TheROIofPLM The ROI of PLM

ValidatingthePossible
April2011 April 2011
JohnMacKrell,VicePresident j.mackrell@cimdata.com John MacKrell Vice President j mackrell@cimdata com Tel:+1.734.668.9922

Global Leaders in PLM Consulting

www.CIMdata.com
Copyright 2011 by CIMdata, Inc. Copyright 2011 by CIMdata, Inc.

CIMdatasMission
Strategicconsultingforcompetitiveadvantageinglobalmarkets

CIMdata is the leading independent global strategic management consulting and market research authority focused exclusively on PLM. l i l PLM We are dedicated to maximizing our clients ability to design and deliver innovative products and services through the application of PLM.

Copyright 2011 by CIMdata, Inc.

ROI&BenefitsareDrivenby3Factors
Recursiverelationshipamongpeople,technologies,andprocesses

Existing business processes may be enhanced using PLM

B Business Process P Reengineering Informa ation Techn nology C Capabilities s

People

Technologies

Processes

New processes enhance how PLM is used

For maximum benefit, cant optimize any one factor! can t
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Copyright 2011 by CIMdata, Inc.

ROIBalance:Costsvs.Benefits
Arealandquantifiableanalysisisrequired

Costsarereal Benefitsmustberealtoo Benefits must be real too

Sobenefitsshould,ifpossible, beestimatedinthesamemethod ofmeasurementMoney of meas rement Mone

Costs C
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Benefits B fi
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ROIHighlights
UnderstandingtheimpactofPLM

Determineandaddressbusinessopportunities PLMbenefitsreceivedbyanytwocompanieswilldiffer PLM benefits received by any two companies will differ understandyours Theappraisalmethodcausestheteamtobetterunderstand thebusiness Benefits&ROIhelpmanagement:
Makeeducatedinvestmentdecisions Reducetheriskofwrongdecisions Avoidgettingthewrongsolution

Peopleimproveinareaswheretheyaremeasured

Copyright 2011 by CIMdata, Inc.

PLM TheDefinition
PLM integratingpeople,processes,businesssystems,andinformation

Strategicbusinessapproach
NOTjusttechnologies Consistentsetofbusinesssolutions

Collaborativecreation,use, management&dissemination
Allproduct/plantdefinitioninformation thevirtualproduct
MDA,AEC,EDA,CASE,analysis,documentation, MDA AEC EDA CASE analysis documentation

Allvirtualproductprocesses
Processesthatplan,design,produce,support,
FullProductLifecycle

Supportstheextendedenterprise Spansfullproduct/plantlifecycle,fromconcepttoendoflife
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PLMSpanstheProductLifecycle
PLMtouchesallphasesofaproductslifeandtheentirevaluechain
Conceptual Design Product Engineering Portfolio Management Requirements

Planning

Manufacturing Manufacturing Engineering Simulation& Validation

Disposal& Recycling Maintenance &Repair Inservice Operation Sales& Distribution Test& Quality

Buildand Produce

PLM SolutionsInformation Management across Media, Process, Time, Geography, & Enterprise
Copyright 2011 by CIMdata, Inc.

PLMCosts
TheobvioussideoftheROIequation

Costs
Copyright 2011 by CIMdata, Inc.

Benefits
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CostModelforPLMSolutions
Typicalcostelements

PLMsoftware&maintenance Hardware(additionalneededforPLM)&maintenance Hardware (additional needed for PLM) & maintenance

WhatgetschargedtoPLM?

PLMappraisal,selection,and PLM appraisal selection and implementationplanning Solutionimplementation Solution implementation Training Businessandsystemadministration Business and system administration

Copyright 2011 by CIMdata, Inc.

SoftwareCosts
Variouscostaspectsexist

Clientlicenses
Subscriptionlicensingmaybepossible OrnoneatallwithOpenSource

Serverlicenses
PLMsoftwaremodules,e.g.,documentmanagement,partsmanagement, f d l d productstructure,engineeringchangemanagement,etc.

Softwaremaintenanceorsubscription p
Annualfee,usuallya%ofvalueofinstalledSW

Databasemanagementsoftware
Formetadata

Other:
Applicationintegration Application integration View&markup,collaboration,etc.
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Selection &ImplementationCosts
Thesecostsareusuallymuchmorethanthesoftwareitself

Internalcostsforsystemselection,appraisal&justification, implementationplanning Internalcostofsubjectmatterexperts Costoflostuserproductivity(timeawayfromjob) Externalconsultancy Training(internalandexternal) Dataandprocessmodeling Integrationwithapplications Tailoringand/orcustomization Datacapture&cleaning Businessandsystemadministration
Copyright 2011 by CIMdata, Inc.

