James White, VP of Strategy, Duro
PLM is usually linked with improving engineering efficiency but rarely is it attached to successful business outcomes, such as profitability or sales performance. However, it should be seen as a strategic business imperative that elevates engineering from a cost center to an innovation center to facilitate commercial success. This blog connects the dots to reveal how cloud-native PLM’s can be utilized to directly drive successful business outcomes.
Lost engineering productivity can result in higher product costs and missed deadlines
Ninety-six percent of manufacturers report that lost engineering productivity negatively impacts their businesses, according to a study by leading PLM analyst firm, Tech-Clarity. The results of the study, shown below, reveal that wasted engineering time can result in higher product costs, missed deadlines and challenges staying on budget. Coupled with the complexity of modern products and their supply-chain centricity, manufacturers face challenges improving engineering efficiency.
Inefficient engineering processes can lead to challenges with sales and profitability
PLM ensures that engineering processes are efficient, repeatable, and flexible by providing workflows and best practices. Here are two examples of end-to-end process failures which could be improved by implementing PLM and focusing on improving engineering efficiencies:
- “We lost the deal because we couldn’t get a quote out on time.”
- “We won the deal but we are losing money on each product we sell.”
In the first example, sales might be blamed for not sending a quote in time. In the second, procurement or finance might be held accountable for product profitability issues. However, engineering plays a critical role in both scenarios as explained below:
- The quote might be delayed if sales has to use manual, paper-based processes to find part information for a custom product. In a competitive bid process, sending the customer a quote contains a level of urgency and sales may not be able to get updated pricing in time. This could be resolved with more effective communications and data sharing between sales and engineering systems, specifically by using PLM as the hub to connect product data with financial systems.
- With profitability issues and time crunches, sales may have to cut corners when issuing contracts by using older product proposals to estimate new ones. Small changes such as a different cooling fan or circuit board might cost more than the usual price due to supply chain shortages. Live sourcing data, viewed in PLM, can enable engineers and procurement teams to see how minor changes impact the product price. With access to up-to-date information about lead times and pricing, engineers could quickly alter a design to factor in the total cost and make informed design decisions.
PLM provides a centralized data repository with access to design, sourcing and change documents. It should be part of strategic business initiatives, and it should be used to enable business outcomes from engineering to production and sales.
Connecting PLM to business outcomes
The best way to make PLM a business imperative is to highlight how efficient engineering processes directly contribute to positive business outcomes. So how does a tool designed for engineers help drive improvements throughout the business?
More streamlined processes enable engineers to create more innovative products because they have time to experiment and evolve designs faster. Often engineers choose the first thing that works rather than the best design because they are under time pressure. Wasting time on administrative tasks, finding documents and inputting data impacts the time they have to iterate and design for both profitability and performance. PLM ensures all stakeholders have access to the right information and reduces much of that manual admin time through automated data input and standardized processes. By centralizing and standardizing BOM structure, change process and component information, engineers have more time to focus on designing products. Maintaining consistency enables the business to scale because more products can be designed with the same human resource.
Sales need fast access to accurate information so that they can respond to customer quotes for non-standard products. In situations where products require customization, such as adding an international connector or customizing a product for a unique installation, sales must get revised costing information from engineering, manufacturing and finance to build an accurate proposal. It could be a lengthy process for sales to call each department or wait for email replies with the calculated pricing. Cloud-native PLM can be used as a backbone for product design and be connected digitally to ERP, MES and other enterprise systems involved in the quoting process. This solves the task of calculating costs using financial and time data sourced directly from numerous systems or databases. PLM facilitates the transfer of engineering BOMs into ERP for costing and work planning. Then the schedule, work effort, including labor rates, machinery and materials costs are calculated in the ERP. Finally, this information can be transferred into a financial system to calculate the correct price and margins, before then digitally approving the quotation and releasing it to sales to present to their customer.
Business performance is an indicator of the health of the business. PLM helps link teams and tools, ensuring that everyone follows the right process to encapsulate corporate governance standards. Standard workflows ensure repeatability across all departments, enterprises and physical locations so that teams work efficiently and to capacity. By sharing product content among departments it’s easier to distribute products, inventory and work; to function as a single virtual organization irrespective of physical location. Finally, PLM provides traceability of the entire product designs history. Manufacturers and engineers can compare as-designed to as-built products to ensure accuracy, to meet specifications and reduce risk by managing a digital paper trail of the product’s complete genealogy.
Elevating PLM to business imperative status
Cloud-native PLM, complemented by adjacent cloud-native solutions, gives much needed flexibility, scalability, and affordability for all tiers of manufacturers. It enables more efficient engineering processes which benefit the overall business. By connecting cloud-native PLM to other cloud-native solutions such as ERP, CAD or MES, engineers can more easily share product and supply chain data throughout the business. Extending PLM beyond engineering into adjacent business functions such as operations, procurement, finance and sales, PLM becomes a business imperative.