Fulfillment

The Product Lifecycle Management Opportunity

Stephen Proud and Michael Wetzer Accenture

In response to increased customer demand and fast-moving bilities, enterprise resource planning (ERP) competition, companies are under unprecedented pressure to systems, and middleware had to be reached. Nowadays, advanced technology solutions generate profitable products at high speed. Product lifecycle from companies such as Ariba and ICG management (PLM) offers companies a new way to rapidly plan, Commerce have brought new, collaborative organize, manage, measure, and deliver new products or services. capabilities to, for example, e-procurement and contract manufacturing. Similarly, ERP systems from companies such as SAP, Product lifecycle management is to product product development link: the capability to Oracle, and J.D. Edwards have developed information what enterprise resource plan- truly integrate existing enterprise resource decision-support capabilities in areas such ning is to enterprise resource information, or management and customer relationship as demand management and distribution customer relationship management is to management (CRM) capabilities with inte- network design. Additionally, integration- customer information. It represents a new grated and real-time product information. focused solutions from companies such as way to plan, organize, manage, measure, and By doing so, it brings the informed input of PTC and MatrixOne now are available to deliver new products or services. Early on, every relevant constituent into a product’s help companies share information more this capability was known as product infor- planning, definition, design, development, seamlessly, and thereby develop, build, and mation management (PIM). However, its sole manufacture, sale, movement, support, and manage products more collaboratively. Other focus then was on product development even retirement. The core capabilities of key capabilities also have come of age. These activities, and associated processes generally multiple functions and organizations collabo- include advanced data-storage systems to were confined to an organization’s four walls. rate across the extended enterprise, whereby manage PLM’s significant increases in data Later, PIM evolved into CPC, or collaborative the product and its associated processes are volume, as well as improved computational product commerce. Internet technology was managed as company assets rather than the speeds and bandwidths to transmit pictures the primary force behind CPC, helping province of individual departments. and solid model objects and also facilitate companies bring external business partners Perhaps most important, PLM represents a interaction among CAE/CAD/CAM systems, into the product development loop. cost-management and business-enhancement product configuration tools, and ERP and But today’s approach – product lifecycle opportunity. For example, by linking down- CRM applications. Technologically speaking, management – is where PIM and CPC were stream functions to the development cycle, the time is right for PLM. headed all along. PLM’s promise is an enter- companies can make better, more cost-effec- On the market side, companies are under prise view of a product’s complete lifecycle – tive decisions about design, componentry, unprecedented pressure to generate fast and from initial design concept through to retire- production specifications, and market timing. profitable product-related responses to ment. PLM represents a real opportunity to: But at the same time, they also gain the changing market demands and competitive •Develop a single environment in which potential to introduce more and better prod- market opportunities. product content, process information, ucts without hiring new people or expanding In some market sectors, typified by and program status information are fully corporate infrastructures or capacities. In aerospace and marine, products often have integrated. both contexts, PLM is a tool for making lifecycles measured in decades. As price pres- • Understand the precise status of a prod- better decisions. sure is exerted on the original equipment uct at any stage throughout its life. market, companies are responding by seeking • Share product-related information among Why Now? profitable growth in the aftermarket and by all internal factions and external business Like many breakthroughs, PLM is the moving away from selling straight products partners, including designers, suppliers, offspring of technological innovation and to offering solutions. Strategies of this type engineers, contract manufacturers, mar- market demand. On the technology side, a may change the company’s economic model, keters, supply chain service providers, high level of sophistication in Internet capa- which in turn requires them to have a better- support personnel, financial personnel, and even customers. Stephen Proud is an associate partner in Accenture’s Supply Chain Management Service Line who specializes in product lifecycle management. He leads the company’s Manufacturing and Design practice in the United Kingdom. Michael Wetzer is a partner in Accenture’s Communications and High-Tech operating Product lifecycle management provides what group. He has 23 years of experience in product engineering, engineering information technology, and for many companies has been the missing product management.

