The Product Lifecycle Management Opportunity
Product lifecycle management is to product information what enterprise resource
planning is to enterprise resource information, or customer relationship management
is to customer information. It represents a new way to plan, organize, manage,
measure, and deliver new products or services. Early on, this capability was known
as product information management (PIM). However, its sole focus then was on product
development activities, and associated processes generally were confined to an
organization's four walls. Later, PIM evolved into CPC, or collaborative product
commerce. Internet technology was the primary force behind CPC, helping companies
bring external business partners into the product development loop.
But today's approach — product lifecycle management — is where PIM and CPC were headed all along. PLM's promise is an enterprise view of a product's complete lifecycle — from initial design concept through to retirement. PLM represents a real opportunity to:
- Develop a single environment in which product content, process information, and program status information are fully integrated.
- Understand the precise status of a product at any stage throughout its life.
- Share product-related information among all internal factions and external business partners, including designers, suppliers, engineers, contract manufacturers, marketers, supply chain service providers, support personnel, financial personnel, and even customers.
Product lifecycle management provides what for many companies has been the missing product development link: the capability to truly integrate existing enterprise resource management and customer relationship management (CRM) capabilities with integrated and real-time product information. By doing so, it brings the informed input of every relevant constituent into a product's planning, definition, design, development, manufacture, sale, movement, support, and even retirement. The core capabilities of multiple functions and organizations collaborate across the extended enterprise, whereby the product and its associated processes are managed as company assets rather than the province of individual departments.
Perhaps most important, PLM represents a cost-management and business-enhancement opportunity. For example, by linking downstream functions to the development cycle, companies can make better, more cost-effective decisions about design, componentry, production specifications, and market timing. But at the same time, they also gain the potential to introduce more and better products without hiring new people or expanding corporate infrastructures or capacities. In both contexts, PLM is a tool for making better decisions.
Why Now?
Like many breakthroughs, PLM is the offspring of technological innovation and market demand. On the technology side, a high level of sophistication in Internet capabilities, enterprise resource planning (ERP) systems, and middleware had to be reached. Nowadays, advanced technology solutions from companies such as Ariba and ICG Commerce have brought new, collaborative capabilities to, for example, e-procurement and contract manufacturing. Similarly, ERP systems from companies such as SAP, Oracle, and J.D. Edwards have developed decision-support capabilities in areas such as demand management and distribution network design. Additionally, integration-focused solutions from companies such as PTC and MatrixOne now are available to help companies share information more seamlessly, and thereby develop, build, and manage products more collaboratively. Other key capabilities also have come of age. These include advanced data-storage systems to manage PLM's significant increases in data volume, as well as improved computational speeds and bandwidths to transmit pictures and solid model objects and also facilitate interaction among CAE/CAD/CAM systems, product configuration tools, and ERP and CRM applications. Technologically speaking, the time is right for PLM.
On the market side, companies are under unprecedented pressure to generate fast and profitable product-related responses to changing market demands and competitive market opportunities.
In some market sectors, typified by aerospace and marine, products often have lifecycles measured in decades. As price pressure is exerted on the original equipment market, companies are responding by seeking profitable growth in the aftermarket and by moving away from selling straight products to offering solutions. Strategies of this type may change the company's economic model, which in turn requires them to have a better-integrated, enterprise- and lifecycle-wide approach to managing product information. In this complex aftermarket environment, product development decisions at an early stage in the product lifecycle can dramatically affect the downstream shape of the ROI curve of the product — and thereby the long-term profitability and viability of the product. Companies will not only need to manage their own product information (such as the location and configuration of their installed base of products), but they may also need to track other companies' installed products on which delivery of these solutions are dependent. PLM is a key tool in helping companies in these sectors maintain control of their product data from cradle to grave while they implement the strategies that seek to exploit the opportunities to extract value from the aftermarket tail of the product lifecycle.
In other industry sectors, such as consumer goods, product lifecycles are sometimes shorter — requiring the capability to rapidly and reliably bring new product to market with the goal of capturing market share and achieving profit targets. Alternatively, for more mature products, there may be a need to use rapid innovation in packaging to breathe new life into flagging sales. At first sight products (such as shampoo) may not appear as intrinsically complex as engineered products (such as an airframe), and therefore do not need the power of PLM. However, in these industries, the complexity is often in other dimensions, such as managing global product specifications, controlling the recipe and associated manufacturing process instructions while permitting regional variations, and managing rapid packaging innovation while maintaining the integrity of the global brand. PLM also can help companies implement these strategies.
In response to such market pressures, companies must focus on getting the product right the first time (on time and defect-free), becoming more scalable in their product-development capabilities, increasing the flexibility of their cost structures, and duplicating their market successes without reinventing the wheel. Similarly, they are more pressed than ever to submit reliable estimates about sales levels and production timing to the investment community. Additionally, few dramatic opportunities remain to reduce costs in many companies. Therefore, the only way to advance their business agendas may be to drive new products into new or existing markets. New products, new customers, and new revenue are the order of the day. In many markets, companies that can reliably get products to market when needed will become the winners.
