Using PLM to Manage Value Streams

April 6, 2010
Companies can satisfy customers' increased demands (and improve their own bottom lines) by strategically connecting value stream processes to customer and business needs, which optimizes the end-to-end value streams that run across the enterprise.

At the core of lean product development and manufacturing processes is focusing on what the customer wants, identifying anything that doesn't add value in providing a product or service and eliminating those wastes. This sounds simple enough, but it means examining hundreds of activities, processes and inputs that bring a product or service to market -- all the events that collectively comprise a value stream.

It's challenging because value streams run across departments (from product design to marketing distribution) from suppliers to customers. Effective management of value streams for industrial equipment manufacturing requires a clear view of how each activity and process contributes or reduces value to the end-user, and improves or worsens productivity for the company as a whole.

Manufacturers following lean product development and manufacturing principles have traditionally mapped out value stream processes and activities within their companies, pulling together cross-functional teams to examine how they do business and to look for waste, particularly where one process hands off to another. Yet in modern organizations with activities and handoffs that stretch around the globe -- often managed in silos -- it's hard to quickly identify waste across an extended value stream. Only by harnessing and distributing the information associated with these processes to the right people at the right time in the right format can companies solve problems and increase customer value and profits efficiently.

Manufacturing is especially challenging in today's uncertain economy with companies fighting for every customer and every sliver of profit margin. For the industrial equipment industry, the challenges are even more difficult as these manufacturers attempt to serve other manufacturers, all of whom are trying to create more value at lower costs.

Product lifecycle management (PLM), since by its nature incorporates CAD, manufacturing, simulation, and multifarious business processes, is well-poised to help industrial equipment companies properly deconstruct value stream processes for lean product development: integrating, federating and presenting actionable information from these sources, as well as from a variety of external business process sources (e.g. ERP, procurement, CRM, etc.) with workflow visibility and tracking. PLM is an important ally in harnessing the full scope of enterprise knowledge to optimize value streams, cut costs, improve productivity and give end-users the value they seek.

For industrial equipment manufacturers and their customers, a product's lifecycle must be long and well-managed. Manufacturers invest more in physical assets than other businesses not only in the purchase of highly expensive plants, machinery and tools, but also in the maintenance and management of these assets. Unlike a broken printer or a crashed computer, production machinery can't easily be restored when it stops working. In other words, idled equipment means lost sales. Optimum machine performance is crucial to the success of manufacturers, and in a no-frills economic climate, they're looking for maximum value and long life in every single purchase.

These performance and output requirements place tremendous pressure on industrial equipment manufacturers and suppliers of all sizes and contributes to a fiercely competitive atmosphere. In addition to equipment function, customers now demand more value and service (like line integrations, post-sale asset management and onsite engineering support) even as they ask for lower prices. It's a tenuous and uncomfortable situation for manufacturers and end-users alike.

Fortunately, aggressive industrial equipment companies can satisfy customers' increased demands (and improve their own bottom lines) by strategically connecting value stream processes to customer and business needs, which optimizes the end-to-end value streams that run across the enterprise. Value stream management can supercharge existing innovation and continuous-improvement strategies, but it requires that companies embrace new ways of thinking and abandon the traditional.

Key to making the shift to a value stream-focused organization is an effective data management and information sharing infrastructure. It's not an easy process, with challenges emerging in product development and continuing throughout the value stream, yet system-wide process management can work. It's best powered by easy-to-access, 3D visualization and collaboration tools that access relevant information available within a PLM implementation. PLM is thus already the ideal complement to lean product development -- pulling together gigabytes of information and allowing employees to organize and analyze data, using 3D, in order to solve problems.

No industrial equipment manufacturer can sustain long-term advantage without a continuous-improvement element to its culture. More importantly, however, these manufacturers must take a broad-based value stream approach to improvements that offer exponentially larger gains in productivity and profitability.

Unfortunately, even industrial equipment manufacturers with lean product development experience often become impatient with such long-term strategic approaches because they don't offer the instant gratification that lean efforts provide on an assembly line. Rather than delighting management with dramatic cost reductions and productivity improvements in specific cells, lines or departments, value stream improvement approaches focus on establishing a tiered framework (or tiered strategy deployment) to identify goals and objectives internally and with supply chain partners, and then embed problem solving capabilities throughout the value stream with suppliers and customers.

Despite the fact that this approach encourages sustainability and dominant market share in the long run, few industrial equipment manufacturers have seen the light. For example, according to a 2009 MPI Manufacturing Study, 83% of manufacturers operating within an industrial equipment and machinery supply chain use lean principles, yet only 38% of these companies practice strategy deployment at a plant level.

Nevertheless, applying continuous improvement across a value stream relies on basic principles that have always been part of lean management: minimizing waste, lowering costs, improving productivity, enhancing revenue generation through better use of assets, and improving ROI. Add PLM to that equation and you have a formula for truly lean product development and customer service success.

David Segal is Director of Industrial Equipment (IE) Market Development for Dassault Systmes.

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