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Enabling Product Innovation:
The Roles of ERP and PLM in the Product Lifecycle
is also known as :
Product Life Cycle Management,
Introduction to the Product Life Cycle,
Product Life Cycle,
Life Cycle Strategies,
Product Lifecycle Management Solutions,
Get Lifecycle Management Solutions,
Product Lifecycle Collaboration,
Industry-leading Product Lifecycle,
Product Life Cycle Stages,
Product Life Cycle Profitability,
Product Life Cycle Maturity,
Successful Product Lifecycle Management,
Product Innovation Lifecycle,
Product Life Cycle Saturation,
End-of-Life Product Recycling,
Product Life Cycle Curve,
Product Engineering Process,
Product Lifecycle Management Information,
Product Life Cycle Information,
Explanation of Product Life Cycle,
Product Life Cycle Refers,
Manufacturing Product Life Cycle,
Product Life-Cycle Policies,
Planned Changes in Product Availability,
Major Product Life Cycle,
Life Cycle Management Techniques,
Successful Product Lifecycle,
Product Life Cycle Support Policy,
Product Life Cycle Support Transitions,
Flexible Product Lifecycle Management,
Product Life Cycle Plans,
Product Life Cycle Strategy,
Application Lifecycle Monitoring,
Product Life Cycle and Operations,
Product Life Cycle Assessments.
Seeking Product Innovation
Aberdeen research shows that developing innovative products is a top priority for manufacturers
today. Companies have turned away from cost cutting as their primary approach
to improving profitability, and are now embracing a strategy of profitable growth. Product
strategies today reflect aggressive corporate strategies, which Aberdeen has determined
now focus significant emphasis on increasing product revenue in over 80% of
Companies are turning toward product innovation to achieve revenue growth. But innovation
alone will not lead to profits. To generate a return on an innovative idea, the idea
must be fully developed into a commercial offering. Developing ideas involves validating
the core idea and developing it into one or more marketable products. This development
process requires marketing work, design work, and potentially mechanical, electrical,
software, and manufacturing engineering. When the concept has been fully defined,
validated, and transformed into a product, it is then ready for commercial launch and
execution from a sales, marketing, manufacturing, and logistics perspective.
Bringing Product Innovation to Market
Best-in-class companies have put in place organization and technology infrastructures to
enable new product development. Improving the new product development process, as
Aberdeen research has identified, correlates to tangible business improvements. Enabling
technology plays a key role in making these processes effective and efficient. Aberdeens
Product Development in Consumer Industries Benchmark reports the following benefits
from companies utilizing product development automation:
- 17.5% reduction in product costs
- 75% reduction in ECO cycle times
- 25% to 35% reduction in design cycles
- 10% to 15% reduction in time-to-volume cycles
- 30% to 40% reduction in part duplicates and introduction of new parts
- 15% to 25% reduction in part search times (improving engineering efficiency)
These operational results, in turn, translate into bottom line returns for the business.
Enabling Product Innovation
Enterprise applications play a key role in supporting and improving product development
and achieving these benefits. Aberdeen's Product Innovation Agenda research indicates
that manufacturers that are best in class in product development benchmarks are four
times more likely to have integrated data, process automation, and collaboration to support
Two primary enterprise applications, Product Lifecycle Management (PLM) and Enterprise
Resource Planning (ERP), play key roles in enabling companies to develop and deliver
innovative, profitable products. This research investigates the ways in which companies
are using these technologies to help improve their product development processes.
The key findings of the research indicate:
- Over half of manufacturers see the value in a single, integrated system for product
development, manufacturing, sales, and support. There is value perceived in
- Less than one-quarter of companies surveyed, however, are willing to accept
manual workarounds and inefficiencies for partners or customers as a tradeoff for
a single system. Software capabilities to support product innovation and product
development outweigh the need for a single system.
- There is a clear separation and promotion process from design to manufacturing
in both processes and systems. Innovation and execution are linked but independent
- The system requirements for enterprise systems in product development and in
executing a supply chain are different. PLM and ERP were developed to address
different requirements in regards to:
- Lifecycle of product data: 60% of companies begin documenting products
when the concept is initiated, before formal structure is defined.
- Product structure: Roughly two-thirds of manufacturers have conceptual
and subsystem-level product hierarchies, before individual parts are defined.
- Product knowledge: Most products are never released to manufacturing,
but saving product failures capture valuable company knowledge.
- Version control: Only one-third of companies release products in less
than four iterations, generating designs manufacturing doesn't need.
- Data types: Product development typically involves multiple documents
and less structured information, driving data management challenges.
- User population: Product development is a collaborative process, with
frequent usage outside of the company's enterprise.
