THE 411 on PLM - Multichannel Merchant

Many merchants who have done quite well selling products manufactured by others are deciding to make some goods of their own. According to a study by AC Nielsen, private-label products accounted for 16% of retail sales in the U.S. in 2005, up 7% from the same period a year earlier. Across the globe, private-label sales grew by 5% in 2005, more than double the 2% growth in manufacturer brands, the study found.

Clearly there’s opportunity in private-label products. But as merchants begin making their own merchandise, they face new challenges. They must develop and design the product and its packaging, source the materials, and manufacture or assemble the goods, in addition to seeing that the products get to their distribution centers and on to their customers. This requires creating and managing an enormous amount of information, especially when the products or supply chains are complex or when numerous products are involved.

Product lifecycle management (PLM) software assists in this effort. Most PLM applications, according to Mike Burkett, vice president of product lifecycle management at Boston-based AMR Research, offer five capabilities: data management, collaborative product design, supply chain management, market trend tracking, and overall product portfolio management.

While these are not new applications, PLM brings them together in a common architecture, says Tom Shoemaker, vice president of solutions marketing with Parametric Technology Corp. (PTC), a provider of PLM solutions based in Needham, MA. And PLM solutions tend to be more user-friendly than database management applications, some of which are complicated enough that a user has to be a database expert to retrieve information. PLM software “facilitates administration of the data,” says Lance Murphy, technical marketing manager with Dassault Systemes, a Westford, MA-based PLM solutions developer.

As a result, PLM allows companies to more quickly introduce products. PLM applications developer Agile Software Co. has found that, generally speaking, consumer-product companies see their product launch cycles decrease by about 30% following implementation of a PLM solution. Murphy adds that for some technical products that require a number of design iterations, product development cycles can be cut by 60%.

Decreasing the time it takes to get a newly designed product to market obviously reduces the costs of product development. But it can also boost revenue. That’s because companies are more likely to introduce a product in time to catch a trend, rather than trail it.

PLM on the job

Karsten Manufacturing Co., a Phoenix-based firm known for its Ping brand of golf equipment, successfully introduced several products in 2000, such as the i3 iron and the TiSL driver. Even so, management was concerned that the company wasn’t bringing new products to market quickly enough, says Dan Shoenhair, director/engineering business manager. “If we don’t innovate on a regular basis, we’re out of business.”

But before Karsten could boost the number of new products the company introduced each year, management needed to cut the time it took to get merchandise from concept to market. At the time, the company’s engineers were hamstrung by a legacy computer-aided design (CAD) system, which often led to changes in product design occurring late in the design process, slowing development.

To change this, Karsten’s management took several steps, including implementing PLM software and moving to a lean manufacturing process. The PLM application, from PTC, manages design and manufacturing information. If a designer revises an engineering drawing, all employees accessing the document from the PLM system will see the updated version. And because the information is available electronically, the ability to update and access it is streamlined.

Karsten’s PLM system was tested in 2001, when circumstances forced a less experienced engineer to oversee the launch of i3+ wedges. Thanks to the PLM application, the newer engineer and his colleagues were able to model four new wedges in about five days. Previously this would have taken about two months.

The pace of product introductions at Karsten has continued to accelerate. In 2001 the company brought two new product lines onto the market. That number jumped to 15 in 2006; these accounted for about 85% of revenue. The time needed to bring a new product from concept to commercial availability dropped from 24 months in 2001 to nine months in 2006. What’s more, the number of engineering employees has grown only slightly, rising from 65 to 67 between 2001 and 2006.

Because Karsten introduced several operational changes at once, it’s difficult to pinpoint exactly which results can be attributed to PLM. But by helping to manage product information and facilitating collaboration among employees, PLM contributed significantly to Karsten’s operational improvements, says Shoenhair.

Reaping the benefits

To date, most of the companies that have adopted PLM have been larger firms that operate globally and have more than 1,000 users, says AMR Research’s Burkett. In fact, PLM got its start in the automotive and heavy-manufacturing industries. Companies in those sectors have to manage volumes of engineering data on each product and see that all departments are working with the latest version of product information.

The applications now are moving into the food, beverage, consumer packaged goods, and apparel sectors. Although the processes and products within these industries may not appear as complicated as, say, designing a commercial airplane, they can get quite involved, notes PTC’s Shoemaker. “The lingo’s different, but there are the same things to contend with: lots of pressure and lots of different configurations. And you’re sourcing from various sources who might change or go out of business.”

That’s why a company’s size is no longer the predominant factor in determining whether the business could benefit from a PLM solution. Several other criteria also come into play, says Sarvesh Jagannivas, vice president of industry strategy with San Jose, CA-based Agile. These include the complexity of the products being manufactured and the manufacturing process itself, the diversity of the products, and the duration of the product’s lifecycle. The more complex the processes, the more diverse and numerous the product lines, and the more quickly a product moves from design to obsolescence, the more benefit a PLM application can provide. In these environments, manually managing the information and processes isn’t feasible, Jagannivas says.

PLM solutions are especially useful when multiple locations are involved in the design and manufacture of products. For instance, Bally Technologies, which designs and manufactures a variety of slot and video machines, operates design facilities in the U.S., India, France, and the U.K., among other places. “We want to constantly be on the cutting edge,” says Guna Rajendran, PLM project manager in information technology for the Las Vegas-based company. “That requires collaboration no matter the time difference of the people working on the project.”