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CostFactors
MaincostdriversfortheimplementationofPLM

Numberofusers&sites Implementationphasing Implementation phasing

Bysolution,grouporproject

NumberofPLMsolutionstobedeployed Number of PLM solutions to be deployed

PDM,visualization,DMU,collaboration,CAD,Dig.Mfg

Q Quantityoflegacydatatobecleaned&moved y g y Numberofothersystemstobeintegrated(CAD,ERP,business p planning,etc.) g, ) Leveloftailoringneeded Training Training

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PLMBenefits
MetricsquantifythebenefitsintheROI

Costs
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Benefits
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MetricsHelpYouUnderstand
Someofthereasonswhymetricsareimportant

When,where,andhowpeopleareusing PLM Theeffectof PLMonthebusiness&itsprocesses The effect of PLM on the business & its processes Howwellthebusinessobjectivesforaprojecthavebeen satisfied Ifsponsorsarereceivingareturnoninvestments Areasthatneedimprovement A th t di t Requirementsforfutureimplementationsoftechnologies& processes Theongoingsuccessofyourbusinesssolutions

Copyright 2011 by CIMdata, Inc.

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NatureofMetrics
Metricsshouldmeetanumberofcriteria

Theyshouldmeasuredirectcost,time,countsavings Theyshouldbemeasuredbothbeforeandaftertheprojectis They should be measured both before and after the project is implemented(tosetbaseline) Theyshouldbereportedautomatically(vs.manually) They should be reported automatically (vs manually)
Facilitatetheprocess Assuretimelyreporting

Theyshouldbeevaluatedtoensuretheydon'tcreatean unwantedbehavior
Cantheybemanipulatedtoshowinappropriateresultsorhideproblems Dotheyviolatehowpeoplearemotivated

Copyright 2011 by CIMdata, Inc.

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GuidingYourPLMProgram
Indicatorsofprogramprogressprovidedirection

PLMprojectmetricstrackthePLMprogramsprogress PLMbusinessmetricshelpyouunderstandhowwellthePLM PLM business metrics help you understand how well the PLM programissupportingtheenterprises businessobjectives,e.g.,
Cost Quality Timetomarket Time to market

BothindicatehowtoadjustthePLM program sscope&timingtomaximize programs scope & timing to maximize yourreturnoninvestment

Copyright 2011 by CIMdata, Inc.

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ExampleBenefits
Examplerangesofbenefitsbasedonactualexperiences

Timetomanufacturing10%to50%reduction Engineeringchangeprocess10%to70%reduction g g g p Designreviewprocess50%to80%reduction Increasedproductivity10%to20%increase Increased productivity 10% to 20% increase Productdevelopmentcosts25%to40%reduction Newpartnumbers5%to15%reduction Timetofindinformation75%to90%reduction Designerrors10%to25%reduction Timetodesign15%to70%reduction Travelcostfordesign20%to35%reduction
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BenefitsforBusinessPerformance
Winagainstthecompetition

Enablesinnovation,predictability,companyflexibility,and bettermanagement
Respondmoreswiftlytonewchallenges,newmarkets,etc. Goodmanagementdependsonrapidaccesstofullanduptodate information CompaniesfirsttoharnessPLMwillraisebarriersofentryfortheir competitors Enablecommunicationswithpartnercompanies E bl i ti ith t i Supportglobalmanufacture,assembly,orservice Supportglobalproductexecution

Companies who continue to ignore PLM will learn all about it from their biggest competitors ll b i f h i bi i
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BenefitsforBusinessPerformance
QualityInitiatives

PLMenablesQualityAssurance
Upholdareputationforexcellenceandreliabilitythroughproductlifecycle Qualityimpactslegal,contractual,liability,costsavings,competitive,human resource,andenvironmentalissues Supporttotalqualitymanagementinitiatives&otherinitiatives Support total quality management initiatives & other initiatives

ISO 9000 Objectives: To supply quality products that dont come back, to customers who do.
David HoyleISO 9000 Handbook Hoyle

Support TQM: Total Quality Management

Copyright 2011 by CIMdata, Inc.