- In the execution cycle, companies must maintain a consistent view of products
across departments, divisions, and often companies. Product data for execution
often spans multiple ERP implementations, requiring a central source for product
- Over three quarters of manufacturers who have used PLM for more than 2 years
have integrated ERP and PLM to some extent. PLM and ERP can be integrated
to form a combined solution for product development and manufacturing.
PLM and ERP play different, complementary roles in product innovation and execution
and are being used in conjunction with one another to help companies capitalize
on the innovation opportunity.
Table of Contents
- Chapter One: Issue at Hand
- The Product Innovation Imperative
- Chapter Two: Key Business Value Findings
- Enabling Product Innovation
- The Value of Integration
- Integration - Capability Tradeoffs
- Defining ERP and PLM Roles
- Chapter Three: Implications and Analysis
- The Innovation Cycle
- Capturing the Design - Product Documentation
- Achieving Innovation from Iteration
- Creating and Utilizing Product Knowledge
- Innovating in Teams
- Transitioning from Innovation to Execution
- The Execution Cycle
- Establishing Control
- Providing the Right Product Data for Execution
- Tying Innovation to Execution - Supporting Continuous Innovation
- Managing Change
- Managing the Technical Impact of Change
- Managing the Business Impact of Change
- Establishing Roles for ERP and PLM in Innovation
- Chapter Four: Recommendations for Action
- Author Profile
- Appendix A: Research Methodology
- Appendix B: Related Aberdeen Research & Tools
- About AberdeenGroup
- Figure 1: Product Innovation in Corporate Strategies
- Figure 2: Benefits of Improved Product Innovation
- Figure 3: Clarity and Effectiveness of ERP and PLM Roles in Innovation
- Figure 4: Commencement of Design Documentation by Lifecycle Stage
- Figure 5: Product Structure Usage by Manufacturers
- Figure 6: Design Iterations before Release
- Figure 7: Percentage of Products Released to Manufacturing
- Figure 8: Relative Collaboration Levels between Design and Manufacturing
- Figure 9: Frequency and Impact of Engineering Changes
- Figure 10: Managing the Impact of Product Changes on Related Items
- Figure 11: Managing the Impact of Product Changes on Related Deliverables
- Figure 12: Systems Support for Product-Related Processes
Table 1: Product Innovation Systems Integration - Capability Tradeoff
Issue at Hand
The Product Innovation Imperative
Aberdeen research has determined that manufacturing executives are aggressively looking
to expand product revenue and grow their top lines. Aberdeen's Product Innovation
Agenda Benchmark identified that a full 82% of corporate strategies place "a lot of emphasis"
on increasing product revenue (Figure 1). At the same time, 93% of corporate
strategies place either "a lot of emphasis" or "some emphasis" on reducing product cost.
The benchmark reports clearly highlight that companies are looking for profitable
To achieve profitable growth, companies are turning toward product innovation. Innovative
products that are in tune with customer needs lead to higher sales volume and command
higher prices. However, trends in manufacturing and design have made developing
innovative products much more difficult. The product innovation environment has fundamentally
changed. Manufacturers must navigate new challenges. Globalization has led
to increased competition, more intense regulatory requirements, and more complex networks
of manufacturers, suppliers, and designers operating in global design and supply
networks. Increased product complexity has demanded the integration of mechanical,
electrical, and software design elements to integrate more readily. Competition and product
commoditization have led to shorter product profitability windows.
The conundrum is that although the environment is more challenging, businesses want to
improve revenue and cost performance. The improvements can only come from improving
product innovation, product development, and engineering operations. Operational
improvements vary by company, but manufacturers report that improving the following
key performance metrics results in improved innovation performance:
- Time to market
- New product success rate
- Percent of revenue from new products
- Process cost reduction
- Total material cost reduction
- Number of new products per year
- Defect rates
- Lead time for custom orders
- Frequency of engineering changes
- Number of new patents
- Percent parts reuse
- Time to volume production
- Engineering change cycle time
- Warranty claim rate
- Frequency of regulatory or non-compliance events
- Engineering change error rate
- Number of physical prototypes required
Benefits are being achieved by improving operational performance despite the challenges.
Companies that have invested in improving product innovation processes have
achieved double-digit improvements in product revenue, product cost reduction, and
product development cost decrease (Figure 2). 84% of companies see gains in more than
one aspect of innovation performance. Product innovation is providing operational improvements
with bottom-line impact.
Key Business Value Findings
Enabling Product Innovation
Improving innovation performance provides strategic benefits resulting in profitable
growth. To improve performance, business has to be done differently. Enterprise software
is an enabler used to implement and sustain process changes that lead to better performance.