Although Bally had been using a PLM system when Rajendran joined the company in 2005, employees weren’t making the most of it. Product information was spread across multiple homegrown systems, making it difficult to determine where the latest data resided. By implementing a PLM application from Agile, Bally employees were able to reduce the time it took to design and bring new products to market. This is particularly true on smaller projects, such as modifying a slot machine so that it would work with various currencies. On these types of projects, the average time to market has dropped from three to four months to six to eight weeks.

“The biggest benefit of PLM is the ability to disseminate information throughout the company,” Rajendran says. “Whoever needs it can access the most up-to-date information anytime, anywhere in the world.”

	Putting PLM in place

Before you can benefit from a PLM system, however, you’ll probably need to transfer information from your various legacy systems into the PLM application. For large companies, this is an enterprise-level implementation, says Rajendran. “It might take you off guard if you don’t plan thoroughly.”

Most companies start by inputting or importing the information that’s currently most important to the company’s operations, says Murphy of Dassault Systemes. After that, they may bring over historical information, though if the information is needed only for archival purposes and not for current operations, many companies leave it outside the PLM application.

Depending on the format in which your data exist, you may be able to do a bulk import. That’s usually the case when the information is available in a common application, such as Microsoft Word. Similarly, its often possible to integrate the PLM application with an enterprise resource planning (ERP) system and then bring the ERP data over directly, says Murphy. On the other hand, if the data aren’t in a standardized format — say, if they include notes written onto a product drawing — they will probably have to be entered manually.

Most PLM solutions are available on either an application service provider (ASP) or a purchase basis. Some companies offer a modular version of PLM. That’s the approach San Francisco-based Freeborders has taken, says Debbie Baldini, managing director of the technology solutions provider’s retail practice. The Freeborders suite of modules includes an online storyboard application in which employees from different departments can share design ideas and an application that manages material sourcing. Although the applications are modular, they work from a common library of information.

Most PLM implementations take from several months to a couple of years, although it’s not unheard of for smaller companies to get up and running within several weeks, says Murphy. Unless the PLM system will be extremely complex, it’s usually not necessary to purchase additional hardware, he adds.

The investment required for a PLM application can vary as widely as the amount of time needed for implementation. Marc Young, president of xLM Solutions, a software consulting firm based in Detroit, runs some hypothetical numbers: Say that a midsize company needs to buy 20 licenses; 15 are dedicated to specific engineers, who often spend all day on the system, while the rest are shared among users, such as purchasing agents, who don’t require their own licenses. The licenses run about $3,000 each. The company also expects to spend $50,000-$60,000 in consulting services during the implementation. That brings the total investment to $110,000-$120,000. Larger implementations can start in the mid-six-figures and head into the millions.

Shoemaker says that PTC’s PDMLink on Demand costs about $125 a month per user. There’s also about $12,500 in startup fees.

	Not a panacea

PLM isn’t the answer to every product lifecycle problem. Despite its name, PLM applications really focus on the design and development stages of a product, rather than its entire lifecycle, says Patrick Ogawa, associate vice president with the retail and consumer packaged goods unit of Infosys Technologies Ltd., a Fremont, CA-based consultancy. “The scope of PLM begins with product design and inception and ends when the item lands in the store.” So if, for instance, consumer demand for a product differs from the forecast, a PLM system alone won’t capture that.

In addition, most PLM applications don’t work well with lean manufacturing operations, says Karsten’s Shoenhair. “They’re more interested in individual tasks and less on the process.” PLM applications won’t tell where bottlenecks between tasks are occurring, for example.

Even so, many of those who have implemented PLM solutions are true advocates. Says Bally’s Rajendran, “PLM is the one tool that gives complete visibility over the products that are the company’s blood.”

Minnetonka, MN-based Karen M. Kroll has written for Business Finance, Inc., and American Way, among other publications.

	Six steps to PLM success

To ensure the smooth implementation of your product lifecycle management solution, keep these suggestions in mind:

Identify the business problem and the contributors to it, says Mike Burkett , vice president of product lifecycle management at AMR Research.
Determine how PLM will solve these problems, says Lance Murphy, technical marketing manager with PLM solutions developer Dassault Systemes. That way you can tackle the project with clear objectives.
Obtain support for PLM from top management. “That’s the one thing that will drive this project in the right direction,” says Guna Rajendran, PLM project manager with gaming manufacturer Bally Technologies. Support from the IT department also is crucial, as you will need them to assist in the implementation.
Form a committee with all stakeholders, says Marc Young, president with software consultancy xLM Solutions. The team should include experts in both product development and information systems, and they should have the power to analyze the options and make decisions.
Be open to the changes PLM allows, says Young. For example, many companies have elaborate methodologies they use to number parts. Because PLM allows you to associate a part with its attributes, this sort of numbering system may no longer be necessary.
Deploy in increments, showing wins as you go. Karsten Manufacturing Co. implemented a PLM data warehouse application with its golf equipment brand Ping, says Dan Shoenhair, director of engineering/business manager. The company let employees use it before launching an application to manage workflow. In all, Shoenhair and his colleagues spent about 18 months implementing PLM, letting people grow with the system.
— KMK