Observers of last January's Detroit Auto Show may have missed the implications of a comment by Bob Lutz, GM's vice chairman and a highly respected auto designer. It was a reference to the manufacturing excellence evident in the displayed vehicles. While he seemed to be tossing a bouquet to fellow exhibitors, Lutz also was alluding to the closing of another aspect of competitive advantage. To the extent show exhibitors attained excellence in some aspect of automaking, such as plant floor operations, competitive differentiation shifts to other factors. Actually, the automakers had already raised the competitive bar even higher with the enterprise strategy of Product Lifecycle Management (PLM). With PLM the automakers and their suppliers set goals to optimize the integration of all the product-associated activities of an enterprise.
"In today's business environment, the most dramatic gains in competitive differentiation derive from an optimal PLM strategy," says Minneapolis-based Bob Nierman, executive vice president, UGS Corp., a leading PLM vendor. As a collaboration and enterprise integration strategy, the software tools of PLM interface with far more than an enterprise's CAD, CAM and CAE systems, says Nierman. PLM adds value by integrating with ERP and supply-chain management systems. He calls PLM a backbone technology for organizational integration and collaboration. He says the important issue is the ability to scale data accessibility to the entire enterprise. His examples: UGS implementations at GM, Ford Motor Co., DaimlerChrysler and Nissan Motors.
Nierman says PLM emphasizes the business fundamental of orchestrating a greater return on the product investment. Think of it in terms of faster time-to-profit, reduced production costs, and continuous innovation throughout the product lifecycle. PLM vendors such as UGS have a special challenge in reaching decision-makers. As an enterprise solution, the message of PLM's strategic necessity must be delivered to C-level professionals across the entire span of an organization -- many different organizations. Nierman says the message has to reach high-level executives in engineering, manufacturing, sourcing and even maintenance.
"The challenge is in communicating an enterprise awareness to executives who may feel their primary responsibilities are to a functional department," says Nierman. (He says another difficulty is to communicate PLM's success stories in a customer environment that still remembers some under-fulfilled claims of large ERP implementations of the last decade.) In PLM, Nierman says, the vital challenge is to reposition product design from being a departmental issue and give it proper enterprise visibility. "From an organizational viewpoint, the most dramatic aspect of the problem is the typical 'wall' or barrier that traditionally limits effective communication between manufacturing and engineering. PLM's mission is to allow the entire enterprise to participate throughout the entire lifecycle of the product." Don't conclude that PLM solutions can be justified only by companies with the product information complexity of automotive or aerospace giants. (Lockheed Martin Corp. and Boeing Co. have UGS implementations, as do GE and Procter & Gamble.) Is Nierman seeing gains in midsize and smaller companies? His answer is yes, although he admits big companies were the original marketing objective for UGS.
"We wanted to connect our PLM solution with the huge paybacks they could demonstrate and let that reputation filter down through their extensive supply chains." Even so, Nierman says PLM should not be categorized as a high-end, big company solution. "Consider that retailers may have 40 to 50 suppliers, and yet PLM can enable their value chains to behave as a single company. Small companies that outsource design can also derive the benefits of easy collaboration and information visibility via a PLM strategy."
Nierman also sees PLM, born in the manufacturing sector, growing into other industry sectors. "The growth sectors include consumer product groups, government, pharmaceutical, retail and medical devices. The rule of thumb: anything that involves a product." At P&G, the product is packaging, he adds. "UGS is no longer looking at PLM as a solution specific to the manufacturing sector of the economy. We look for PLM to change the process of innovation across all industries." The global market for PLM software and services is expected to grow by a compounded annual growth rate of 8% through 2007, to more than $9.2 billion, says research company Daratech. Through 2007, Daratech expects the product data management and collaboration segment of the PLM market, which UGS leads via its Teamcenter portfolio, to grow 16% compounded annually.
The Compelling Case
How much of an imperative is a PLM strategy for the success of a product-oriented organization? After all, one of PLM's targets, the integration of the islands of automation were 20th century goals for factories of the future. One 20th century proponent, Jack R. Meredith of the University of Cincinnati, noted that the impetus for improvement often comes from the decision to employ a new technology (Page 29, "California Management Review," Volume XXIX, Spring 1987, No. 3). The decision, especially its timing, could be a critical factor that determines the magnitude of the benefit an organization might hope to garner from PLM. The argument hinges on a version of the classic question -- when does a unique technological innovation become a commodity necessary for anybody's business entry or participation? That question leads to another one worthy of introspection: If PLM is implemented now, will that early adoption (presumed) bring competitive benefits or at the very least sustain market position? One industry analyst, Gartner Inc.'s Marc Halpern, offers a conclusion: "By 2007, Fortune 1000 manufacturers that have not embraced a PLM strategy that is supported by software will become noncompetitive (0.9 probability)." To learn more about how to manage information technologies that mature into infrastructural commodities, see Nicholas G. Carr's "Does IT Matter?" (2004, Harvard Business School Press).
