“PLM is the bloodstream of the business process,” declares Lyndon Smith. As director of quality for the Radial Shaft Seal Division of Tier One automotive supplier Freudenberg-NOK, based in Plymouth, Mich., Smith is responsible for quality management at six plants—four in the United States, one in Brazil and one in Mexico. “The fundamental profitability of any business is reliant on the profitability of its products. That’s why PLM is an integral part of the fundamental business of any company.”
Prior to deploying a Product Lifecyle Management, or PLM, solution from Lawrence, Mass.-based Aras Corp., the disparate engineering groups at Freudenberg-NOK were all doing something different. Standardizing design enabled a centralized view of all projects across the company, as well as standardized reporting. Since the PLM implementation, Freudenberg-NOK has experienced some significant benefits.
“First, with proper resources supporting design and development, you have a better design for both your product and your process,” says Smith. “Second, with a more consistent product long term, it creates a more robust end-product due to reduced variation. Finally, you get closer to your cost targets for profitability. You’re not wasting money on excess scrap or inefficiency.”
According to Jim Brown, an analyst with Boston-based AberdeenGroup Inc., PLM has finally arrived as an enterprise application. “The solution now enables the business and works across the enterprise,” he says. “It really is a supply chain application now, rather than just an engineering application. If you’re just improving the engineering, but you’re not addressing the relationships at the enterprise level and with partners, you are missing the opportunity of PLM.” That’s the core of PLM, says Brown. “It’s about managing all the relationships of a product.”
The kitchen sink?
One of the challenges PLM had to overcome was definition; amid claims that just about everything up to and including the kitchen sink was covered by the PLM umbrella, many vendors and analysts had trouble articulating a clear message of what PLM does. Is it a super computer-aided design solution? Is it product configuration? Is it supply chain engineering? Does it actually cover every aspect of a widget’s lifecycle, from conceptualization to product retirement?
Even today, if you ask five industry analysts to define PLM, you will probably get five slightly different responses. But at the core, the answers will all be the same, and that crystallization has helped PLM vendors rake in a lot of cash. According to Daratech Inc., a Cambridge, Mass.-based research firm that specializes in tracking PLM, worldwide PLM spending in 2005 topped $10.4 billion—up 13 percent from 2004. Overall, the past 10 years have seen a healthy PLM compound annual growth rate of 13.2 percent. What’s more, Daratech projects growth in the space to increase again this year to 14 percent over the 2005 numbers, carrying the space to $11.95 billion.
The factors driving this market growth are almost as varied as the things that an enterprise can do with a PLM solution. On the one hand, the numbers benefit from some artificial inflation, thanks to the growing strength of the Euro and Yen, which boosts market values reported in U.S. dollars. But the positive economy has also led to more implementations.
“PLM is gaining traction because it’s now integrating the engineering world and the business much closer together,” says Bill Carrelli, vice president of Strategic Marketing for Plano, Texas-based PLM vendor UGS Corp., who points out some fundamental business drivers that are powering the acceptance and adoption of PLM.
“Greater innovation is at the top of the list,” he says. “It’s incredible how important innovation has become. There has been a shift [of focus] from cost cutting to organic top-line growth. Also, globalization is in the middle of the agenda for companies today. Partners are playing a key role in innovation.”
AberdeenGroup’s Brown agrees. “Increasing efficiency is important, but it is more important to innovate than to have two fewer engineers on staff. Even three years ago, we were in a ‘how to squeeze another penny out of the cost’situation. Now we are in a more optimistic economy, a growth economy.”
And this means the buy decision, which used to be the province of the engineering manager, is coming more and more from the executive level. Says Chris Farinacci, vice president of Global Marketing for San Jose, Calif.-based PLM vendor Agile Software Corp., “The focus is moving from engineering-centric data management to managing the actual business processes, and now on decision support and executive visibility, and that’s what’s taking PLM into the strategic levels.” One of the latest trends is decision support focused on executive visibility, according to Farinacci. “What programs are on schedule, on cost? Are we investing in the right product lines? How do we cannibalize or kill existing product lines? The other piece to that is analytics and reporting. PLM is becoming a tool that’s linking to the highest levels of the company. Executives want better decision-making.
