The ROI of PLMThe ROI of PLM“Validating the Possible”April 2011April 2011
John MacKrell Vice President ‐ j mackrell@cimdata comJohn MacKrell, Vice President ‐ [email protected]: +1.734.668.9922
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www.CIMdata.com
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Global Leaders in PLM Consulting
CIMdata’s MissionStrategic consulting for competitive advantage in global markets
CIMdata is the leading independentCIMdata is the leading independent global strategic management consulting and market research authority focused
l i l PLMexclusively on PLM.
We are dedicated to maximizing our clients’ ability to design and deliverinnovative products and servicesinnovative products and services through the application of PLM.
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ROI & Benefits are Driven by 3 FactorsRecursive relationship among people, technologies, and processes
Existing business processes may be enhanced using PLMPr
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New processes enhance how PLM is used
For maximum benefit, can’t optimize any one factor!For maximum benefit, can’t optimize any one factor!
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For maximum benefit, can t optimize any one factor!For maximum benefit, can t optimize any one factor!
ROI Balance: Costs vs. BenefitsA real and quantifiable analysis is required
Costs are real
Benefits must be real tooBenefits must be real tooSo benefits should, if possible, be estimated in the same method of meas rement Moneof measurement—Money
C B fi
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Costs Benefits
ROI HighlightsUnderstanding the impact of PLM
Determine and address business opportunities
PLM benefits received by any two companies will differ—PLM benefits received by any two companies will differunderstand yours
The appraisal method causes the team to better understand the business
Benefits & ROI help management:Make educated investment decisions
Reduce the risk of wrong decisions
Avoid getting the wrong solution
People improve in areas where they are measured
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PLM – The DefinitionPLM – integrating people, processes, business systems, and information
Strategic business approachNOT just technologies
Consistent set of business solutions
Collaborative creation, use,management & disseminationAll product/plant definition information – the virtual product MDA AEC EDA CASE analysis documentationMDA, AEC, EDA, CASE, analysis, documentation, …
All virtual product processesProcesses that plan, design, produce, support, … Full Product Lifecycle
Supports the extended enterprise
Spans full product/plant lifecycle, from concept to end of life
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PLM Spans the Product LifecyclePLM touches all phases of a product’s life and the entire value chain
Planning
Conceptual Design
Product Engineering ManufacturingPortfolio
Requirements
Planning Engineering Manufacturing Engineering
Simulation & Validation
Management
Build and Produce
Disposal & Recycling
Sales & Distribution
Maintenance& Repair
Test & QualityIn‐service
Operation
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PLM Solutions—Information Management across Media, Process, Time, Geography, & Enterprise
Cost Model for PLM SolutionsTypical cost elements
PLM software & maintenance
Hardware (additional needed for PLM) & maintenanceHardware (additional needed for PLM) & maintenanceWhat gets charged to PLM?
PLM appraisal selection andPLM appraisal, selection, and implementation planning
Solution implementationSolution implementation
Training
Business and system administrationBusiness and system administration
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Software CostsVarious cost aspects exist
Client licensesSubscription licensing may be possible
Or none at all with Open Source
Server licensesf d l dPLM software modules, e.g., document management, parts management,
product structure, engineering change management, etc.
Software maintenance or subscriptionpAnnual fee, usually a % of value of installed SW
Database management softwareFor meta‐data
Other:Application integration
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Application integrationView & markup, collaboration, etc.
Selection & Implementation CostsThese costs are usually much more than the software itself
Internal costs for system selection, appraisal & justification, implementation planning
Internal cost of subject matter experts
Cost of lost user productivity (time away from job)
External consultancy
Training (internal and external)
Data and process modeling
Integration with applications
Tailoring and/or customization
Data capture & cleaning
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Business and system administration
Cost FactorsMain cost drivers for the implementation of PLM
Number of users & sites
Implementation phasingImplementation phasingBy solution, group or project
Number of PLM solutions to be deployedNumber of PLM solutions to be deployedPDM, visualization, DMU, collaboration, CAD, Dig. Mfg…
Quantity of legacy data to be cleaned & movedQ y g y
Number of other systems to be integrated (CAD, ERP, business planning, etc.)p g, )
Level of tailoring needed
Training
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Training
PLM BenefitsMetrics quantify the benefits in the ROI
Costs Benefits
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Metrics Help You Understand…Some of the reasons why metrics are important
When, where, and how people are using PLM
The effect of PLM on the business & its processesThe effect of PLM on the business & its processes
How well the business objectives for a project have been satisfiedsatisfied
If sponsors are receiving a return on investments
A th t d i tAreas that need improvement
Requirements for future implementations of technologies & processesprocesses
The ongoing success of your business solutions
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Nature of MetricsMetrics should meet a number of criteria
They should measure direct cost, time, count savings
They should be measured both before and after the project isThey should be measured both before and after the project is implemented (to set baseline)
They should be reported automatically (vs manually)They should be reported automatically (vs. manually)Facilitate the process
Assure timely reporting
They should be evaluated to ensure they don't create an unwanted behaviorCan they be manipulated to show inappropriate results or hide problems
Do they violate how people are motivated
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Guiding Your PLM ProgramIndicators of program progress provide direction
PLM project metrics track the PLM program’s progress
PLM business metrics help you understand how well the PLMPLM business metrics help you understand how well the PLM program is supporting the enterprise’s business objectives, e.g.,Cost
Quality
Time to marketTime‐to‐market
Both indicate how to adjust the PLM program’s scope & timing to maximizeprogram s scope & timing to maximize your return on investment
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Example Benefits Example ranges of benefits based on actual experiences
Time‐to‐manufacturing—10% to 50% reduction
Engineering change process—10% to 70% reductiong g g p
Design review process—50% to 80% reduction
Increased productivity 10% to 20% increaseIncreased productivity—10% to 20% increase
Product development costs—25% to 40% reduction
New part numbers—5% to 15% reduction
Time to find information—75% to 90% reduction
Design errors—10% to 25% reduction
Time‐to‐design—15% to 70% reduction
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Travel cost for design—20% to 35% reduction
Benefits for Business PerformanceWin against the competition
Enables innovation, predictability, company flexibility, and better managementRespond more swiftly to new challenges, new markets, etc.
