly says the mission of JT Open is to benefit all organizations associated with PLM. With JT Open that community of users, vendors, and interested parties is formally uniting and broadening a data format that had its start as part of the product portfolio at UGS PLM Solutions a decade ago. For example, "GM currently has more than three million JT files and has standardized globally on this format," says Kline, GM's global information officer for product development.
