Page 2By CIOinsight | Posted 02-01-2004
PLM: The Means of Production
Heavily hyped by vendors and consultants alike, PLM technology is no sure thing.
Product lifecycle management means different things to different people.
In early 2003, Loewen, a Canadian specialty wood window manufacturer based in Steinbach, Manitoba, committed to an initiative to upgrade from a two- to a three-dimensional CAD system. The goal was to speed up design and production of its standard productswhich, when combined with special features and designs, totaled more than 4.3 trillion potential options, not to mention the specialty orders that accounted for up to 20 percent of Loewen's business. But company officials soon realized that speeding up the process hinged upon finding a better way to manage its vast amounts of product data. "Part of our growth strategy involves constantly introducing new products to the market," says Stephen Segal, CIO at Loewen, "and one of the issues we face is not just how we design the products, but how to manage the information associated with them."
What if there were a way to determine automatically the feasibility of a new product's design, a process that could take weeks to determine? What if multiple designers could work on the same project simultaneously and be able to share design information with potential customers throughout the process? If all this were possible, Loewen executives estimated they could knock off nearly 30 percent in production time.
Enter product lifecycle management, a concept that has been touted lately as the next cure-all for your company-wide ills. PLM means many different things to many different people, but at its most basic level, it is "a process for guiding products from concept through retirement to deliver the greatest business value to an enterprise and its trading partners," says Marc Halpern, an analyst at Gartner Inc. That can include research, development and design as well as product launches, the servicing of products once they've reached the market, and their eventual retirement. While companies from Nike Inc. to Harley-Davidson Inc. to Ford Motor Co. to Boeing Co. have all made use of PLM in one form or another, the concept is only beginning to be hawked to midsize companies. The goal: to create a company-wide work-flow and analytic tool to help track and wring the most value from the products you make and sell.
Although it's meant to manage product data, not transactional processes, Halpern says PLM as a concept is not much different from ERP. "Ten years ago, there was no ERP. There was general ledger software, there was inventory management software, and so on. The challenge was to share the data in a process-centric way. The same thing is happening with PLM today. You already have engineering applications, product data-management applications and big demand for project management functionality."
In fact, says AMR Research Inc. analyst Kevin O'Marah, you've probably been doing PLM for a while now, and just didn't know it. "PLM has been around for quite a while, but the tools within it have been used departmentally. Actually, a surprisingly large portion of companies' existing IT spending is their PLM budgets."
At the core of any PLM initiative is a database that organizes any and every piece of information that goes into making a particular product, such as formula cards, packaging information, shipping specifications and patent data. From there, companies can slice and dice the data, creating work flows to deliver information to serve specific functions. Designers and engineers can use the data to quickly determine which parts are needed for a new design. Purchasing can use it to consolidate materials orders, smoothing the supply chain. Retailers can use it to determine things like shelf height and how the product should be stored in their warehouses. In theory, PLM can touch nearly every corner of your businessincluding your customer.
Loewen's PLM plan has several layers: automate the design processes by embedding certain constraints into the system so engineers will know automatically which parts work together; create a digital work flow that will allow designers and clients to collaborate during the design process; consolidate materials orders and optimize the supply chain; and give the sales and marketing departments better visual tools to help them sell more windows. The goal: Increase productivity by 30 percent and save as much as $150,000 per year in the process.
Sounds great, right? At first glance, yes, but beware. Like any enterprise solution, PLM isn't as easy as it looks. And despite its many promises, product lifecycle management is probably going to cause you more than a few headaches.
Ask Your CFO:
Ask Your Head of R&D
Ask Your IT Department:
Do you really need PLM?
Given the goals of PLM, and the complexity of the technology, how can you tell if you even need PLM? AMR's O'Marah says PLM is best suited for companies selling physical products such as consumer packaged goods and electronics, particularly merchandise that requires complex manufacturing processes. So if you're primarily a service company, then you probably don't need PLM. "It's so much easier for nonphysical product companies to keep data organized because for them it's all just text files," says O'Marah. "For product companies, it's a whole series of different kinds of information, from mechanical geometry to circuitry design to software code to branded artwork."
Also, says O'Marah, companies that are based in one location and don't rely on outside contractors probably don't need PLM. "If you are a single site, you can do a lot of this stuff with spreadsheets, Access databases and other kinds of simple-minded tools like a CAD vault, because a single-site location has its designers and engineers in the same place as its manufacturing people."
But companies that deal with contract manufacturers and third-party suppliers are another story. Steve Norton, head of hardware development at Acme Packet, a Woburn, Mass.-based manufacturer of hardware components for Voice over IP, says they moved from Microsoft Access to a PLM database from Omnify Software because they needed to keep track of more than 300 parts, and a simple spreadsheet wasn't doing the trick. "Access was extremely clumsy, and we ended up having to change our template on a daily basis as we learned more about what information we wanted to include," he says.
And the spreadsheet provided no way for his team to know if the company's contract manufacturers were working with the right specifications. "Even if the data is pristine when it leaves here, you are always going to run into this problem where spreadsheets are out of date, or the engineer isn't going to be real religious about forwarding schematic changes to the factory on a timely basis."
