Commentary: July 2006

By Marc Lind, Aras Corp.

(Editor’s note: This the full-length version of this commentary from which the excerpt in the July 2006 issue of DE was derived.)

Midsize businesses—whether independent companies or divisions of large enterprises with annual revenues of less than $1 billion—face an ever-increasing combination of challenges in today’s fiercely competitive markets. More demanding customers, new compliance requirements, and global outsourced manufacturing are just a few of the trends that are creating significant strains on the new product development process. But the most common problem midsized companies confront during new product development is complexity. Midsized business executives realize that for their company to survive they must manage their product development processes more effectively to achieve:

• Greater new product innovation to fuel future revenue growth
• Enhanced collaboration to shorten development cycles and mitigate risks, and
• Better coordination at product launch to ensure quality and new product margins.

Executives at midsized companies recognize that automating the product development process to provide better visibility and communication is essential to achieve success in the global economy. To these executives the need for a PLM (product lifecycle management) solution is clear;  however, the critical considerations in selecting and deploying a PLM solution are often not as obvious. While the necessity for PLM in midsized businesses has grown, conventional enterprise PLM systems remain complicated, prohibitively expensive, and requiring significant consulting to implement and maintain.

“There is a common misconception that midmarket manufacturers’  business processes are not as complex as their multibillion-dollar counterparts. AMR Research has found that this is not true, and in many cases, smaller manufacturers have grown more complex as they’ve taken over the design and manufacturing tasks outsourced by their large OEM customers,” asserts Michael Burkett, PLM Practice Vice President at AMR Research. (AMR Research Report SMBs: Your PLM Options, Michael Burkett, Dineli Samaraweera, David O’Brien,  September 30, 2004.) “Choosing the right PLM application is not a one-size-fits-all decision.”

Midsize business executives are increasingly looking for cost-effective alternatives and seeking guidance on PLM strategy best practices. The following points provide a practical strategy for midsized companies to realize the benefits of PLM software and position the business for future growth.

Focus on the Business—Achieving alignment with strategic business priorities is essential. It is important for a midsized company to concentrate on a critical business process that must be fixed or improved to compete effectively, such as phase-gate program management or new product risk management. PLM can support a variety of business initiatives, and midsized companies must align a PLM project with strategic business drivers to accomplish meaningful results.

One Size Does Not Fit All—The ability to develop new products is more often than not part of a company’s core competency and the process is integral to satisfying customers. In fact, within midsized companies the range of different approaches to product development and the level of process complexity vary dramatically. The diverse nature of product development processes makes it impossible for a preconfigured system or an unchangeable on-demand offering to support most midsized companies without sacrificing their ability to compete.

Ensure Ability to Adapt—Business conditions are increasingly dynamic, and midsize companies are often faced with the need to adapt in order to survive. Challenging new customer requirements, unanticipated competition, additional compliance mandates, and global outsourcing needs all change constantly and sometimes simultaneously. A midsized company’s PLM solution must be flexible to enable the business to adapt quickly to changes in the market and to turn threatening circumstances into strategic opportunities. The more modern Internet service-oriented architectures taking advantage of the Microsoft technologies deliver the greatest flexibility these days.

Plan for the Future—Midsize businesses should consider the strategic direction of the company and map out an incremental plan that will support the future. A project roadmap should identify manageable PLM project phases that will speed results and deliver benefits at each stage. KPI metrics should be employed to measure progress and demonstrate results to senior management. By understanding and taking into account the future needs of the business a PLM solution project will ensure proper alignment with key initiatives and goals.

Long-Term Ownership Cost—The total cost of ownership of a PLM enterprise solution is an important consideration for any midsized company. The initial cost of licenses is only the first in a series of expenses that include deployment-related expenses, recurring fees (maintenance or subscription), personnel and infrastructure, and the often overlooked cost of solution scope. Midsized companies need to seriously consider the breadth of a solution’s functionality scope when calculating ownership cost. Limited business functionality in a PLM solution can translate into the need for additional application expenses and unanticipated systems integration fees.

Marc Lind, CPIM, is vice president for Aras Corp. (Lawrence, MA) and has more than a decade of experience leading world class manufacturing initiatives. Send your comments about this article through e-mail by clicking here. Please reference “Commentary, July 2006” in your message.