Today, an article I wrote have been posted on the Supply & Demand Chain Executive website, in the “In Depth” section.
Below is the link and full text.
PLM for the Mid-market Supply Chain
A better look at a behind-the-scenes catalyst
Posted: May 21st, 2009 03:58 PM EDT
By Miki Lumnitz
In today’s global economic climate, companies around the world — from large OEMs (original equipment manufacturers) to mid-market manufacturers — face enormous challenges. It is easy to write off the problems of mid-market companies as comparatively insignificant. After all, they’re smaller; doesn’t that mean their problems are smaller too?
In reality, today’s mid-market companies’ face the same challenges as large OEMs, and they face them with fewer resources, less money and less ability to absorb risk. In addition, they have to deal with the increased competition in the mid-market, the increasing demand for a shorter product lifecycle, the pressure to develop more complex products than in the past, the management of multiple parallel projects and being part of the supply chain.
The Evolving Role of the OEM
The position of mid-market companies within the supply chain has undergone dramatic changes. OEMs, which may or may not be mid-market companies themselves, require increasingly more value, efficiency and sheer output from mid-market suppliers, and tend to deal with only the highest-level core and competitive competencies internally. For instance, in some industries, approximately 65 percent of final product development is outsourced to mid-market suppliers. Given such increased demands, suppliers need to differentiate themselves competitively by bringing specific knowledge and innovation to their products and to their relationships with the OEMs — it’s a matter of survival. If OEMs don’t see the results they need as quickly as required, they’ll gladly replace one supplier with another, or possibly shrink the supply chain altogether. Add to that the unpredictability of other suppliers’ actions (which affect the entire chain), and it’s clear that PLM isn’t a luxury — it’s a necessity.
The role of the OEM is changing. Ten years ago, the OEM controlled the entire supply chain and maintained all the specifics of product development in-house. Suppliers were part of an indelible hierarchy, with efficiency viewed as happenstance, not as an overarching value. As time went by and technology advanced, OEMs saw the benefit of collaborating with tier-one suppliers who were responsible for major product components. This trend hasn’t slowed — it has progressed from involving the traditional supply chain hierarchy to networks of suppliers.
The consequence of this change is that OEMs can no longer dictate the systems and methodologies used by their suppliers, as they are connected to multiple OEMs and to other companies. In the future we will undoubtedly see more and more networks of suppliers exchanging intellectual property with multiple OEMs across industries and with each other.
PLM Adoption in the Mid-market
For the large OEMs of the world the use of product lifecycle management (PLM) is practically a standard. However, in the mid-market — the segment that contains the vast majority of the world’s manufacturers — the use of PLM is not as prevalent.
In order to succeed and thrive, high-tech/industrial mid-market suppliers have to innovate and develop new products faster (with a target time-to-market projection of three to six months for the high-tech industry) and streamline operations and communications. They need to achieve global development excellence and increase efficiency by leveraging core competencies of the value chain and ensure on-time, on-cost and good-quality product delivery. They must also integrate regulatory compliance into product lifecycle processes to reduce business risk and sell products in global markets.
Adopting PLM isn’t a chore that companies must complete; it is a way to increase innovation and stay competitive. Product lifecycle management helps streamline business and development processes, especially with regard to collaborative engineering, standardization, mechatronics (multi-disciplinary product development integrating mechanical, electrical/electronic and software components that require unified bill-of-materials management — a "single version of the truth"), change management, components engineering and IP reuse. The resulting benefits are substantial:
- Increased product innovation: By adopting new product introduction NPI methodology within a single engineering platform, from concept to manufacturing.
- Global product development excellence: By leveraging streamlined global innovation networks and concurrent multi-disciplinary mechatronics product development.
- Improved profitability: By leveraging existing products/components and creating modular new products that facilitate re-use in multiple applications.
- Shortened time-to-market and improved ROI: By lowering development, manufacturing and purchasing costs while delivering improved product performance.
- Increased control on costs, quality and delivery dates: By integrating quality and change management processes and enabling real-time decision making for all levels.
- Ensured customer satisfaction: By being demand-driven and integrating customer requirements and specifications throughout the engineering process.
The PLM vision is wide and can touch almost every hidden corner of a company. This is why a phased approach is recommended, otherwise known as: "start small and grow as you go." It’s like eating a sandwich: You’re better off taking small bites in an orderly succession, rather than to try to eat the entire thing in one bite and risk choking. Product lifecycle management should undo process clogs, not create them.