According to Tom Shoemaker, director of solutions marketing for PLM supplier Parametric Technology Corp. (PTC), in Needham, Mass., a PLM deployment needs to do four things really well.Creation: Product definition—What is it? What does it do? What does it look like? This function is comprised of mechanical and electrical computer aided design (CAD).
Collaboration: It needs to provide a mechanism through which all the different groups (including mechanical engineers, computer engineers, electrical engineers, sales and marketing, and procurement) can work together across silos.
Control: This has grown beyond version management, which was at the heart of product data management, or PDM, to encompass change and configuration management and greater security issues such as intellectual property protection.
Communication: The right information must be disseminated to the right people in the right form (such as manuals or CD-ROMs).
“PLM can have a huge impact on the greater enterprise,” says George Ashley, director, engineering technology, Ingersoll Rand, in Montvale, N.J., who freely admits that he “drank the PLM Kool-Aid.” But for Ingersoll Rand, he says, it’s more than vendor marketing hype. In fact, after rolling out a system from PTC, the diversified industrial manufacturer may be the poster child for PLM.
“We have our CAD data under control with only one version of the truth. We have our engineering changes under control. That has tremendous benefits. We are compressing our design cycles and lowering costs. And our big push this year is to link good bills of material (BOMs) to our back-end ERP (enterprise resource planning) system.”
At the front end, Ingersoll Rand is now putting together a group to figure out how the company will add a rules-based configurator that can feed data directly to the ERP system and drive manufacturing. This will deliver what Ashley calls the holy grail—a seamless set of business processes that combines customer relationship management (CRM), product development and manufacturing.
The trend to outsourced manufacturing continues to provide impetus to the product data management aspects of PLM—it’s still critical to make sure your contract manufacturer in mainland China has the right version of the product—but the latest trend is global design.
“Outsourced manufacturing has clearly been a trend for some time,” says Brown, at AberdeenGroup. “Now, people are taking design global, either by establishing overseas design centers or by partnering with external design firms. It’s a huge trend.” According to AberdeenGroup research published in December 2005, one-quarter of companies are already doing this, and 53 percent of discrete manufacturers not already doing global design are heading in that direction.
“If you think about the challenges of collaboration, communications and control, they are difficult in any product development environment” Brown points out. “Then you take that and expand it across geography, time zones, cultures and languages, and it’s a nightmare waiting to happen. Some of it is tactical: Who has the latest version? How do I communicate requirements over geography? And some is strategic: How do I maintain control when the design is no longer being done in-house?”
In today’s automotive marketplace, the product has to be manufactured globally, says Freudenberg-NOK’s Smith. “The major automotive manufacturers have sites set up around the world, and consumer expectation is that their products have the same levels of product quality no matter where it’s produced.
“Now the PLM process becomes very complicated because you are dealing with two or three global partners with different engineering capabilities and you’re working in different languages. So the PLM process has to create the structure for a disciplined approach to assure the end-product meets all customer requirements on a global scale.”
“We have engineers in the United States, Italy and India,” says Ingersoll Rand’s Ashley. “Design Anywhere allows us to do ‘follow-the-sun’ design and take advantage of low-cost countries. The business value is decreased cycle time and decreased development costs. But the bigger bang for the buck comes from Build Anywhere. Plants have to be smaller, they have to be located closer to suppliers and customers. Build Anywhere is the hard part of PLM.”
“PLM has matured to the point that it’s got business context now. It’s not just a cool tool,” says Peter Schroer, Aras founder and chief executive officer. “The new stuff is all about control and quality issues. This is what people are concerned about.”
Of course, despite support from boosters including Smith and Ashley, and a more focused value propostion, potential PLM users must still get approval from the chief financial officer’s (CFO’s) office, and that can be challenging, “positive economy” notwithstanding.
“CFOs typically look for ROI (return-on-investment),” says Ashley. “But they won’t see the tangible ROI until after a product is launched, and then will realize it through long-term manufacturing effectiveness or efficiencies. It’s easy to see these as ‘soft’ or intangible benefits. They are an investment in the future.”
That doesn’t mean the benefits aren’t real.
According to Peter Schmitt, vice president of marketing for PLM supplier Dassault Systemes, of Paris, PLM can be tailored to suit whichever business strategy a given company wants.
“Reduced time to market, reduction in engineering efforts/ costs/time, increased quality of design, reduced quality issues. All these process improvements, and increased efficiency—at the end of the day that makes the CFO very happy.”
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