PLM - What is it?


Understanding PLM and PDM

The two acronyms PDM and PLM are closely associated; the main difference is one of
scope and purpose. Whereas PDM is mainly a set of tools and methods aimed at efficiently
managing product data, PLM is a holistic approach that uses a wide range of different
concepts, technologies, and tools, which extend to groups beyond the functions of a
company or even a supply network in order to manage and control the lifecycle of a
product.

PLM what is it?

In many ways, product data management can be seen as a subset of PLM. First EDM
(Engineering Data Management) and then PDM (Product Data Management) emerged in
the late 1980s as engineers recognized a need to keep track of the growing volumes of
design files generated by CAD (Computer Aided Design) systems. PDM allowed them to
standardize items, to store and control document files, to maintain BOM’s, to control item,
BOM and document revision levels, and immediately to see relationships between parts
and assemblies. This functionality let them quickly access standard items, BOM structures,
and files for reuse and derivation, while reducing the risk of using incorrect design versions
and increasing the reuse of existing product information.

However, the benefits of operational PLM go far beyond incremental savings, yielding
greater bottom line savings and top-line revenue growth not only by implementing tools
and technologies, but also by making necessary, and often tough, changes in processes,
practices and methods and gaining control over product lifecycles and lifecycle processes.
The return on investment for PLM is based on a broader corporate business value,
specifically the greater market share and increased profitability achieved by streamlining
the business processes that help deliver innovative, winning products with high brand
image quickly to market, while being able to make informed lifecycle decisions over the
complete product portfolio during the lifecycle of each individual product.

The scope of information being stored, refined, searched, and shared with PLM has
expanded. PLM is a holistic business concept including not only items, documents, and
BOM’s, but also analysis results, test specifications, environmental component information,
quality standards, engineering requirements, change orders, manufacturing procedures,
product performance information, component suppliers, and so forth. Modern PLM system
capabilities include workflow, program management, and project control features that
standardize, automate, and speed up operations. Web-based systems enable companies
easily to connect their globally dispersed facilities with each other and with outside
organizations such as suppliers, partners, and even customers. PLM is a collaborative
backbone allowing people throughout extended enterprises to work together more
effectively.

Operational efficiencies are improved with PLM because groups all across the value chain
can work faster through advanced information retrieval, electronic information sharing,
data reuse, and numerous automated capabilities, with greater information traceability and
data security. This allows companies to process engineering change orders and respond to
product support calls more quickly and with less labor. They can also work more
effectively with suppliers in handling bids and quotes, exchange critical product information
more smoothly with manufacturing facilities, and allow service technicians and spare part
sales reps to quickly access required engineering data in the field.

In this way, PLM can result in impressive cost savings, with many companies reporting
pay-off periods of one to two years or less based solely on reduced development costs.
PLM also enables better control over the product lifecycle. This gives opportunities for
companies to boost revenue streams by accelerating the pace at which innovative products
are brought to market. Excellent lifecycle control over products also gives new
opportunities to control product margins more carefully and remove poorly performing
products from the markets. This set of benefits, driving top line revenue growth and
bottom line profitability, makes ROI extremely compelling, with some industry analysts
characterizing PLM as a competitive necessity for manufacturers.

Understanding Product Lifecycles

In many cases, the product lifecycle is still not a very clear and exact concept. The
lifecycle concept can be seen from a number of different aspects and understood in many
different ways depending on the frame of reference of the persons defining it. Another
very important point here is that the lifecycle status of product information is a completely
different thing from the lifecycle model of a product. In relation to the product information
lifecycle, a more appropriate term would be the status or phase of the product information.

The two most important, but separate lifecycles are:

  1. Product definition lifecycle (i.e. the evolution of product definition and related information)
  2. Individual Product unit lifecycle

The generic and “classical” product lifecycle model (the S-curve) can help in analyzing
product, industry, and technology maturity stages from all perspectives. Businesses are
constantly seeking ways to grow cash flows by maximizing revenue stream from the sale
of products and services. In mature businesses (rather than start-ups using venture
investment) it is the cash flow that allows a company to invest in new product development
and business development, in an effort to acquire additional market share and become a
leader in its industry. It is logical and obvious that in order to ensure long-term value
creation and good balance in business, any company must have a portfolio of products that
contain both high-growth low-volume products in need of cash inputs and low-growth
high-volume products that generate large amounts of cash.

In addition to classical product lifecycle models, there are a number of different variations
of such models usually specific to a particular branch of the industry as well as to the
industry’s special characteristics. The best-known variations of the model are in cyclic
industries such as pulp and paper, where the growth and maturity phase can be
undulating, and in high technology industries where the balance of introduction, growth,
and maturity phases differs somewhat from the classical model.

The basic behavior of products and lifecycles

Usually the best way to attain a stable revenue stream is to have so-called cash cow
products bringing steady cash flows with good margins. These are leading products that
command a large market share in mature markets. In general, those who enter the
markets first usually get the most publicity and are considered technology leaders (i.e.
with the shortest planning and introduction phase). Those who first get into the markets
with sufficient volume (the growth phase) actually get the biggest market share, while the
most agile players in the later lifecycle phases get the best margins for single products.
Based on these assumptions, the ideal product portfolio would contain products that:

  1. Are business leaders in the maturity phase, so they generate large amounts of cash from products requiring low levels of investment.
  2. Look promising, but are still in the planning phase and generating negative cash flow
  3. Are in the introduction phase and are potential leaders, though they are not yet generating much cash
  4. Are retiring from the markets

Usually all products in all lifecycle phases face specific challenges that are typical for each
phase and each product, but many businesses in fact have the poorest level of operations
in the retirement phase. Those poorly performing companies might have many products in
the product portfolio that should have been eliminated years ago. They do not bring in
much cash but they strain the resources of spare parts manufacturing and service
organizations, or help desk and support organizations, not to mention the cost of
maintaining the product information and skills needed for those products.