Good management depends on rapid access to full and up‐to‐date informationinformation
Companies first to harness PLM will raise barriers of entry for their competitors
E bl i ti ith t iEnable communications with partner companies
Support global manufacture, assembly, or service
Support global product execution
Companies who continue to ignore PLM will learn ll b i f h i bi i
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all about it from their biggest competitors
Benefits for Business PerformanceQuality Initiatives
PLM enables Quality Assurance Uphold a reputation for excellence and reliability through product lifecycle
Quality impacts legal, contractual, liability, cost savings, competitive, human resource, and environmental issues
Support total quality management initiatives & other initiativesSupport total quality management initiatives & other initiatives
ISO 9000 Objectives:ISO 9000 Objectives:ISO 9000 Objectives:ISO 9000 Objectives:“To supply quality products that don’t come back, to “To supply quality products that don’t come back, to
customers who do.”customers who do.”David HoyleDavid Hoyle——ISO 9000 HandbookISO 9000 Handbook
Support TQM:Support TQM:Total Quality ManagementTotal Quality Management
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Benefits for Business PerformanceRegulatory issues
PLM supports industry regulations and requirementsIndustry requirements, e.g., QS 9000, FDA, RoHS, WEEE, REACH … regulations
Environmental, health, and safety considerations
Provides access any time, anywhere to valid information and proves the capability to satisfy regulators
PLM maintains a traceable system of record
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Benefits for the OrganizationFacilitate effectiveness of the organization
Improve corporate communicationsIntegrate product development across divisions of a company
Break down geographical barriers
Provide concurrent access to all enterprise resources
Access to all product data (e g the technical library) from every deskAccess to all product data (e.g., the technical library) from every desk
Support organizational changeCorporate reorganizationsCorporate reorganizations
Acquisitions
Implementing concurrent engineering & other initiatives
Business process re‐engineering
Automation and enforcement of new business processes
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PLM Building KnowledgeCreating & managing your intellectual assets to enable innovation
Intellectual Intellectual AssetsAssets
Traditionally, the knowledge Traditionally, the knowledge of the organization is the of the organization is the
(Incorporate (Incorporate Principles)Principles)
of the organization is the of the organization is the sum of that which is held sum of that which is held by its peopleby its people
Knowledge(Patterns)
Information(Relationships)
( )
Data(Items)
( p )
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Adapted from Knowledge Management by Gene Bellingerhttp://www.systems-thinking.org/kmgmt/kmgmt.htm
( te s)
Data Reuse Creates ValueYour intellectual assets need to be leveraged
Allow product developers to easily re‐use parts, designs, & processes
“Up to 80% of the work done in an engineering department is“Up to 80% of the work done in an engineering department isidentical or very similar to work done previously”identical or very similar to work done previously”identical or very similar to work done previouslyidentical or very similar to work done previously
From Research by Arthur D LittleFrom Research by Arthur D Little
The more your data is used and reused the more value it produces for your enterpriseRe‐use proven designs with confidence
Avoid prototyping and testing
Avoid re using failures and repeating the same old mistakes
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Avoid re‐using failures and repeating the same old mistakes
Benefits for UsersPLM is attractive to users
PLM is a consistent data source: one place to look
Provides shared access to dataProvides shared access to data
Links dataInter‐data relationships provide a more complete view of informationInter‐data relationships provide a more complete view of information
Powerful search facilities—by attributes, browsing, full text retrieval
Visibility to all product information through a common source
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Benefits for UsersEmpowering the organization with the right information
Empowers workersProvides easy access to knowledge & expertise
Reduces burden of administrative tasksAutomates tracking
Records who, what, where, when, etc.
Automatically links related information (e.g., viewable data to geometric model, models to specifications), p )
Transfers BOMs to ERP, avoid re‐keying
Automatic versioning and revision tracking
Encourages use of a common terminology
Improves personal productivity
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Benefits for the Product or ServiceImprove customer’s perception of products & services
More quickly respond to customer queriesNavigate through data
Search and find
Discover related information
Costs
100%Defined CostsFacilitate rapid product
improvements early in product development cycle
50%
product development cycleWhen the big decisions are needed
When committed costs are high and
TimeEngineering Manufacturing After-Sales
0%
incurred costs are low
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Benefits for the Product or ServiceFacility production and maintenance
Facilitate longer production runsCut time‐to‐production, time‐to‐commissioned
Benefit from profit margin on additional production
Gain value from larger market share for the product
Cut plant down‐time with PLM and project managementIf the “product” is a plant or facility, cut non‐productive time
Opportunity to improve planned maintenanceOpportunity to improve planned maintenance
Facilitate hand‐off of product dataA petrochemical plant owner‐operator estimates the cost of movingA petrochemical plant owner operator estimates the cost of moving information between hook‐up & commissioning into operations at $10 million
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Benefits for Business Process Streamline design reviews and approvals
Provide a formal mechanism to evaluate product developments at major milestones
Allow many users to see product data and make comments on that dataReview the design rather than merely its documentation
Allow users to see product definition information
Supports review teams having a collective competency greater than that of the designersE g include representatives ofE.g., include representatives of marketing, purchasing, manufacturing, servicing, test, inspection, reliability, quality assurance
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q y
Benefits for Business Process Improve change processing (1 of 2)
Make changes earlier in the processImproved access to design information
Work with more up‐to‐date information
Support concurrent processes
Reduce cost of managing and tracking changes
Establish & maintain procedures for the identification, d & l f ll hdocumentation, review & approval of all changes across whole product life cycleEngineering Change RequestEngineering Change Request
Engineering Change Order
Engineering Change Record
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Benefits for Business Process Improve change processing (2 of 2)
Major process for control of a product Implement using workflow
Tracks the impact of a changeCost and time
Part and document relationships
Where used investigations
Ripple effect: one change can require anotherNC
3D
PART
Ripple effect: one change can require another
PLM captures the approval or rejection of a change for audit and historyand historyPLM enables electronic comment/markup
PLM enables rapid communication of changes
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Benefits for Business ProcessIncrease efficiency by streamlining processes
Improve the purchasing cycleEffective purchasing depends on managing data and processes as well as good cross‐functional communications
Speed work ordersWork orders, with all relevant reference documentation and data in a folder, distributed electronically
Unify multiple BOMsUnify multiple BOMsE.g., engineering, manufacturing, purchasing
Allow use of multiple part numbering (customer, supplier, internal)
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Benefits for Business ProcessIncrease efficiency by streamlining processes
Improve cross‐functional integration and collaborationThe purchasing cycle ‐ profit from larger discounts, fewer suppliers, reduced inventory, fewer errors resulting in scrap
Change management cycle
S d i iSpeed response in emergenciesPredefine processes to access a complete data set
Encourage & enable continuous improvementEncourage & enable continuous improvement of processes
Enable business transformationEnable business transformationSupport process change & integration with lower risk
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Examples of MetricsApplicability & importance vary by company & PLM project
Business Metrics PLM Project Metrics
Time to access data Software delivered against planTime to access data
Plant down‐time for maintenance
Software delivered against plan
Tasks completed on time
Cost of IT resourcesCost of changes
No. of standard parts/no. of special parts
Number of processes (workflows) implemented
Quantity of legacy data migratedp p
No. of successful bids/month
Tooling costs or assembly costs
Quantity of legacy data migrated
Number of licenses delivered
Number of users implementedScrap, inventory rates, or re‐work rates
Warranty costs returns or MTBF
p
Number of users trained
Number of PLM solution errors d
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Warranty costs, returns, or MTBF reported
Benefits of Open Source
Minimize cost of PLM licensesLower capital expense for PLM shortens payback period & lowers up‐front risksrisks
Be clear that just because you don’t have to buy PLM licenses, you don’t have to buy the infrastructure (database operatingyou don t have to buy the infrastructure (database, operating environment, visualization tools, other product design software, etc.)
Reduce software maintenance & tailoring costs
Reduce Total Cost of OwnershippDecrease initial start‐up costs & ongoing costs
Result is improved ROI, achieved more quickly with better
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Internal Rate of Return (IRR)
Parting AdviceHow true it is!
“If you torture data sufficiently itIf you torture data sufficiently, it will confess to almost anything.”
Fred Menger, chemistry professor (1937- )
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