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In short, shifting business requirements Time-to-Market and technological achievements have Improvement aligned to produce the need for – and the means to attain – an integrated approach to product development. Product lifecycle Margin/ Sales Price management is that approach: helping companies design, develop, manufacture, move, store, and service new products in Margin an integrated way that results in: Improvement •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 Revenue Time property and developing standardized, Uplift proven work methods Figure 1 By improving time to market, the sales curve shifts up and to the left, and profit margin is •Reliability, consistency, and reductions in increased through price and expanded market share. the enterprise learning curve •Increased profitability through shorter integrated, enterprise- and lifecycle-wide neered products (such as an airframe), and time to margin, increased customer approach to managing product information. therefore do not need the power of PLM. satisfaction, lower cost of goods sold, In this complex aftermarket environment, However, in these industries, the complexity lower failure rates, and reduced costs product development decisions at an early is often in other dimensions, such as •Value extracted from the later stages of stage in the product lifecycle can dramatically managing global product specifications, the product lifecycle affect the downstream shape of the ROI curve controlling the recipe and associated manu- of the product – and thereby the long-term facturing process instructions while permit- Getting PLM Right profitability and viability of the product. ting regional variations, and managing rapid Any initiative with such significant rewards Companies will not only need to manage packaging innovation while maintaining the is bound to be difficult and potentially their own product information (such as the integrity of the global brand. PLM also can costly. PLM is no exception. At the outset, location and configuration of their installed help companies implement these strategies. building an economic case is tricky because base of products), but they may also need to In response to such market pressures, companies tend to operate differently in a track other companies’ installed products on companies must focus on getting the product PLM environment. Certain departments or which delivery of these solutions are depend- right the first time (on time and defect-free), functions may have to be eliminated or ent. PLM is a key tool in helping companies becoming more scalable in their product- replaced by new capabilities, which compli- in these sectors maintain control of their development capabilities, increasing the flexi- cates the establishment of clear cost/benefit product data from cradle to grave while they bility of their cost structures, and duplicating projections. PLM implementations also are implement the strategies that seek to exploit their market successes without reinventing lengthy, so the concept might have to be the opportunities to extract value from the the wheel. Similarly, they are more pressed sold and resold as executives and sponsors aftermarket tail of the product lifecycle. than ever to submit reliable estimates about come and go. This means inevitable In other industry sectors, such as sales levels and production timing to the changes in long-term working relationships consumer goods, product lifecycles are investment community. Additionally, few and the likely politicalization of issues and sometimes shorter – requiring the capability dramatic opportunities remain to reduce costs missions. Like any major business undertak- to rapidly and reliably bring new product to in many companies. Therefore, the only way ing, broad buy-in is critical. market with the goal of capturing market to advance their business agendas may be to Implementation challenges are further share and achieving profit targets. Alterna- drive new products into new or existing compounded by a significant displacement tively, for more mature products, there may markets. New products, new customers, and effect. This is because PLM’s greatest impact be a need to use rapid innovation in packag- new revenue are the order of the day. In is in the earliest phases of a product’s defini- ing to breathe new life into flagging sales. At many markets, companies that can reliably tion – when it still is possible to capture the first sight products (such as shampoo) may get products to market when needed will advantages associated with changes in not appear as intrinsically complex as engi- become the winners. design or disciplinary inputs. However, at

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Unplanned maintenance and repair Market pressures is inefficient and results in high require shorter levels of downtime for end users product cycle times

Lack of cross-functional Poor leveraging of prior management of the delivery experience leads critical path leads to to uncompetitive bids P ro O uncompetitive p je e c ra time to market t M tio a n n s Poor ability to meet Sales and After-Sales a a Services Project g n promised delivery e d Lack of commercial Service and Management m e dates causes Support n awareness and narrow dissatisfied customers t technical focus results in suboptimal decisions Sales and Resources Commercial and Skills Product Insufficient focus on Lifecycle design for manufacture Complex products and Management processes mean long and manufacturing Manufacturing Research and design cycle times processes design Scaling and Development/ results in excessive Variants Design assembly lead times/rework M Manufacturing a a n n Development d Poor interface control d u New-Product S fa and process c u tu Introduction Poor utilization of p p rin concurrency, combined lie Design an assets due to g rs with product variants, excessive changeover Engineering drive excessive times engineering changes

Lack of reuse leads to high High engineering costs numbers of parts and tooling due to excessive Engineering changes changes and poorly prioritized and too administration overhead long to resolve