Based on past experience, most mid-market companies start preparing themselves for PLM deployment by managing their design environment. They do this by creating a solid PLM foundation with computer-aided design (CAD) data and product data, and then they expand their implementation to cover the process from concept to manufacturing using an "item-centric" approach (including collaboration around the bill of materials (BOM) and process/change management), based on the same modular PLM platform. After making sure these elements are in place, PLM can be integrated with other enterprise processes through global collaboration and effective decision-making processes.
The greater the scale of the deployment, the greater the benefits are and, hopefully, the greater the adoption/acceptance by end-users. Starting the deployment from concept to manufacturing will attract the most end-users to the process (who will see the value of collaboration) and will spur user acceptance. Even if for each business process you initially choose to deploy the most simple and intuitive solution, and not necessarily the most advanced one available, you’ll succeed and grow as you go within the same PLM platform. Your initial focus should be on managing the process and getting people on board. Once you’ve completely taken care of that, then go ahead and gradually bring more advanced, complex solutions into the fold.
Real-world Example
As an example, let’s review Pentair Water, a company that opted to create a collaborative PLM global environment using ENOVIA SmarTeam’s solution. The major motivating factor for Pentair’s decision to deploy PLM was the need for the company to unite its many worldwide branches — especially in China and India — and to create synergies among its largely autonomous divisions. Up to that point Pentair had been distributing product data by express shipping CDs, e-mailing massive files or uploading information to non-secure FTP servers. All three of these methods posed an extreme risk to security, data consistency and speed. Pentair decided to implement PLM to reduce business risks and lower the overhead involved in meeting product quality standards.
Ultimately, Pentair executives used the PLM solution to address four needs: a common 3D design system, a single centralized data repository with a common model, a collaborative platform capable of supporting multiple locations, and a common approach to business process management.
The results the company has seen have been positive. Having a single source of data and a consistent data model with revision and version management allows multiple Pentair designers to simultaneously collaborate on a project, cutting design cycles in half while improving quality. Because PLM allows the company to avoid redundancy in its designs, Pentair has seen fewer mistakes overall and a decrease in the number of changes made at the tooling stage — when they’re the most expensive. Product lifecycle management has also cut down on wasted time searching through databases for information that may not exist and has improved collaboration between U.S. offices and manufacturing centers in China and India. PLM has become Pentair’s main solution for supply chain management, customer service, quality, production and purchasing.
PLM and Emerging Industries
The benefits from adopting PLM are tangible across all industries, but not all companies in all industries are currently mature enough in how they view PLM to effectively adopt it. When we look at the PLM market (especially in the mid-market), analyzing it within a technology wave, it’s rather difficult to determine whether it’s in a "growth" phase or "maturity" phase. A closer look at segmentation is necessary to make that call. Companies from some of the manufacturing sector’s "traditional" industries (automotive, aerospace & defense, industrial equipment, high-tech, energy & process, shipbuilding, consumer goods) tend to be ready to adopt PLM, while other manufacturing industries (consumer packaged goods, construction, medical devices) aren’t so easy to read.
The markets that many would define as being emerging industries (including apparel, pharmaceuticals and business services) are still in their respective "growth" phases. This means that most of those companies in the mid-market will be ready to adopt PLM only after several years. This puts the pressure on the aforementioned "traditional" manufacturing companies to adopt PLM as they already face competitors that have implemented PLM and thus have an advantage over them.
Companies within the emerging industries, on the other hand, should understand that if they can successfully adopt PLM before their competition, they can jump ahead in their market, bringing more innovative products to the forefront in shorter amounts of time, using quicker development strategies and making better use and reuse of their company’s intellectual property.
Obviously, deploying PLM will require a culture change within the company. The challenges involved in implementing PLM will be minimal, provided that the selected solution delivers industry best practices and modular out-of-the-box packages; offers the flexibility and openness required to fine-tune the out-of-the-box packages in accordance with existing company process; and most importantly, ensures a low total cost of ownership. After all, streamlining your mid-market company’s product lifecycle management should not break the bank.
As final note, the current economic situation in the global market is indeed a momentous challenge, but it is also a huge opportunity. By the time it ends, some companies will have disappeared, but others will be there, armed with dedication to innovation and a willingness to evolve. Product lifecycle management can help your company see future opportunities that transcend current challenges.
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