PLM: from acronym to value chain

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Variety may be the spice of life but for product organisation executives, their product portfolios will be closer to their hearts. As customers demand more products and keener prices, companies face challenge and change in their approaches to product design and management. So how can today’s companies overcome the obstacles inherent in conventional product design and drive improvement across product lifecycles and throughout the supply chain?

Historically, corporate strategists have deferred to Michael Porter’s wisdom – that organisations compete either through cost or differentiation and success on these axes ultimately determines a company’s position in the marketplace. And is it not sufficient to concentrate on one or the other. Without a balanced approach an organisation can become stuck in the middle, on a path to failure.

As a first step on the right road companies must therefore strive to manage: Increasing product variety – driven by increasing understanding of customer needs; Faster product changes – supported by well-defined technology strategies; Cost and lead-time – ideally managed through the extended value chain and applied across the product portfolio.

Optimising the product development operation drives the need for strong capabilities throughout the value chain; such capabilities are to be found in product lifecycle management, or PLM.

Success is not simple
Imagine for a moment you’re a manufacturer of dairy products looking to launch a new dessert. Designed for the sophisticated palate of your target retailer’s customers, your product is intended to fly off the shelves, generating rapid revenue turnaround (and bolstering future product development spend). Success will not come simply by managing design well, but will also require the creation of multi-disciplinary teams working across locations, connecting functions, systems and organisational models.

According to AMR’s survey, ‘Trends in New Product Development’ [Source: Strategic Planning News, October 27, 2004], PLM is held up as a compelling route to the improvement of new product development and introduction. The survey shows that among the 43 per cent of organisations planning to increase IT spend over the next 12 months, plans are dominated by systems for PLM, product data management (PDM), and customer relationship management (CRM). And more than half of the respondents cited the top reason for product launch failure as ‘product not meeting customer needs’. The second most-cited reason for failure was ‘late to market/missed demand’.

PLM capabilities can not only increase success in product design but also drive improvements in the extended supply chain including:

  • Sourcing – where flexible product architectures, modularisation or platform development enable efficient reuse of material and design and standardisation
  • Value engineering – enabling and regulating design-to-cost and value engineering methods at all stages in the product lifecycle
  • Manufacturing – driving design for manufacture/assembly, process flexibility, quick change introduction and lead-time reduction
  • Logistics and distribution – launch planning, warranty and reverse logistics, transport costs, availability
  • Integrated planning – product and project portfolio management, resource allocation, initiative planning, campaign management
  • After sales – field service, total cost of ownership reduction
  • Product management – marketing, repositioning or promotional costs.

Despite the efficiencies to be gained downstream, decision-making is often not easy in the early stages of product development, due to a lack of reliable information on future conditions affecting the product.

PLM capabilities address this shortfall, gathering and linking islands of automation such as ERP, CRM, PDM and supply chain systems – with customer requirements always steering the course. The consequence, in an effective PLM process, is better and earlier information, communication and co-ordination, and all-round support for key design, development and sourcing decisions. Furthermore, PLM capabilities facilitate collaboration and co-management of key processes in the product lifecycle.

But how can you employ PLM methods to add value? Consider the following steps:

  • Implement strategic review and analytical methods to identify potential for improvement across your product portfolio
  • Set up systems to enable multi-disciplinary teamwork and extend this to partners in the supply and demand chains
  • Consolidate, organise and protect product and process information to support the product lifecycle
  • Enable and regulate matrix processes, the sharing of targets and metrics. In short, prepare the organisation for more flexible, collaborative approaches.

At Accenture, we believe manufacturers can, and should, take the PLM route to competitive advantage and bottom line results. Our dedicated team of more than 200 PLM experts worldwide take a holistic view of PLM as a set of processes and tools to help manufacturers make good decisions, and to build the basis from which to drive product success and the optimization of the supply chain – for profit and performance – over the entire duration of a product’s life.

Alejandro Cuartero is a partner in Accenture’s Supply Chain Management Service Line.

Jerker Funnemark is a senior manager in Accenture’s Supply Chain Management Service Line.

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