In other words, new systems help to support new ways of doing things. Product
innovation is a "team sport." To accelerate and improve product development, companies
are approaching innovation with more parallel activities, involving multiple departments
earlier in design, working with experts scattered in disperse networks, and including
input from suppliers, customers, and other third parties. To accomplish this,
companies must have strong data management, collaboration, project control, and communication
Product innovation improvement comes from better information and improved coordination.
Aberdeen research has shown that best-in-class innovators are four times more
likely to have centralized data and product knowledge than the industry norm. They are
also four times more likely to have integrated process automation and collaboration solutions.
Enterprise applications are providing the support for improved innovation performance.
The Value of Integration
Manufacturers would ideally like to have a single, integrated system to manage productrelated
processes. Integrated systems reduce risk, decrease the need for integration, simplify
training, reduce support complexity, and provide a better total cost of ownership.
Countless conversations with CIOs and IT leaders have emphasized the desire for a
common system, less complexity, and more integration. Many companies have incorporated
standards in order to consolidate systems.
It is clear that companies recognize the value of an integrated system. What is often unclear
is their willingness to make trade-offs between integration, product capabilities, and
vendor expertise. For many manufacturers, the decision on how to support their product
innovation processes is not straightforward. There are few integrated systems that cover
product innovation and product development as a whole, let alone an integrated system
that also covers manufacturing, sales, distribution, logistics, and service.
Integration - Capability Tradeoffs
Recognizing the value of better innovation and the desire for integrated systems, Aberdeen
surveyed a sample of approximately 65 manufacturers in order to understand the
roles or ERP and PLM in product innovation. Aberdeen found that the majority of companies
surveyed, as expected, place "a lot of value" on a single, integrated system for
product development, manufacturing, sales and support (Table 1). Another third of respondents
indicate that there would be "some value," with very few indicating "no
value." Given the opportunity, respondents would prefer a single, integrated solution.
Manufacturers are not very willing to give up functionality in return for a single system,
however. More than one-third of respondents say that they are not willing to trade any
functionality whatsoever; that the integrated system must be "equal or better." Another
third of manufacturers indicate that they are willing to accept some workarounds and inefficiencies,
but only for internal users. Less then one-third are willing to trade off functional
capabilities when the workarounds or inefficiencies impact external partners or
customers, although some (less than one person in ten) are willing to trade "significant"
When put to the test, the desire for a single system is outweighed by the need for functionality.
This finding was relatively consistent across job functions, including CIOs and
IT leadership. Similarly, companies were asked whether they would be willing to trade
business process expertise for integration, with only slightly higher willingness to trade
expertise for integration.
Defining ERP and PLM Roles
Not all companies have the same product innovation needs. Functional tradeoffs may be
different based on industry, geography, and even corporate strategy elements. Not surprisingly,
companies are using the different software suites in varying ways and amounts.
There is no "one answer" to the way ERP and PLM are being deployed, meaning that
companies have had to define the roles that ERP and PLM will play and how they will
complement each other accordingly.
Many companies struggle with unclear and ineffective roles between ERP and PLM.
Confusion over terminology causes a lot of the trouble. There is no single definition of
PLM and current PLM suites differ in scope from each other, which is typical in an immature
market. Adding to the confusion, some ERP vendors list PLM as a module of
their offerings. Avoiding the acronyms, manufacturers must look for ways to improve
product innovation, product development and engineering and then select the appropriate
systems to support them. Understanding real business needs helps to define the right role
for each. Companies must determine the right support from PLM and ERP for their own
businesses by educating themselves on the needs and benefits of improving their product
There is clearly room for improvement in the clarity and the effectiveness of the roles.
Only one-quarter of respondents said their enterprise systems' roles are "very clear," and
almost half of respondents said that the roles are not effective (Figure 3). Manufacturers
must continue to educate themselves on PLM process and software capabilities and continue
to refine the roles of their enterprise applications to meet their needs.
To better understand the roles each should play in innovation, companies must understand
the distinct differences between product development and supply chain execution.
The key differences are the amount, kind, and format of data required for each task and
how iterative and collaborative the processes are. The following sections on "The Innovation
Cycle" and "The Execution Cycle" will provide details of these differences and
the implications for systems usage. These differences must be supported with the appropriate
Implications and Analysis
The Innovation Cycle
To understand system requirements, one must first understand the processes that the application
supports. Product innovation is a creative process starting with concepts, ideas,
and requirements. These concepts are captured and organized around project and products
to put them into the context of the product development process. As early product
ideas are formed, product design documentation gets underway. The first product concepts
may only define major systems and how they interact, or rough concepts of the
product geometry. Design information evolves at different steps of the lifecycle as information
and the structure of the product become more complete. The product will typically
pass through a number of engineering stages and be touched by many individuals,
including engineers as well as non-technical resources like Marketing. Throughout the
design process, additional input from suppliers, manufacturing, procurement, regulatory,
and other departments is incorporated until the product is fully defined, validated and
ready for launch.
