Making the Case for Greater PLM Investment

Product Lifecycle Management (PLM) is the next major wave of opportunity for manufacturers looking to improve business performance. Indeed, PLM will become vital for any Fortune 1000 to remain competitive. Small to medium sized business will need it to grow. Yet, IT organizations of many major manufacturers still accord higher priority to ERP, Supply Chain Management (SCM), and Customer Relationship Management (CRM) than PLM. Arguing for deeper commitment to PLM will require a simple definition that makes business sense to non-technical executives and a compelling case for greater investment.

Gartner defines PLM as:

"Guiding products from concept through retirement to deliver the greatest business value to an enterprise and its trading partners."

PLM uses product information and business analysis to support product portfolio strategies, product life cycle planning, management of activities and the execution of those activities through each phase in a product's life cycle. These phases include product ideation, product definition, manufacturing process planning, production, service, growth and retirement.

The most fundamental PLM activities include:

• Monitoring the progress of a product at any stage in its life cycle - for example, tracking actual cost and time of product development and comparing these to schedules and budgets.
  
  
• Analyzing issues that might arise at any phase of a product's life cycle - for example, if product development costs exceed budget, PLM provides access to information about products, projects and resources that help users understand the root causes.
  
  
• Deciding on actions to address problems.
  
  
• Enforcing decisions and executing activities.

Just as Enterprise Resource Planning (ERP) consolidated disparate back-office activities into a cohesive environment for running business operations, PLM consolidates diverse business activities that create, modify and use data to support all phases of a product's life cycle.

PLM has the most fundamental impact on the overall performance of a business, the value proposition of ERP, SCM, and CRM center on reducing cost by making the execution of transactions and fulfillment of business agreements more efficient. These activities add value to a company by increasing profitability and increasing the scalability of business operations to larger markets.

However, products are the core value of companies. CRM applications have little value unless a company has defined products that markets want. The product definition managed by PLM business processes and software determine the possible options that Sales Configurators can manage. Product definitions also dictate the nature and cost of parts, services, and material flows that companies manage and transact with ERP and SCM applications. Even more important, PLM expedites the creation and management of the product definition. It is this product definition that transforms the intellectual assets and innovation skills of a company into new and larger wealth producing markets.

Senior management and IT executives do not give PLM the attention it deserves because they do not understand its full impact. When making the case for heavier PLM investments, users should assert the following points:

• PLM represents the best opportunity to reduce product life cycle costs, while simultaneously increasing an enterprise's ability to innovate on product families and related services throughout the product life cycle. Reducing life cycle costs results in increased profits and financial resources. Increasing the ability to innovate means competitive differentiation that grows revenue and expands markets.
  
  
• PLM reduces costs by providing a common IT framework to track and improve the financial and time performance of activities associated with each phase of a product's life cycle. This framework aligns product life cycle activities - historically the domain of disconnected engineering and manufacturing groups - within an enterprise IT backbone. The enterprise IT backbone supports procurement, sales, marketing, manufacturing operations, field services and executive management. Increased visibility across these domains can improve performance for each of them.
  
  
• PLM fosters innovation by creating an IT infrastructure for collaborating and managing product knowledge that spans all levels of an enterprise, and can extend to its business partners, suppliers and customers. This IT infrastructure can help enterprises align activities at the executive level, such as managing product portfolios, with activities at operational levels, including creating designs, making product changes and modifying manufacturing process plans.
  
  
• To remain competitive, discrete and process manufacturers will need to deploy a PLM strategy before 2007 to address increasing complexity of products, processes, and growing resource shortages. Increasingly, manufacturers face problems with the availability, timeliness and relevance of product information during all stages of a product's life cycle. The increasing complexity of products and expansion of networks of suppliers, partners, and customers needed to deliver them aggravate the challenge. Also, execution of lifecycle activities becomes increasingly challenging given the increasing gap between demand and supply of technically expert resources with industry-specific experience.

Getting Started With PLM
Manufacturers should begin their PLM efforts by identifying how they want to structure product life cycles, including the life cycles of key product elements, such as parts, software and subsystems. Each of these elements will have a different set of priorities, challenges and workflow to define, create, produce and support them throughout the life cycle of a product. PLM implementers must determine and synchronize milestones for each of these elements to deliver a product.

They must also identify the business processes critical to product success that PLM should support. To do this, they must identify the key PLM role, who plays the key roles, what information these players need, and how PLM software should represent the information. The understanding of the product life cycle definition, business processes, key players and information needs will provide insight to selection of software vendor partners and deployment priorities. Gartner will present strategic and tactical guidelines for PLM deployment in greater depth at Industry Outlook COE Fall in September, 2003.