Transcript Workshop Objectives - Stanford Graduate School of Business

Product Lifecycle Management
Why Now?
DESIGN WRAP UP
February 13, 2007
Why is Innovation Important?
Innovation is a Major Driver of Top and Bottom Line Results
Untapped improvement potential of innovation management
The four main conclusions from a 2005 global Innovation Excellence study were:
• Innovation-based profit growth tops the corporate agenda
• Innovation excellence can boost EBIT margins by 4 percentage points
• Top innovators have 2.5 times higher sales of new products and get more than 10 times
higher returns from their innovative investments
• Top innovators focus on customers, clarity of purpose and great people and get the highest
impact from idea, technology and resource management
Based upon an Arthur D Little global survey of more than 800 companies to obtain their insights on Innovation
Excellence. The sample covered most industries from engineering and manufacturing to consumer goods and
public and professional services.
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How well do Companies Innovate?
Innovation Performance Measure – Product Launch Success
Q: What percent of new product introductions were successful?
0%
1% to less than 10%
10% to less than 20%
20% to less than 30%
30% to less than 40%
40% to less than 50%
50% to less than 60%
More than 60%
Total
Total
2%
5%
12%
16%
13%
12%
19%
21%
100%
Revenues
$1B - $9.9B
3%
8%
12%
12%
11%
12%
22%
21%
100%
<$1B
1%
4%
11%
20%
13%
17%
15%
20%
100%
$10B +
2%
3%
14%
16%
16%
5%
21%
24%
100%
Industry
Process Discrete
0%
1%
5%
4%
23%
13%
13%
15%
18%
10%
10%
8%
13%
18%
18%
33%
100%
100%
Based on a 2006 AMR Research study involving 216 interviews with IT decision makers in U.S. based
companies with more than $250M in revenue. The interviews included discussions of current and future
supply chain spending plans, business processes, budget allocations, and application usage.
Vertical segments represented:
• Process Manufacturing (n=39) – Chemicals, pharmaceuticals, and consumer package goods
• Discrete manufacturing (n=80) – Automotive, aerospace, and high-tech
• Services (n=71) – Retail, wholesale distributors, and transportation
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What are the Supply Chain / PLM Trends?
More Integration, Innovation, and Collaboration
Open Innovation
Knowledge-based Eng.
Systems Engineering
Product Value-Mgmt.
Portfolio-Mgmt.
Requirements driven E.
Configuration-Mgmt.
Eng.-Change-Mgmt.
CAD-Integration
Classification
Document Mgmt.
Bill-of-Material
Process
Reengineering
SCM
• In the past 5 years, companies
have invested in basic PDMfunctionalities
• The main focus was so far around
capturing product information for
downstream processes (e.g. for
manufacturing or service)
• The next S-curve is starting – new
process coverage including
Material master data
ERP
1995
2000
2005
2010
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Basics
Productivity
Business
Transformation
PLM – The second wave
•
•
•
•
systems engineering
open innovation
product value management
requirements engineering
• Main focus is to generate real
business value from available
technologies across the whole
product lifecycle and the extended
enterprise
Why PLM? It is the Primary Extended Enterprise Strategy to Drive Product & Process
Innovation and Cost & Revenue Improvements
Increased Customer Demands
– A more informed and demanding
customer with high product and
service performance and quality
expectations
– Risk averse, cautious, focused on
performance and more willing to
switch providers
Emergence of New Channels
– Availability of multiple channels,
appropriate to different products,
services and environments:
– Off shore manufacturing capabilities
will drive new channels for sourcing
Consolidation
Ongoing Merger and Acquisition
activity is driving the need for greater
coordination and economies of scale
PLM Enabled
Innovation
Globalization
New players are continually entering
markets as both suppliers and
competitors bringing skills and
challenges from other parts of the
globe
Revenue Enhancement
Offering new products and entering
new markets is driven by the desire to
stabilize revenue streams and
increase shareholder value
– Gaining a first to market advantage
– Avoiding obsolescence
Price Pressures
The global market is driving increased
pressure to reduce costs
“PLM is the fourth major class of enterprisewide business applications
(after ERP, SCM and CRM), given its importance to product strategy and execution
and today’s level of software investment” – Gartner.
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What are the Benefit Drivers of PLM?
Motivation to Leverage PLM Varies Significantly by Industry Sector
Characteristic
Aerospace &
Defense
Auto
High Tech
Consumer
Products
Retail
Pharma
Med Equip
Development Time & Complexity