Capturing the Design - Product Documentation
Aberdeen research discovered that design documentation starts very early in the design
process, at conceptual levels, before distinct parts or assemblies can be identified. Many
companies capture different forms of product structures as the design progresses from
loose concepts to a tightly defined manufacturing specification. Figure 4 details the stage
at which companies begin developing design documentation, which clearly shows that
companies begin documentation very early in the process. Over three-quarters of companies
start design documentation by the time a conceptual product structure is developed.
By the time a product is approved and ready for manufacturing, the product structure will
be reorganized to reflect production and assembly processes. For example, assemblies
will be redefined to reflect not the logical design structure of the product, but how the
product will physically be produced and assembled in execution. Manufacturing information
such as process routes and tooling information will be added by manufacturing engineers.
Details will be added that include manufacturing and planning information such as
costs and scrap factors. All items, including consumables and fasteners, will be detailed if
not previously identified. Figure 5 highlights the different types of product structures that
are developed during design by the manufacturers surveyed.
Many companies employ a sequence of different design structures along the development
lifecycle. The list in the chart is a subset of what many manufacturers will develop, identifying
some of the major product structures that will be developed during the design
It is important to understand the structure and timing of this information when considering
the roles of ERP and PLM. Much of the information captured early in the lifecycle is
not directly usable by manufacturing until individual parts, assemblies, and production
sequences are known. This is valuable information about the product and the design intent,
but not valuable to the manufacture, sale, or distribution of the product until its final
form. Maintaining product knowledge and making it accessible during the product innovation
process is very important, but access to that information provides little value to
manufacturing resources. Instead, it increases the potential for confusion or the introduction
of errors due to clutter. Because of the processes they were designed to serve, PLM
systems are intended to manage early product structures and design information, where
ERP systems may have trouble capturing a product structure before part numbers are defined.
Achieving Innovation from Iteration
Innovation is characterized by trial and error. The optimal product design is rarely
achieved with the first attempt. The classic example is the invention of the light bulb,
which is said to have come after two years and thousands of failed attempts. In the same
way, most product designs are achieved by designing, testing, and redesigning using different
approaches. In the same way that many products are never released to manufacturing,
most iterations of a product design never see manufacturing. In fact, only about onethird
of companies claim to release products in less than four iterations (Figure 6).
Many designs, in fact, are not complete products, but capture the thought process at a
point in time. As much as design follows a logical pattern, design is not linear but cyclical.
The innovative process is characterized by hunches, testing, and redesign. This creative
process may include potential new materials, or experimental parts that are considered
and then discarded. Managing this process requires some level of flexibility, while
keeping the overall process in control. When a design approach is taken based on an
analysis or review, it is important to know why that path was chosen later - whether redesigning
this product or designing something similar.
It is important to understand iteration when discussing the roles of ERP and PLM for two
reasons. As with products that aren't released and design-related documentation, iteration
generates large volumes of information. This data is highly valuable to innovation but
potentially distracting and or confusing during manufacturing. Iteration also brings up the
topic of control. Executing a supply chain in a cost-effective manner requires tight control
and strict repetition of operating procedures. Predictability in the process, adherence
to procedure, and visibility to results are key to quality and efficiency. The innovation
process requires control as well, but in a more flexible way. In order to maintain some
control of part proliferation, the definition of a new material that may never be used
again should not be at the whim of an individual engineer. Nor should defining an experimental
item require the full breadth of data required for production parts. It is not
necessary to add the same rigor that would be required to add a part to an ERP system to
manage execution, requiring all accounting and planning information to be added as an
example. When selecting the roles of ERP and PLM, manufacturers need to ensure that
they enable - not limit - innovation while still maintaining control of the product development
Creating and Utilizing Product Knowledge
The volume of design documentation can grow very large and cumbersome, but that is
only partially due to varied forms of product structures. In addition to product structures,
companies track market requirements, test results, marketing surveys, project documents,
2D or 3D CAD models, electrical designs, project data, reviews, approvals, and a host of
other forms of information. Most of this information captures valuable knowledge about
the product, the design intent and the history of lessons learned during the product development
process. In the innovation cycle, creative processes both use and create product
knowledge. This information, like conceptual product structures, is relatively useless in
the execution cycle with the exception of the final, approved manufacturing specifications.