Figure 2 PLM can help companies address these typical issues. this stage, all that is visible on the balance might include schedule responsiveness, opment infrastructures. Product lifecycle sheet is the labor being committed by resource usage, and out-of-pocket management accommodates both of affected departments. PLM’s principal bene- expenses that are incurred as the program these directions. fits may not be visible until the product is is implemented. • Substandard product quality: Excessive launched in the market. Despite these obstacles, PLM remains a failure rates often point to a breakdown Ownership hurdles also must be dealt distinctive opportunity for companies to in engineering change-order mechanisms. with. PLM requires a company’s design and rationalize the design, development, and PLM can help stabilize this process. engineering organizations to imbue more overall management of their product portfo- discipline, provide more content, and manage lios. In particular, companies with the follow- What to Expect: Key product creation in new and unfamiliar ways. ing concerns should look particularly hard at Characteristics of a PLM Yet, PLM’s beneficiaries are the downstream product lifecycle management: Environment users who can obtain better-designed, lower- • Long product cycle times: Margin ero- PLM is not business as usual. Among the cost products. In effect, there often is an sion, excessive discounting, and erratic most overt differences are personnel and job unclear relationship between when and materials management and inventory changes. Certain clerical or supporting roles where a company invests its money, and profiles are common signs that product- may cease to exist – replaced by new oppor- when and where the benefits are achieved. delivery performance is substandard. tunities for people to grow professionally or Lastly, managing the right metrics is • High product-development and to contribute new insights about how to critical. In one sense, this refers to techni- launch costs: High recurring and non- improve product quality, reduce costs, and cal (system performance) issues associ- recurring product costs often indicate an enhance business performance. Behind the ated with complex data sets and traffic over-reliance on internal solutions or scenes, however, companies that implement over a network; for example, identifying resources. Appropriate responses include PLM approaches are even more different. For acceptable response times for extracting more collaboration with third parties example, the method and speed with which or creating a part number. Other metrics and the enhancement of product-devel- information is shared and accessed is funda-

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40 percent decrease in Product release 25 percent reduction in unplanned maintenance cycle time reduced overall MRO costs and (Asian airline) by 20 percent 15 percent decrease in (aircraft manufacturer) unplanned downtime (European airline) New training program resulted in Increased RFQ projectOperation m a 30 percent improvement efficiency (more than d in assessment scores 95 percent on-time s an (aero engine ale ices anagemen quotation) and S After-Sales s and manufacturer) Serv Project eliminating unprofitable Service and Management quotes increased profits Support t by $16 million (truck manufacturer) Sales and Resources Commercial and Skills Reduce design cycle Product Reduce assembly time by 40 percent Lifecycle hours by 50 percent (semicondutor Management and rework Manufacturing Research and manufacturer) production costs by Scaling and Development/ 60 percent (aircraft Variants Design manufacturer) 40 percent reduction Manufacturing Manufacturing and Suppli Development d in design changes and New Product n a g 25 percent reduction 85 percent reduction n Introduction erin esig e in design time in part-setup time D in ers g (aircraft manufacturer) (mobile phone En manufacturer) 20 percent savings 50 percent reduction in in engineering costs due to tooling and 55 percent reduced engineering changes reduction in number Reduced engineering and administration of engineered parts change cycle times (automotive supplier) (aircraft manufacturer) from 45 days to less than four days (data storage company)

Figure 3 PLM can provide a range of benefits across several business functions. mentally altered. Employees view relevant such as planning, manufacturing, sales, view of the problem or objective. Thus, information sooner and more clearly, thus engineering, and testing. the great advantage of PLM is that product giving them the opportunity to provide input PLM environments also contain far design and development are sequenced and feedback in a manageable way. stronger linkages among the customer virtually, so collaborations accomplished Another profound difference is that object, resource object, and product object at near real-time speed come close to elimi- PLM environments typically have a (the PLM/ERP/CRM connection). In addi- nating the drivers of most change orders. control center, which governs access to tion to greater speed and more data Additionally, the change orders that do all information pertaining to a product’s integrity, these linkages can result in new need to be processed benefit from the PLM development and subsequent life. Compa- insights into what products or product environment’s increased data integrity and nies use the control center to reach into configurations the company should be sell- linkages to other enterprises and applica- all aspects of the business and collect and ing and at what cost. tions. Speed and quality are prime benefici- scrutinize needed, product-associated Perhaps the most profound change from aries of this capability. information. This process involves “meta- a design standpoint is a marked reduction Product lifecycle management has the abil- data” or data tags – which do not extract in the number of engineering change ity to reshape how companies leverage prod- or move physical data objects from other orders. Virtually all companies move uct information to reduce costs, enhance applications, but establish ways to access, through their product-development cycles quality, and infuse new marketplace advan- view, and interpret information irrespec- with prototypes that evolve several times in tages. In effect, PLM is the last link in a tive of where it currently resides. This is response to change orders. But as most triumvirate that includes ERP and CRM. a stark contrast to most product-develop- design professionals know, responding to a Working together these three capabilities will ment environments, in which product change order is never simple – primarily carry the most forward-thinking companies information resides in multiple functions, because each order reflects only a single to new heights. ■

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