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Concurrent Engineering Blog

Why has PLM become so important?

Posted by Gavin Quinlan on 19-Aug-2011 11:39:00

PLM ProfitsIn manufacturing today, product development processes and profitability are inextricably linked. There is a strong causal relationship, whereby such processes have a direct impact on manufacturers’ ability to generate sustained business growth. Fundamental in today’s global business environment – one that’s characterised by geographically dispersed workgroups, increased competition, and new customer requirements in emerging markets – product development challenges for discrete manufacturers are more complex than ever.

Since these challenges – which concern everything from having more project stakeholders, to managing disparate systems with incompatible data, to dealing with increased frequency of design changes and complying with stricter industry regulations – represent formidable obstacles to business profitability and success, it’s critical that organisations determine how to effectively address such issues.

(It’s important to note that while revenue improvement represents 80% of the profit opportunity and cost reduction represents the remaining 20%, industry leaders successfully adopt best practices in both areas.)

At an ever-increasing rate, manufacturers have come to regard Product Lifecycle Management (PLM) as the potential solution.

“Organisations implementing PLM can expect both top-line and bottom-line benefits that come from gains in time-to-market, operational efficiency, production costs and regulatory compliance.” – Forrester Research (1)

Likewise, IDC Manufacturing Insights’ assessment that PLM is assuming corporate-wide importance – ”PLM is slowly maturing into an enterprise decision-making discipline” (2) – reflects a growing consensus among analysts that PLM’s significance will one day rival well-established enterprise solutions like ERP (Enterprise Resource Planning), CRM (Customer Relationship Management) and SCM (Supply Chain Management), and potentially offer even greater value. Gartner expresses this sentiment even more pointedly, by asserting: “In addition to PLM’s inherent value, PLM decisions have strong influence on the business model and benefits that can be realised by ERP, SCM and CRM applications in downstream business processes; in that sense, PLM is the most fundamental business application in manufacturing.” (3)

In short, the implications of adding a PLM solution are clear:

• Companies exist to make money for their shareholders by achieving sustained earnings growth

• Revenue growth and cost reduction are the only two ways to improve earnings – with revenue growth being the more sustainable, unbounded option

• Revenue growth is four times more influential than cost reduction, with regard to profit contribution

• PLM enables product-centric organisations to meet their bottom-line goals while addressing product development process challenges related to regulatory pressures, product complexity, and geographic dynamics

• Similar to the evolution of ERP, PLM is a consolidating technology that offers significant IT cost-of-ownership benefits

• Unlike ERP – which focuses on cost-reduction initiatives – PLM addresses both cost reduction and revenue growth

• PLM has reached a point in its maturity where its ROI potential is making it a top-of-mind business imperative for C-level executives

1. Forrester Research Inc., ROI of Product Lifecycle Management, February 2009

2. IDC Manufacturing Insights, Product Lifecycle Strategies Top 10 Predictions for 2010, Webcast, 2010

3. Gartner Group Inc., Brant, Kenneth F. and Halpern, Marc; Findings: PLM's Business Value is Fundamental, yet Still Not Well Understood, April 2010

Download the ROI of Product Lifecycle Management Whitepaper

roi of plm