While the information about design intent and the development process may not be important
to execution, it is critically important to innovation. If a problem arises with the
product at a later time, being able to review the steps in the design process can provide
valuable insight. Or if a similar product needs to be developed, the existing product can
be used as a starting point for the new one. Being innovative doesn't always mean creating
a brand new idea. Often, innovation comes from applying an existing approach to
address a new challenge or using an existing solution in a new way. To engineer innovative
products, engineers don't have to discover a new scientific principle; they just have
to solve the problem effectively.
Failed products, if knowledge is captured appropriately, are still valuable learning experiences.
Often knowing the reasons behind decisions will prevent re-examining options
previously discarded. A product that was discarded due to a technical limitation, for example,
may become a viable product based on new technology from a supplier. There is a
large amount of value and intellectual property developed in the design process. This information
is often difficult to reuse, however, because it is largely unstructured. If this
information is readily accessible to other designers, and readily searchable, then it is
valuable and will promote reuse of ideas and concepts. Reuse is very valuable because it
creates new value from a previous investment in research and design. Many products that
begin design are never released, but the design process has generated valuable information
that can be reused. This is incredibly important when considering that half of companies
surveyed indicate that fewer than 60% of the products that begin design are eventually
released (Figure 7).
Understanding knowledge management and reuse is important when considering the
roles of ERP and PLM. Innovation-generated information is typically less structured, and
often resides inside of documents as opposed to a form that fits cleanly into a database
table. The format and volume of information in the innovation cycle is much better suited
to a knowledge management structure then a relational database, although metadata that
categorizes and makes unstructured data easy to find and use may be well suited to a
more rigid data structure. PLM solutions are designed to manage a combination of structured
data, unstructured data, and metadata.
Innovating in Teams
Innovation is a team sport. As design and profitability windows have decreased, the need
to incorporate input and feedback from internal and external sources in advance becomes
critical. There is no longer time to address manufacturing or packaging concerns when
the product is already designed. The time to rework the design is no longer available, let
alone the expense. Aberdeen research has highlighted the value and trend toward incorporating
regulatory requirements and sourcing considerations earlier in the design process.
Product innovation typically involves more interaction than execution, with about
half of respondents saying that they have "much more interaction in design than in manufacturing"
Frequently, products are now being designed concurrently with suppliers' design of required
components, requiring much more fluid communication and visibility to design
changes up and down the supply chain. Execution involves many parties as well, including
outsourced manufacturers, distribution channels, logistics and others. Typically,
however, the information shared during the execution phase is more transactional in nature
as opposed to creative and unstructured.
Understanding design collaboration is important when determining the roles of ERP and
PLM systems because innovation requires the involvement of many individuals, many of
whom are not frequent users of the system. In addition, the interaction frequently involves
reviewing designs or documents that are in frequent revision. Collaboration capabilities
should support users across multiple disciplines, and provide the appropriate
product or project context to ensure that information shared is relevant to the reviewer
and displayed in a form that they can relate to. In addition, product innovation typically
involves sensitive data and intellectual property, so collaboration platforms must respect
that security of information being shared outside the firewall. PLM systems are designed
to provide collaboration in the context of product innovation, product development and
Transitioning from Innovation to Execution
Innovation without execution is irrelevant. Unless a company is in the business of licensing
technology or selling patents, manufacturing, distribution, and logistics must play
their role to realize a return on innovation. Most companies report a clear separation from
product development and execution, with a clear "handoff" or "promotion" process.
Forty-seven percent of companies surveyed have clearly defined ownership and handoff
points, while another 38% have loose guidelines for transfer from design to manufacturing.
The handoff indicates that there is a clear boundary between the design phase and
what is released to manufacturing. This logical separation is reflected in enterprise applications
as well. Most companies reported having a promotion process from design systems
to manufacturing, although many had loose guidelines for execution of that handoff.
The logical boundary between design and production, or innovation and execution,
makes sense. Considering the small percentage of products that are actually released to
manufacturing, the number of design iterations required before a manufacturable item is
released, the differing formats and types of information generated at different stages of
design, and the different types of unstructured documentation generated during design,
only a small percentage of the information from the innovation cycle is useful to manufacturing
and execution. Cluttering the ERP system with this information could potentially
cause performance problems, and lead to errors if the wrong information is accessed.
While past revisions and data for products that never made it out of the conceptual
stage are a valuable asset to innovation, they are a liability to execution and would
be distracting at best. Therefore, a clear separation of data and a structured promotion
process is more appropriate. This can be particularly true for distributed manufacturing
environments where the company, suppliers and contract manufacturers are likely to have
different ERP implementations.
The Execution Cycle
The execution cycle differs from the innovation cycle. Managing a supply chain requires
up to the minute information on product demand, supply, and available capacity. Without
accurate inventory and order information, customer expectations is missed and demand
goes unfilled. Planning requires accurate information or planning results are of little
value, resulting in missed expectations, poor utilization and increased cost. Competition
has forced manufacturers to tighten their supply chain processes to remove excess inventory
and other waste. Managing the execution process involves analyzing performance
and making timely corrections. Managing execution requires translating operational performance
into financial accounting, and demands accuracy and detailed information.
Otherwise, the financial data will not provide the insight and level of detail required for
process improvement. Execution demands precision and control.
The major theme for ERP is control. Costs are very important to manage, and manage
tightly so manufacturers can understand where money is being made or lost. Customer
satisfaction relies on the ability for manufacturers to provide the right product, at the
right place, at the right time. In addition, the product must also have the appropriate
documentation and paperwork. ERP also manages large volumes of data, which are typically
transactional in nature and fit well into a relational data model because they consist
of repetitive instances of the same information, such as a sales order. There is a lot to
control within the execution cycle, and ERP systems have evolved to handle these requirements
From an innovation perspective, control is also important. Clearly the intellectual property
contained within a PLM system should be tightly controlled. The innovation process
must be controlled as well, but the level of control which is required to plan and execute
a global supply chain may not be appropriate for the creative environment within product
innovation. An example of unnecessary control overhead would be adding all of the required
data for an active item to an experimental item. There is value in identifying the
item, but requiring the full information needed to control a part in the execution cycle
would inhibit innovation. In this instance, an item might be brought in and discarded because
it didn't meet the needs. That knowledge, however, should be captured for future
reference. But the item should not become additional clutter in the execution system.
Providing the Right Product Data for Execution
Having the right product information to support procurement, sales, manufacturing, distribution,
logistics, and accounting is critical to execution. Although the information
needed by manufacturing is a small subset of the original design data, the accuracy and
availability of that information will significantly impact execution. The presentation and
structure of the data may be different, such as the engineering bill of material (EBOM)
and the manufacturing bill of material (MBOM)that are each designed to serve a different
purpose, but the information must be in synch.
When determining the roles of ERP and PLM systems, it is important to ensure synchronization
of released product data with the execution systems. ERP-PLM integration is
becoming more prevalent. Survey respondents that have been using PDM or PLM for
more than 1 year report integration in a number of areas, including:
- Item Definitions (71%)
- Bills of Material (82%)
- Engineering Changes (46%)
- Costs (60%)
- Sales History (46%)
- Quality / Defects (43%)
- Product Specification (43%)
- Item Lookup (36%)
The relatively high percentage of companies that have integrated ERP and PLM indicates
both the need for integration and also that the challenge of integration can be met effectively.
Tying Innovation to Execution - Supporting Continuous Innovation
Keeping data in synch between product innovation and execution is not a one-time event,
however. Innovation doesn't end at the first release of a product. Products are changed in
order to satisfy quality, cost, competitive, regulatory, supply, and other improvements. In
a dynamic environment, managing the change process becomes very important in order
to prevent scrap, quality problems, and excess cost. Changes are not necessarily a bad
thing, the company strategy may be to continuously innovate and offer improved products
to customers. But engineering changes are notorious for creating confusion and
problems. Change must be managed; it is where innovation and execution collide. Managing
change is one of processes that is worthy of particular attention when considering
the roles of ERP and PLM. Not only does this process require synchronization between
ERP and PLM, it is one of the key areas where ERP and PLM both appear to address the
same issue, but do so with very different approaches leading to different results.
The first challenge in managing change is to understand the impact of the change. In a
complex product or series of products, a change typically has downstream impacts on
other products. Even for simple products, a change in the product design may require a
change to related technical documentation, work instructions, marketing material, or
other downstream deliverables that are based on the product design. Understanding the
impact of a change means understanding all of the relationships that the change will impact.
In addition, the change will have a business impact that must be understood. The
impact on suppliers, customers, costs and production should be understood and optimized.
This is a challenge for many companies. Aberdeen research identified that some companies
experience engineering changes on a daily basis, and most experience them on at
least a weekly basis (Figure 9). Unfortunately, many companies also experience additional
costs from rework and scrap on a daily or weekly basis because the engineering
changes are not well communicated and executed. Over half of companies surveyed experience
engineering changes resulting in additional cost, rework, or scrap on at least a
monthly basis. In addition to direct cost, product changes are frequently delayed which
results in a delay in responding to the need for the change, whether market or financially
motivated. A similar number of respondents also indicated that they experience delays in
implementing engineering change orders (ECOs).
