SMBs Have It All in Focus with PLM

The primary goal of small to midsize manufacturing companies, for example in the mechanical engineering and plant construction sectors or the automotive industry, must be to secure their competitive edge in the long term by offering exceptional product quality. “The three most important ways to achieve this are improving and shortening product development processes, harnessing the associated cost savings and increasing flexibility,” says Jakov Cavar, analyst at consultancy firm PAC (Pierre Audoin Consultants). In the future, SMBs will need to bring out new and innovative products, together with customer-specific adaptations of these products, onto the market at an increasingly rapid pace. And this is only possible if the entire lifecycle of a product – from development and design to prototyping, manufacture, marketing and recycling – is monitored electronically. “IT support in this respect is becoming more and more of a strategic competitive factor, which is why SMBs must develop the appropriate expertise within their company,” recommends Hendrik Dettmering, a PLM expert from the Technical University of Munich.

PLM – much more than a trend

As far as this recommendation is concerned, companies seem to be well on their way. “Compared with other IT solutions, 2002 was a good year for PLM,” says IDC analyst Romala Ravi. More and more companies are recognizing the benefits of using PLM with existing systems to better monitor, standardize and control the lifecycles of their products. PAC analyst Jakov Cavar also points out that, “Growth rates for PLM will be significantly higher than for the entire software and services market.” IDC is predicting the market will grow annually by more than 26 percent by 2007. The market volume is set to climb from around USD 3 billion last year to USD 9.7 billion by 2007. Forecasts by other market research institutes confirm that product lifecycle management (PLM) is much more than a trend or short-lived hype. According to the Aberdeen Group, global expenditure on PLM will have increased to more than USD 5 billion by 2005 (compared with USD 3.4 billion in 2001). US consulting firm CIMdata, which specializes in PLM, is even going as far as to predict that the PLM market volume will have grown to USD 20 billion by 2007. While the Aberdeen Group reveals that 75 percent of PLM usage is currently confined to large firms, experts and market analysts such as PAC analyst Cavar believe that SMBs will soon be a powerful force on the PLM market. At present, no more than five percent of all industrial SMBs with less than 1,000 employees already have a PLM solution in place, though this figure is on the increase. There are several reasons behind this. Many SMBs, e.g. in the automotive or aircraft construction industries, act as suppliers to large enterprises and therefore cannot avoiding implementing new technology. What’s more, an increasing number of companies no longer manufacture their products or parts themselves, but rather have them produced or assembled by others.

From stand-alone solution to PLM system

The logical development of this process is bringing together different data using a PLM solution. This not only facilitates cooperation but also lowers costs, especially seeing as planning and production have both diversified considerably in the meantime. “Production facilities and designers are often based in completely different locations,” says CIMdata Vice President Alan Christman, describing the situation. “SMBs, such as suppliers, are nowadays more involved than ever in large firms’ product development processes,” Hendrik Dettmering of the Technical University of Munich goes on to say. This is taking place against a progressive trend toward outsourcing production due to increasing globalization. Small to midsize manufacturing firms will in future be most affected by this trend, reveals the “PLM4KMU” research project which focuses on SMBs in particular and which involves the IT Research Center (FZI) of the University of Karlsruhe and the Technical University of Munich among others. We are also seeing development collaborations involving more and more countries.
Between 1998 and 2000, the proportion of outsourced production climbed from 15 to 40 percent, says Alan Christman and he believes it will continue to increase. Particularly in the automotive industry, suppliers will have taken over around 75 percent of development and production tasks from vehicle manufacturers by 2015, predict experts from Mercer Management Consulting and the Fraunhofer Institute for Manufacturing Engineering and Automation (IPA) and the Fraunhofer Institute for Material Flows and Logistics (IML). In an environment that has seen such change, integrated solutions are crucial to success. Therefore a PLM system not only manages all product-relevant information and data and makes it available to every employee in a suitable form, it also covers all business processes – from technical processes and production to acceptance testing and maintenance. The time for stand-alone solutions is over, since “The PLM approach is both integrated and horizontal and aims to optimize development and production processes across all areas of a company and use integrated e-business functionalities to transcend corporate boundaries,” summarizes Cavar.

PLM is more than just software

According to CIMdata President Ed Miller, PLM has become so relevant to business because of a paradigm change within companies. Businesses improved their corporate structures in particular in the 1990s through investment in ERP (enterprise resource planning), while nowadays the focus is on initiatives to increase profitability and value development. As a result of this development, PLM is not simply a piece of technology but rather a strategy with which all information relating to a product can be generated, managed and leveraged. According to a CIMdata definition, business processes are just as important in PLM as the underlying data. For Aberdeen analyst Jack Maynard, product lifecycle management is even the “first business strategy” which promotes the core competence of manufacturing firms, namely the products they manufacture and sell.
PLM gives businesses access to the smallest details and a whole range of aspects in the lifecycle of a product. However, it also has a profound effect on existing structures (strategy, products, processes, systems and organization) and corporate culture, since the individual phases of the product lifecycle need to be coordinated in ever greater detail, comprehensive process and information flows have to be put in place and the product lifecycle systematically changed. A software solution such as mySAP PLM fulfils these requirements, since concepts and ideas can be quickly turned into successful products. Everyone involved in product development – from product designers, suppliers and manufacturers right through to the customer – are linked together, thereby making it much easier to exchange information. mySAP PLM can be easily adapted to suit changing requirements within a company and can grow with the business and, thanks to the open architecture, can even be linked up to other solutions from SAP or third-party suppliers.

A well thought-out introduction

SMBs should certainly give a great deal of thought to the introduction of PLM software. In addition to the usual question of finding the right provider, it’s also vital to address business management and technological questions, which at first do not seem to be directly related to PLM. This includes, among others, investment protection (will the manufacturer be in business in the future?), support from the manufacturer, scalability, integratability and low complexity, a factor which Cavar believes is “particularly important for SMBs”. PLM expert Dettmering also advises SMBs to work out the right PLM concept before they look at special software.
So when should SMBs introduce PLM software? “At the very latest, SMBs should begin looking for a PLM system if they are in danger of losing an overview of product data, particularly in the design and documentation stages but also in sales and maintenance,” advises Cavar. It’s best if the investment is made before the worst case scenario actually kicks in. If a production line is shut down for the first time because the wrong components were delivered, it could already be too late.

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Dr. Andreas Schaffry
Dr. Andreas Schaffry