With the PLM system, however, Acme Packet's manufacturers connect to a portal that lets them view the necessary design information, while e-mail updates let Acme designers know that its manufacturers have reviewed the changes. Norton says that's helped Acme to reduce manufacturing errors from about 10 percent to zero. And with each product containing thousands of dollars' worth of equipment, says Norton, the savings are significant, especially for a small company like Acme.
Ask Your Production Team:
Ask Your Line Managers:
Ask Your Legal Department:
Once you've decided to implement PLM, make sure your employees understand and support the goals of the initiative.
The most critical first step in designing a PLM strategy is to talk to your peopleand not just the IT people. Because PLM can be leveraged across many departments, such as purchasing, sales and R&D, getting buy-in from every line of business is key. Segal spoke to nearly every department at Loewen to see how a PLM strategy could be used most effectively. "We met with different groups who could take advantage of PLM and had them give us their three or four pages of what they might get from the system." That, he says, helped the company understand and support the initiative.
But perhaps the biggest challenge is getting employees to "act locally and think globally." "Changing the mind-set of our designers is certainly a challenge," says Segal. "From day one, they have to build their files while thinking of all the other departments and processes that might benefit from it. Before, they were doing a specific function and designing databases for their own internal needs. Now they have to think cross-organization."
That, say analysts, underscores the importance of assigning a high-level business leader to spearhead the process. O'Marah points to a recent AMR study that found that only 8 percent of companies that are doing PLM make sure a top C-level executive owns the project, while fully 42 percent say the highest-level owner is a senior director or manager. "You have this incredibly important cross-functional process, and you're driving it down to a senior director? Well, no wonder you're having a hard time achieving buy-in. No wonder cultural barriers are a problem," says O'Marah.
At Loewen, the head of research and development originally led the PLM implementation, but "as soon as we looked at the broad implications across all the departmental groups, we immediately transferred the overall project responsibility to me," says Segal.
Many analysts stress that a PLM project should be spearheaded not only by the CIO but by a top-level business executive as well. "Ultimately, owning the architecture is the CIO's job," says O'Marah. "The CIO should be setting standards, ensuring adherence to standards, managing relationships with vendors and helping to resolve the integration among other systems. But as far as work flow and analytics and which ones you do first, that's not really the CIO's role. The CIO needs to work with a business owner." O'Marah thinks many companies will eventually create an executive position to manage PLM, as they have with supply-chain management.
Meanwhile, the sheer scope of getting everyone onto one system can be daunting. Dan Blair, director of worldwide technical standards and systems at Procter & Gamble Co. who helped create P&G's Corporate Standards System, which manages all the data relating to each of P&G's 300 brands, knows getting employee support can be a challenge (see "Viewpoint," page 84). When he installed the system in 1999, he says, "We had about three dozen standards offices around the world, and each had its own procedure. We had about eight electronic systems people were using; the rest were hard-copy systems." Blair says it took nearly three years to roll out the system to each business unit. "Your biggest issues are the groups that believe they already have a good system for their own needs, especially if they have an electronic one currently."
Ask Business-Unit Managers:
Tell Your Executive Team:
Ask Your CEO:
Don't be fooled into thinking PLM is a simple project.
If you thought getting everyone on board was tough, wait until you get to the technical implementation. "It's not the type of thing where four boxes of shrink-wrapped software show up on your desk and you're up and running," says Loewen's Segal. Just populating the database with the necessary product information could take years. And it's not only about digitizing mountains of paper-based datathe tough part is developing universal standards.
"Definitions are a dicey issue," adds AMR's O'Marah, "and as mundane as figuring out a parts-numbering scheme sounds, that's where people end up spending time and money."
There are plenty of software vendors out there willing to give you a handmore than 100 at last countbut many tend to be niche players, catering to specific markets and focusing on only one or two areas of PLMdesigning and planning manufacturing operations, for instance, or product portfolio management. So choose carefully. "The first thing we did was some initial vendor analysis," says Segal, "because we had some ideas in terms of what we wanted to do, but we wanted to actually see what was possible. That helped us target an RFP that vendors could respond to."
Many vendors are beginning to offer more complete PLM packages, but a full-range offeringone that really can track a product from conception through retirementwon't appear until at least 2005, says Gartner's Halpern. Until then, integrating PLM with your other systemssuch as the supply chain and ERPwill continue to be tough. If you're already working with SAP for your ERP needs, for example, you may consider them for a PLM implementation. On the other hand, you may prefer to go with a best-of-breed vendor with proven expertise in your industry. Many vendors have agreements with other software companies that can help ease integration woes, so it's important to ask the vendor about such partnerships.
Finally, Halpern says, hosted systems are emerging for smaller companies that can't make a large investment in PLM: "Instead of going through these deployments, which are very costly, it may be more cost effective for small and medium-size companies to go with a hosted system such as Arena Solutions or CoCreate Software."
Tell Your COO:
Ask Your IT Staff:
Ask Potential Vendors: