Using “Parts Optimization and Value Analysis” to Identify an ROI for PLM

By Martin van der Roest

Over the past several months, we have all been in various conversations with prospects.  As we get into the discovery and briefing stages, we’re constantly trying to uncover the real issues and challenges.  Airing out “dirty laundry” is not always easy.

As the information and details unfold, you can see the solution forming in your mind’s eye and the potential business value it can deliver.  The value propositions are played back in the forms of “reduce cycle time”, “improve product quality”, “drive broader visibility”, and so on.  This is not to say they aren’t true, but the prospect is skeptical.  It’s probably not the first time they have heard these “lofty” themes.

Doing an audit or assessment can make sense, but it seems to me this is simply more “discovery”.  Customers can see them as “just another study.”  How many of these have we done and things sit afterwards with no decisions?

A couple of months ago, I talked about the value of PLM needing to touch something on a company’s P&L.  Revenues, cost of goods, cost of quality, TCO, etc.  I’m convinced that companies want to see this connection.  Show them something that “if they don’t make a decision, they’ll lose money.”

So what would that be?  Well, let’s back up and quickly explore the symptoms or manifestations associated with poor processes, limited collaboration and lacking infrastructure might be.  These are the things PLM can solve.  I would contend that by not solving these things, companies will experience such issues as …

  • duplicate parts sourced from multiple vendors
  • excessive inventory levels of stagnate parts
  • rework orders
  • idle machinery
  • delayed deliveries
  • quantity discounts sacrificed
  • … and the list can go on depending on the nature of the business

And all of these have money associated with them. 

So what if we could scoop up the needed data related to the above items on a recurring basis and crunch the pants off of them in order to arrive at specific metrics and insights?  We would get hard evidence … simply the facts that in turn would illuminate underlying issues.  Assuming the data is accurate, the results would be telling.

The mechanical details of how this is done are left to another blog.  But for now, I’ll simply call it “Parts Optimization and Value Analysis”.

That “business value” message is now very P&L specific … “reduce cost of goods by 3%”.  If I were the president of a company spending $100M … 3% would be interesting to me.

Of course the idea is not new.  Several global consultancies and even some software vendors offer services around this topic.  Other terms have been used such as Parts Rationalization and Inventory Optimization.

However, I have not seen this this type of approach applied to driving ROI insights to justify a PLM initiative.