Sink Or (Sim)ulation
PLM's enterprise value derives from accessing and leveraging product information wherever it resides. One example is the simulation software that supports virtual product development (VPD) in a PLM strategy, notes Ann Arbor, Mich.-based Bob Ryan, executive vice president, MSC.Software Corp. For example, Toyota Motor Corp. licenses MSC.Nastran simulation tool to solve vehicle and system engineering questions related to stress and noise vibration and harshness. (Toyota also licenses MSC.Patran, MSC.ADAMS and SimDesigner.) The VPD mandate is to facilitate the innovation process -- how to design products for form, fit, function and manufacturability. "As part of an optimal PLM strategy VPD can easily and effectively relate to other aspects of a product's lifecycle, such as inventory, maintenance and related considerations." Together PLM and VPD change the paradigm of a product life cycle to deliver faster innovation and lower cost, he adds. A vital part of the paradigm is better integration of physical and virtual building and testing of the product. With an optimized PLM/VPD strategy, the result is accelerated innovation and greatly reduced risk. Ryan warns of challenges from legacy departmental practices that become troublesome cultural barriers. "One can be a barrier that develops between people who know how to build and test things physically and those who know how to build and test designs on the computer. What emerges is distrust between the two groups. People who test things physically don't trust the results of the people who do simulations and generally the people who do simulations reciprocate." At worst, Ryan says the disconnect results in a competitive environment. To maximize the benefits of virtual product development, Ryan recommends viewing physical build and test as a complement to virtual build and test. "They're not competitive technologies." A second challenger is the need to automate procedures with standard, audited systems. For instance, according to Ryan, Boeing's initial work on its first digital aircraft, the 777, is going one step beyond CAD and checking form and fit with a digital mockup. Boeing will then virtually fly the aircraft to check the functioning of the landing gear and other systems. Leading companies are moving in this direction. In automotive, Ryan's example is BMW's automation of crash and noise and vibration simulation. Using MSC's SimManager tool, BMW imports CAD models from their supply chain, assembles a full vehicle model and subjects them to a virtual procedure for crash simulation. Some 40-50 automated procedures include frontal barrier crash, offset crash, side and rear impact. Once completed, BMW shares the simulation results with vehicle design engineers. What-if design iterations are used to relate design variables to crash quality. Ryan warns of the tendency to deviate from the necessity to automate test procedures. "Don't attempt to 'polish the apple' by attempting to model even more phenomena. We have the capability to predict the performance of very complicated things, and some companies tend to focus more on how to extend those methods rather than automating test procedures for the benefit of their main PLM strategy." VPD's goal should be to integrate testing automation into the main stream PLM environment, stresses Ryan. His advice: Start by studying how VPD automation can solve existing design problems. The second step: Research the benefits VPD automation can bring to new design initiatives. The final level is to achieve the ability to do design signoffs by using simulation instead of physical tests. The end point arrives when simulation can drive all of the product definition throughout the supply chain.
The Web Connection
Market forces continue to present new urgency for the business process advantages of PLM. Consider: In the 1990s, 80% of a Boeing plane was built in-house. Today the ratio is nearly reversed, says IBM Corp.'s William Reedy, vice president Websphere business development, Somers, N.Y. Another instance is the evolving need for collaboration and data integration even with competitors. A current example is the April announcement that Ford Motor Co. and GM are collaborating to develop a six-speed automatic transmission for the 2006 model year. Small wonder that Web-based and hosted applications are now available. For example in June, IBM announced that Lam Research Corp., a supplier of semiconductor fabrication equipment, is the first client ever to select a new, Web-based PLM service. IBM plans to provide Lam with a comprehensive network-based solution for managing and archiving product design documents and processes, including knowledge management and collaboration features. IBM's new on-demand PLM service facilitates standardization of design practices and enables collaboration through the Lam value chain, helping increase product quality, improve market responsiveness and lower cost of production. Lam will tap into the service on an as-needed basis paying only for the resources used. The service allows Lam to eliminate upfront capital expenditures and reduce deployment time (where Lam would install the infrastructure and manage the application in-house). Lam's PLM service is being built on the PTC Windchill application software suite, including PDMLink and ProjectLink Version 7, and is expected to be used in late summer of 2004. IBM expects to offer a similar service for other PLM applications by year-end, says IBM's Reedy. For IBM, the PLM service is an extension of its on-demand marketing initiative. "An on-demand world presumes the need to build responsiveness to the market, the supply chain and customer needs," adds Reedy. "That avoids missing opportunities with the wrong product at the wrong cost." IBM is not alone with a service approach. Four years ago Michael Topolovac got his inspiration for a hosted PLM solution with the difficulties he was having managing product information. His company, a small maker of underwater camera housings was reduced to devising its own PLM solution. Its internal success led to the spin off of Arena Solutions Inc. Menlo Park, Calif., where he serves as CEO.