In short, shifting business requirements and technological achievements have aligned to produce the need for — and the means to attain — an integrated approach to product development. Product lifecycle management is that approach: helping companies design, develop, manufacture, move, store, and service new products in an integrated way that results in:
- Faster rates of innovation, time to market, time to volume, and efficiency
- High-quality new-product ideas, conceptual research, and product-development decisions
- Scalability of labor force and infrastructure
- Repeatability: leveraging intellectual property and developing standardized, proven work methods
- Reliability, consistency, and reductions in the enterprise learning curve
- Increased profitability through shorter time to margin, increased customer satisfaction, lower cost of goods sold, lower failure rates, and reduced costs
- Value extracted from the later stages of the product lifecycle
Figure 1: By improving time to market, the sales curve shifts up and to the left, and profit margin is increased through price and expanded market share.
Getting PLM Right
Any initiative with such significant rewards is bound to be difficult and potentially costly. PLM is no exception. At the outset, building an economic case is tricky because companies tend to operate differently in a PLM environment. Certain departments or functions may have to be eliminated or replaced by new capabilities, which complicates the establishment of clear cost/benefit projections. PLM implementations also are lengthy, so the concept might have to be sold and resold as executives and sponsors come and go. This means inevitable changes in long-term working relationships and the likely politicalization of issues and missions. Like any major business undertaking, broad buy-in is critical.
Implementation challenges are further compounded by a significant displacement effect. This is because PLM's greatest impact is in the earliest phases of a product's definition — when it still is possible to capture the advantages associated with changes in design or disciplinary inputs. However, at this stage, all that is visible on the balance sheet is the labor being committed by affected departments. PLM's principal benefits may not be visible until the product is launched in the market.
Ownership hurdles also must be dealt with. PLM requires a company's design and engineering organizations to imbue more discipline, provide more content, and manage product creation in new and unfamiliar ways. Yet, PLM's beneficiaries are the downstream users who can obtain better-designed, lower-cost products. In effect, there often is an unclear relationship between when and where a company invests its money, and when and where the benefits are achieved.
Lastly, managing the right metrics is critical. In one sense, this refers to technical (system performance) issues associated with complex data sets and traffic over a network; for example, identifying acceptable response times for extracting or creating a part number. Other metrics might include schedule responsiveness, resource usage, and out-of-pocket expenses that are incurred as the program is implemented.
Figure 2: PLM can help companies address these typical issues.
Despite these obstacles, PLM remains a distinctive opportunity for companies to rationalize the design, development, and overall management of their product portfolios. In particular, companies with the following concerns should look particularly hard at product lifecycle management:
- Long product cycle times: Margin erosion, excessive discounting, and erratic materials management and inventory profiles are common signs that product-delivery performance is substandard.
- High product-development and launch costs: High recurring and non-recurring product costs often indicate an over-reliance on internal solutions or resources. Appropriate responses include more collaboration with third parties and the enhancement of product-development infrastructures. Product lifecycle management accommodates both of these directions.
- Substandard product quality: Excessive failure rates often point to a breakdown in engineering change-order mechanisms. PLM can help stabilize this process.
What to Expect: Key Characteristics of a PLM Environment
PLM is not business as usual. Among the most overt differences are personnel and job changes. Certain clerical or supporting roles may cease to exist — replaced by new opportunities for people to grow professionally or to contribute new insights about how to improve product quality, reduce costs, and enhance business performance. Behind the scenes, however, companies that implement PLM approaches are even more different. For example, the method and speed with which information is shared and accessed is fundamentally altered. Employees view relevant information sooner and more clearly, thus giving them the opportunity to provide input and feedback in a manageable way.
Another profound difference is that PLM environments typically have a control center, which governs access to all information pertaining to a product's development and subsequent life. Companies use the control center to reach into all aspects of the business and collect and scrutinize needed, product-associated information. This process involves "meta-data" or data tags — which do not extract or move physical data objects from other applications, but establish ways to access, view, and interpret information irrespective of where it currently resides. This is a stark contrast to most product-development environments, in which product information resides in multiple functions, such as planning, manufacturing, sales, engineering, and testing.
Figure 3: PLM can provide a range of benefits across several business functions.
PLM environments also contain far stronger linkages among the customer object, resource object, and product object (the PLM/ERP/CRM connection). In addition to greater speed and more data integrity, these linkages can result in new insights into what products or product configurations the company should be selling and at what cost.
Perhaps the most profound change from a design standpoint is a marked reduction in the number of engineering change orders. Virtually all companies move through their product-development cycles with prototypes that evolve several times in response to change orders. But as most design professionals know, responding to a change order is never simple — primarily because each order reflects only a single view of the problem or objective. Thus, the great advantage of PLM is that product design and development are sequenced virtually, so collaborations accomplished at near real-time speed come close to eliminating the drivers of most change orders. Additionally, the change orders that do need to be processed benefit from the PLM environment's increased data integrity and linkages to other enterprises and applications. Speed and quality are prime beneficiaries of this capability.
Product lifecycle management has the ability to reshape how companies leverage product information to reduce costs, enhance quality, and infuse new marketplace advantages. In effect, PLM is the last link in a triumvirate that includes ERP and CRM. Working together these three capabilities will carry the most forward-thinking companies to new heights.