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BenefitsforBusinessPerformance
Regulatoryissues

PLMsupportsindustryregulationsandrequirements
Industryrequirements,e.g.,QS9000,FDA,RoHS,WEEE,REACHregulations Environmental,health,andsafetyconsiderations

Providesaccessanytime,anywheretovalidinformationand provesthecapabilitytosatisfyregulators PLMmaintainsatraceablesystemofrecord

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BenefitsfortheOrganization
Facilitateeffectivenessoftheorganization

Improvecorporatecommunications
Integrateproductdevelopmentacrossdivisionsofacompany Breakdowngeographicalbarriers Provideconcurrentaccesstoallenterpriseresources Accesstoallproductdata(e.g.,thetechnicallibrary)fromeverydesk Access to all product data (e g the technical library) from every desk

Supportorganizationalchange
Corporatereorganizations Corporate reorganizations Acquisitions Implementingconcurrentengineering&otherinitiatives Businessprocessreengineering Automationandenforcementofnewbusinessprocesses

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PLMBuildingKnowledge
Creating &managingyourintellectualassetstoenableinnovation Traditionally, the knowledge of the organization is the sum of that which is held by its people
Intellectual Assets (Incorporate Principles)

Knowledge
( (Patterns) ) Information (Relationships) ( p)
Data (Items) ( te s)
Adapted from Knowledge Management by Gene Bellinger http://www.systems-thinking.org/kmgmt/kmgmt.htm
Copyright 2011 by CIMdata, Inc.

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DataReuseCreatesValue
Yourintellectualassetsneedtobeleveraged

Allowproductdeveloperstoeasilyreuseparts,designs,& processes
Up to 80% of the work done in an engineering department is identical or very similar to work done previously previously
From Research by Arthur D Little

Themoreyourdataisusedandreusedthemorevalueit producesforyourenterprise
Reuseprovendesignswithconfidence Avoidprototypingandtesting Avoidreusingfailuresandrepeatingthesameoldmistakes Avoid re using failures and repeating the same old mistakes
Copyright 2011 by CIMdata, Inc.

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BenefitsforUsers
PLMisattractivetousers

PLMisaconsistentdatasource:oneplacetolook Providessharedaccesstodata Provides shared access to data Linksdata

Interdatarelationshipsprovideamorecompleteviewofinformation Interdata relationships provide a more complete view of information Powerfulsearchfacilitiesbyattributes,browsing,fulltextretrieval Visibilitytoallproductinformationthroughacommonsource

Copyright 2011 by CIMdata, Inc.

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BenefitsforUsers
Empoweringtheorganizationwiththerightinformation

Empowersworkers
Provideseasyaccesstoknowledge&expertise

Reducesburdenofadministrativetasks
Automatestracking Recordswho,what,where,when,etc. Automaticallylinksrelatedinformation(e.g.,viewabledatatogeometric model,modelstospecifications) , p ) TransfersBOMstoERP,avoidrekeying Automaticversioningandrevisiontracking

Encouragesuseofacommonterminology Improvespersonalproductivity
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BenefitsfortheProductorService
Improvecustomersperceptionofproducts&services

Morequicklyrespondtocustomer queries
Navigatethroughdata Searchandfind Discoverrelatedinformation

Facilitaterapidproduct improvementsearlyin productdevelopmentcycle product development cycle

Whenthebigdecisionsareneeded

Costs
Defined Costs

100%

50%

Whencommittedcostsarehighand incurredcostsarelow
0% Time

Engineering

Manufacturing

After-Sales

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BenefitsfortheProductorService
Facilityproductionandmaintenance

Facilitatelongerproductionruns
Cuttimetoproduction,timetocommissioned Benefitfromprofitmarginonadditionalproduction Gainvaluefromlargermarketsharefortheproduct

CutplantdowntimewithPLMandprojectmanagement
Iftheproductisaplantorfacility,cutnonproductivetime Opportunitytoimproveplannedmaintenance Opportunity to improve planned maintenance

Facilitatehandoffofproductdata
Apetrochemicalplantowner operatorestimatesthecostofmoving A petrochemical plant owneroperator estimates the cost of moving informationbetweenhookup&commissioningintooperationsat$10million

Copyright 2011 by CIMdata, Inc.