Managing the Technical Impact of Change
The first step in avoiding costly problems from engineering change is to identify the
technical impact of the change. Few changes impact a single item without having an impact
on related items. When a change is made, any items that contain the newly revised
part or assembly should be analyzed. These "parent" items can be found by querying the
BOMs. A simple "where-used" of an item or assembly can show where it appears in
higher level bills of material. Each of those parent assemblies will be impacted by the
change. But what will the impact be? Will the parent item need to be redesigned or simply
referenced as the next revision to indicate the existence of the changed item? Will
other peer-level items need to be changed as well? "Where used" should identify all of
the potentially impacted parent items, but it will require manual effort to review each design
to see if the parent item or any of the peer items need to be redesigned.
Although getting a potentially large list that needs to be reviewed manually is a step in
the right direction, it would certainly be better to understand the "where used" in context.
This will help limit the list of items to be reviewed to the most likely candidates to need
changes. Understanding the impact on parents and peers requires knowledge of the nature
of the relationship between the items and assemblies. Do the parts mate? Might they interfere?
By understanding the relationship between the parts, a much smaller list of items
that need to be addressed can be summoned. PLM systems can hold this information
based on the relationships within the designs themselves. About two thirds of companies
can only identify a large list of potentially impacted items, or do not have a good way to
identify the impact of changes at all (Figure 10).
A smaller number of survey respondents (22%) can identify impacted items based on
item relationships taking into account item interfaces and mating information. This puts
these companies at a competitive advantage when managing change, because they can
pinpoint the impact of change more accurately. Beyond identification, ideally the relationship
can be altered automatically based on the changed item, and the change propagated
to all necessary parent items. Exceptions, such as clashes, could be highlighted
automatically. Only 11% of respondents were also able to propagate the changes automatically
to impacted items, which should allow them to avoid the cost and errors associated
with manual and update. Although it was not specified in the survey, it is expected
that those companies are still manually reviewing the changes before approving the revised
Beyond finding the items that have been changed, it is also important to find the deliverables
that have been impacted. After a product is designed, design information is used to
create drawings, technical documentation, marketing content, process instructions, and
other derivatives. These derivatives embody the design and extend it to serve other purposes
such as sales or service. Unfortunately, the relationship between the design and the
derivatives is often severed when the deliverable is created. As the design changes, the
impact analysis of the change must be extended to these deliverables.
If the linkage between the design and the deliverable is maintained, then an impact analysis
can determine whether or not the derivative should be updated. By maintaining the
relationship at a document to item level, impact analysis becomes easier. Only about onethird
of respondents could identify a precise list of the impacted deliverables (Figure 11).
As with designs, the ideal scenario is to identify the downstream information that is actually
impacted based on their relationship with the change, identify those impacts, and
then propagate the changes automatically. To do this means that not only does the link
between the deliverable and the design need to be maintained, it needs to be dynamic. An
example of this would be for an approved design change to automatically generate a new
image in the marketing collateral or service manual and create a revised version of the
deliverable. Only 12% of respondents reported the ability to propagate changes to deliverables.
Is it important to remember the number of designs and derivative documents can
be very large, making the transition to automatic updates - instead of time-consuming
and error-prone manual reviews - a clear area for improvement and competitive advantage.
PLM solutions are designed to provide the data and tools required to identify and
manage the technical impact of change.
Managing the Business Impact of Change
Identifying the technical impact of change results in updated product designs and documentation.
The change does not provide value until it goes into effect. Most businesses
have a separation between the time that the designs are updated and the time the change
is executed. After the change is reviewed and signed off from a technical perspective, the
implementation plan must be determined. The introduction of these changes to manufacturing
and procurement has a business impact that must be properly managed and communicated
to prevent quality failures, scrap, rework, or missed shipments. The timing
should be based on optimizing value based on current business conditions, taking into
account supply and demand, levels and locations of inventory, costs, planned production,
planned purchases, quality goals, and current demands for the product.
The information to determine the business impact of change resides in the ERP application
and is critical to making the optimal decision on when to introduce an engineering
change. Without that information, the impact of making a change based on a set date -
the date when existing inventory is consumed - at a particular serial number, or for a
particular production run, could not be understood. In addition, engineering changes of
ten must be communicated to (and sometimes approved by) manufacturing, purchasing,
suppliers, customers, and others - many of whom use different execution systems. This
change could be defined and communicated by the PLM system, but it will need to be
executed by ERP in order to put the change into the context of the current manufacturing
plans, purchase orders, and sales orders.
Establishing Roles for ERP and PLM in Innovation
The analysis supports Aberdeen's belief that managing product innovation and product
execution are different, and that the differences in business processes drive different requirements
for the enterprise applications that support them. While there is no "one size
fits all" answer for the roles of ERP and PLM, it is clear that PLM solutions have been
architected to meet the special needs of product innovation, product development, and
engineering. Manufactures should clearly define the roles that these enterprise applications
play in their businesses based on the individual company and its goals for product
innovation. The roles may vary by business process, and in some cases functions may be
split between both ERP and PLM. Figure 12 identifies the wide variation of usage roles
indicated by survey respondents. Another interesting finding that is evident on this chart
is that there are still a lot of manual processes remaining, indicating an opportunity for
improvement for many manufacturers.
Recommendations for Action
- Utilize PLM and ERP - Manufacturers looking to improve profitability and
grow in the current, challenging innovation environment should investigate using
PLM solutions in combination with ERP solutions.
- Clearly identify roles - Identify which business processes will be supported by
PLM and ERP, and define complementary roles that leverage the strength of
- Make a clear integration capability decision - When deciding on whether to
use PLM solutions, recognize the value of integration, including lower risk and
- Don't sacrifice your real needs - When defining roles, understand the importance
of the capabilities that each solution can offer and don't sacrifice innovation
- Integrate - Integrate product innovation and execution processes and systems,
including formal promotion and change management processes.
- Act - Companies with complex products, short product lifecycles, frequent engineering
changes, or global value chains will have higher demand for PLM capabilities.
Aberdeen research shows that companies that organize and automate
product innovation, product development, and engineering processes are better
positioned to achieve best-in-class operational innovation performance.
Vice President and Service Director
Global Product Innovation and Engineering Research
Jim Brown leads AberdeenGroup's Global Product Innovation and Engineering research.
Its goal is to provide fact-based research and experienced analysis that advises executives
on how to achieve maximum product profitability and corporate value by employing optimal
approaches and enabling technology to identify, specify, engineer, develop, and
continuously improve innovative, high-value products.
Jim founded research and consulting firm Tech-Clarity, acquired by Aberdeen in May
2005, which researched and communicated the business value of PLM- and enterpriserelated
software solutions. Jim began his professional experience with roles in manufacturing
engineering and software systems at General Electric before joining Andersen
Consulting (Accenture), where he focused on enterprise software applications. Jim is a
frequent author and speaker on applying software technology to achieve tangible business
benefits. He has also served as the PLM analyst for Technology Evaluation Centers
and The PLM Evaluation Center, and has been an executive at several software companies.
His research has been published internationally.
Between August and September 2005, AberdeenGroup examined the relative roles of
PLM and ERP applications in approximately 65 manufacturing companies to understand
the roles of enterprise solutions supporting product innovation, product development and
Responding companies completed an online survey that included questions designed to
determine the following:
- The characteristics of their innovation environment that would lead to the need
for PLM solutions to augment ERP, including questions about the volume of design
and product information and the amount of collaboration performed
- The frequency and impact of engineering changes, and the capability to identify
and address the downstream impacts of change
- The existing usage of applications to support innovation
The study aimed to identify the current roles and uses of ERP and PLM in product innovation
and the implications that current innovation environments have on these roles
Responding enterprises included the following:
- Job title: The research sample included respondents with the following job titles:
director or manager (35%); senior management (17%); CIO/IT leader (8%), vice
president (6%); engineer (12%), internal consultant (9%); staff (3%), and other
- Job function: The research sample included respondents from the following functional
areas of responsibility: information technology (31%); product development
/ management / strategy (25%); product design or engineering (12%); procurement
(6%); manufacturing engineering (5%); marketing (5%); logistics or
supply chain (5%); finance (5%); customer service (3%); sales (5%).
- Industry: The research sample included respondents predominantly from manufacturing
industries. At a high level, the respondents represented: discrete manufacturing
(52%); consumer products (26%); process manufacturing (14%); services
(5%), and others (3%).
- Company size: About 35% of respondents were from large enterprises (annual
revenues of more than $1 billion U.S.); 32% were from mid-size enterprises (annual
revenues between $50 million and $1 billion); and 32% were from small
businesses (annual revenues of $50 million or less).
Related Aberdeen Research & Tools
Related Aberdeen research that forms a companion or reference to this report includes:
- Product Innovation Agenda Benchmark (September 2005)
- Product Development in Consumer Industries Benchmark (June 2004)
- The Design for Compliance Benchmark Report (November 2004)
- Formula-Based Product Development (November 2004)
Information on these and any other Aberdeen publications can be found at
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