What’s the value of a PLM solution?

A couple of weeks ago someone within a company’s IT department asked, “So, what’s the value of a PLM solution?”  This person acknowledged that the term “PLM” was unfamiliar to them.   And on top of that, they were tasked to look into potential solutions as well as consider the ROI.

 First, it is a great question.  This person was trying to cut to the chase.  Yes, at some point, they will need to get into the specific features.  But initially, they wanted to understand its place in the business as well as the potential business value.  Bravo.

 The term “PLM” is not as common as other terms in an IT organization.  I would imagine that common threads of discussions touch on technologies such as SaaS/cloud based solutions, SAN/NANs storage, voice-over-IP, etc.  Some of the terms related to specific applications most likely include CAD, ERP, ECM (Enterprise Content Management) and CRM.  My own anecdotal experience with various customers suggests that PLM is still not common vernacular.

 When I think of PLM, I basically think of a solution that addresses the needs required to support a product’s life cycle.  This cycle might originate in sales and progress all the way thru obsolescence.  Certainly ERP folds in as a transactional mechanism to support the treatment of released items … for example, ordering, inventory, scheduling, etc.  But the dynamics of a product life cycle is inherently far from transactional.  The activities require a real or perceived central repository of product data coupled with mechanisms to treat work flows, processes and collaboration.  And since each company blends in a combination of their own business requirements, cultural, and industry nuances, it is vital that this platform is flexible and can grow with the needs of the organization.

 Evolving Needs

Over the years, companies have often times evolved their PLM needs.  It might start with a better way to manage CAD drawings and assemblies … hence a product data management (PDM) solution.  As the business grows, functional extensions are added such as other data bases to support engineering change and related non-CAD files, utilities to support data extractions and transfers, along with spread sheets and emails to support pseudo workflow processes.

And as much as everyone might adjust, make due, accept, and resign themselves to “what is”, there is no doubt that numerous improvements are possible.

 But treating those possibilities as tactical efficiencies or “eliminating key strokes”, etc., invariably add more to an evolving cobbled collection of precariously assembled components.  This process is not sustainable.

 So how then to escape this evolutionary gravitational force?

 PLM Shows up on the Bottom Line

 Everybody understands business value propositions.  And therein is where PLM is ideally suited to take the conversation to the next level.

 So going back to the question … “What is the value of PLM?”  Consider starting with a P&L (profit and loss) statement in mind.  

 At the gross margin segment, there is clear opportunity to drive shorter sales cycles as well as reduce the cost of goods.  Shorter sales cycles potentially represent improved sales and simply doing more for less.  And, it can be argued that better sales tools, estimation techniques, specification development methods, etc., can all contribute to shorter sales cycles depending on the nature of the industry.

 Terms like “parts reuse” and “cost of quality” are ultimately translated into reducing the costs of goods.  Here, redesigning parts that already exist and that now require a new vendor, etc., clearly adds to the expense.  And if the engineering change cycle isn’t as automated or complete as possible, the potential for scrap and/or returning stock drives additional expenses and extends time to market.

 On the lower half of the P&L are multiple overhead expenses that contribute to operating the business.  The simple one is the “total cost of ownership” or TCO.  This is the expense of maintenance, subscription and upgrades for example.  If you are using software from any of the big global PLM vendors, the monthly or yearly fees can be disproportionate to the value they ultimately drive.  Even if you have a homegrown system, the required man-power to maintain and support the DYI activities can be more expensive than people think.

 Since PLM is commonly initiated or operated within the engineering, planning, production and possibly segments of manufacturing, the immediate business value is most likely going to come in the form of a reduction in the cost of goods and cost of quality, as well as potentially lowering the cost of ownership.

 What if implementing PLM along with best-practice processes can cut the cost of goods by 5% by the second year?  Now that is a pretty dramatic value proposition that would get anyone’s attention.

But I think there is money being left on the table.  I am convinced that PLM is under-utilized in driving a shorter sales cycle time.  Depending on the nature of the business, existing engineering and released data is ideally suited to readily supporting sales automation mechanisms, configurable quoting options, and potentially prototyping/evaluation cycles.


 So my encouragement to anyone looking to evaluate PLM solutions is to step away from tackling the tactical issues and features.  This has all been done.  Pretend you have to sit in on your next company’s board meeting (or maybe you already do) and present the value proposition for pursuing a PLM solution.  It’s amazing how the remaining details fall out of this approach.

 by Martin van der Roest