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BenefitsforBusinessProcess
Streamlinedesignreviewsandapprovals

Provideaformalmechanismtoevaluateproduct developmentsatmajormilestones Allowmanyuserstoseeproductdataandmakecomments onthatdata

Reviewthedesignratherthanmerelyitsdocumentation Allowuserstoseeproductdefinitioninformation

Supportsreviewteamshavingacollectivecompetency greaterthanthatofthedesigners
E.g.,includerepresentativesof E g include representatives of marketing,purchasing,manufacturing, servicing,test,inspection,reliability, q qualityassurance y

Copyright 2011 by CIMdata, Inc.

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BenefitsforBusinessProcess
Improvechangeprocessing(1of2)

Makechangesearlierintheprocess
Improvedaccesstodesigninformation Workwithmoreuptodateinformation Supportconcurrentprocesses

Reducecostofmanagingandtrackingchanges Establish&maintainproceduresfortheidentification, documentation,review&approvalofallchangesacross d & l f ll h wholeproductlifecycle

EngineeringChangeRequest Engineering Change Request EngineeringChangeOrder EngineeringChangeRecord

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BenefitsforBusinessProcess
Improvechangeprocessing(2of2)

Majorprocessforcontrolofaproduct
Implementusingworkflow

Trackstheimpactofachange
Costandtime Partanddocumentrelationships Whereusedinvestigations
NC

PART

Rippleeffect:onechangecanrequireanother Ripple effect: one change can require another

3D

PLMcapturestheapprovalorrejectionofachangeforaudit andhistory and history

PLMenableselectroniccomment/markup PLMenablesrapidcommunicationofchanges

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BenefitsforBusinessProcess
Increaseefficiencybystreamliningprocesses

Improvethepurchasingcycle
Effectivepurchasingdependsonmanagingdataandprocessesaswellasgood crossfunctionalcommunications

Speedworkorders
Workorders,withallrelevantreferencedocumentationanddatainafolder, distributedelectronically

UnifymultipleBOMs Unify multiple BOMs

E.g.,engineering,manufacturing,purchasing Allowuseofmultiplepartnumbering(customer,supplier,internal)

Copyright 2011 by CIMdata, Inc.

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BenefitsforBusinessProcess
Increaseefficiencybystreamliningprocesses

Improvecrossfunctionalintegrationandcollaboration
Thepurchasingcycle profitfromlargerdiscounts,fewersuppliers,reduced inventory,fewererrorsresultinginscrap Changemanagementcycle

Speedresponseinemergencies S d i i
Predefineprocessestoaccessacompletedataset

Encourage&enablecontinuousimprovement Encourage & enable continuous improvement ofprocesses Enablebusinesstransformation Enable business transformation
Supportprocesschange&integrationwithlowerrisk

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ExamplesofMetrics
Applicability&importancevarybycompany&PLMproject

BusinessMetrics
Timetoaccessdata Time to access data Plantdowntimefor maintenance Costofchanges No.ofstandardparts/no.of specialparts p p No.ofsuccessfulbids/month Toolingcostsorassemblycosts Scrap,inventoryrates,orrework rates Warrantycosts,returns,orMTBF Warranty costs returns or MTBF

PLMProjectMetrics
Softwaredeliveredagainstplan Software delivered against plan Taskscompletedontime CostofITresources Numberofprocesses (workflows)implemented Quantityoflegacydatamigrated Quantity of legacy data migrated Numberoflicensesdelivered Numberofusersimplemented p Numberofuserstrained NumberofPLMsolutionerrors reported d
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Copyright 2011 by CIMdata, Inc.

BenefitsofOpenSource
MinimizecostofPLMlicenses
LowercapitalexpenseforPLMshortenspayback period&lowersupfront risks

BeclearthatjustbecauseyoudonthavetobuyPLMlicenses, youdon thavetobuytheinfrastructure(database,operating you dont have to buy the infrastructure (database operating environment,visualizationtools,otherproductdesign software,etc.) Reducesoftwaremaintenance&tailoringcosts ReduceTotalCostofOwnership p
Decreaseinitialstartupcosts&ongoingcosts

ResultisimprovedROI,achievedmorequicklywithbetter InternalRateofReturn(IRR)
Copyright 2011 by CIMdata, Inc.

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PartingAdvice
Howtrueitis!

If you torture data sufficiently, it If sufficiently will confess to almost anything.

Fred Menger, chemistry professor (1937- )

Copyright 2011 by CIMdata, Inc.

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