Product Complexity






Value of Innovation






External Collaboration






Level of R&D Investment






Degree of Regulation






Outsourced Manufacturing






# of “SKUs”






Packaging Complexity






Launch Difficulty






Service Management






Instance of New Product Failure






Sectors beginning to focus on PLM related transformation (e.g., CPR, Pharma,
Telecom) are driven by reasons that are different from traditional adopters of PLM.
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 = High or Extensive
 = Moderate
 = Low or Limited
Who is Leveraging PLM?
The Fastest Growth is in Industries That Have Not Traditionally Employed PLM
Product Lifecycle Management
Industry
Manufacturing
Revenue Revenue
Growth
Revenue, Revenue,
Share,
Share,
Rate,
2004 ($M) 2005 ($M)
2004
2005
2004–2005
1456
1590
96%
96%
9%
Wood Products, Paper, Printing
2
3
<0.5%
<0.5%
31%
47
58
3%
4%
23%
2
3
<0.5%
<0.5%
16%
Pharmaceuticals/Biotechnology
74
85
5%
5%
15%
Apparel
68
76
4%
5%
11%
Food, Beverages, Consumer Packaged Goods
144
160
9%
10%
11%
Machinery (Farm, Construction, Factory)
Computers and Electronics (Peripherals,
Communication Equipment, Semiconductors)
185
201
12%
12%
9%
242
263
16%
16%
8%
Aerospace and Defense
189
205
12%
12%
8%
95
103
6%
6%
8%
335
359
22%
22%
7%
71
66
1522
75
72
1662
5%
4%
100%
5%
4%
100%
6%
9%
9%
Textiles
Primary/Fabricated Metal
Petro Products, Chemicals, Plastics
Automotive and Auto Parts
Other Manufacturing
All Other Industries
Total
Source: AMR Research, 2006
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How is PLM Involved?
Product Lifecycle Management Involvement Across the Demand Chain
• Monitor market
conditions
• Identify potential
offerings
• Select product and
service offering
categories
• Design product
offerings
• Collaborate with
Sales & Marketing to
optimize products
• Collaborate with
sourcing and
manufacturing
2. Design
• Determine timing of
product launch
• Schedule
production capacity
• Plan phase out of
products
3. Plan
• Aggregate
purchasing
spend
• Manage sourcing
• Improve quality
and service
4. Buy
• Manage quality
control
• Monitor
manufacturing
performance
5. Make
1. Decide
7. Sell
8. Maintain
• Maintain product
information Service & repair
information
• Manage part to part
relationships
• Asset management
• Provide product information
to support sales
• Manage complex product
configuration
• Capture future requirements
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6. Move
• Transport product from
manufacturing / sourcing
through distribution to
retail
• Manage transportation
capacity
How Does PLM Assist?
PLM Contributes to Increased Revenue or Reduced Cost Across the Entire Demand Chain
Product Portfolio Management:
• Regular review of internal and external
performance and trends
• Review of internal portfolio performance
• Portfolio balancing and rebalancing to
align with strategic goals and objectives
Design and Engineering:
• Specifications and
structures
• BOMs
• Engineering Change
• Development & testing
Supplier Collaboration
2. Design
Lifecycle Program
Management:
• Manage innovation
funnel
• New product
launch
• Transition planning
• End of life planning
3. Plan
4. Buy
Design & Sourcing
Management:
• Integration with product
definition & changes
• eRFI,,RFQ,,RFP
• Promote use and reuse of
preferred parts and optimal
part selection
5. Make
1. Decide
7. Sell
8. Maintain
Channel Collaboration
As Built Lifecycle
Information:
• Service & repair information
• Part to part relationships &
configuration management
• Asset management
Configuration and
Sales Support:
• Configuration Mgmt
• Integration to CRM
• Future
requirements
capture
Product Inventory
Management:
• Obsolescence &
stock write-off
• Product recall
• Asset tracking
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6. Move
Manufacturing Execution:
• Product change phase in &
out including review,
approval and notification
• Batch control & lot
traceability
• Quality control & assurance
• Document control
PLM – Why Now?
Support for innovation translates to a standardized process for multiple pathways leading to
commercially scalable product.
• Internal Development
Concept
Technical
Design
Final Selection
and Approval
Commercially
Available
Product
• Strategic
Partnerships
• Shared
Development
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PLM – Why Now?
Current growth strategies include forming partnerships between prior competitors, overtaking
the same customer mind- and pocket-share
Golf Equipment
“PLM interested us because we
needed to gain efficiency in our
computer-aided design, both to
increase the number of new products
we were bringing to market each year
and to cut the time it took to do it.”
Dan Shoenhair, Director of
Engineering, Ping Inc.
CIO Insight, July 2006
Apparel
“If you look at the cycle times from
design to retail shelf, about two-thirds
is spent in product development. The
new system has the potential to
remove months from the production
cycle…”
Boyd Rogers, VP of supply chain and
technology, VF Corp.
Information Week.com February 2005
Outdoor Equipment
“The linkages between groups and
their various processes supported by
PLM add much more value than
product data-management tools alone
ever could.”
Kevin Myette, REI Director of R&D
CIO Insight, July 2006
Consumer Package Goods
“By consolidating their
specifications for purchasing
across all of its global units, P&G
has reduced its direct materials
costs on common materials such
as corrugated box materials,
pigments, and chemicals totaling
hundreds of millions of dollars”
Source: MatrixOne/P&G Press
Release 6/27/02
Innovation
“Aberdeen’s Product Development in Consumer Industries
Benchmark reports the following benefits from companies
utilizing product development automation:
• 17.5% reduction in product costs
• 25% to 35% reduction in design cycle times
• 10% to 15% reduction in time-to-volume cycles
• 75% reduction in Engineering Change Order cycle times
• …”
Aberdeen Group 2005 survey of 65 manufacturing companies
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Challenges to introducing PLM
Organization
New Skill sets
Readiness for change
Process discipline
New Data Requirements
Discipline
Understanding how to leverage
Storage
Executive Sponsorship
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