The past few years have seen companies doing everything they can to reduce costs. From outsourcing and offshoring to RIFs (reductions in force), the byword has been, “Cut expenses.” But if most of the economists are right, 2005 will be a much better year, and companies will go back to concentrating on increasing revenue.
Bryan Stolle, CEO of product lifecycle management vendor Agile Software, points out that there are three ways to do this: Sell more products, create new products, or find new market opportunities for existing IP (intellectual property).
In the good old days, companies could create a dozen new products in a year. If not all new, they were at least new versions of the current product line. Apple offering iPods in different sizes and colors is a perfect example of slicing the same IP pie another way.
Faced with worldwide competition, vendors are experiencing tight margins, which constrict both the amount of R&D dollars available for product development and the number of products a company can safely launch. The hit rate on successful product launches has to be between 50 percent and 80 percent, depending on the margin pressure in your industry, Stolle says.
The key is to optimize the product lifecycle. But that can only be done by looking at PLM (product lifecycle management) in a different way. Indeed, there is a sea change taking place among the more forward-looking companies. They have come to realize that PLM’s narrow role in the enterprise must change. Events that were handled by different roles are now becoming part of the PLM solution.
Companies have always known that creating new products is not just an engineering problem. The real problem arises when teams do not have the technology available to do a good job, says Michael Burkett, research director of PLM at AMR Research.
For the most part, marketing, manufacturing, and the supply chain work off their own systems, yet each affects the success of a product launch. For example, if I pick a low-quality part, I’ve instantly created a warranty problem for the final product. A part with a supply-chain problem means I can’t meet demand. A part with limited availability may mean I have to rework my supply chain.
Creating visibility into events and potential events helps companies “manage the gotchas,” Stolle says. That’s what a modern PLM solution is all about. What it means is that IT managers need to understand the impact of introducing a product, how IT systems affect its time to market, and the role technology plays in making it successful.
Looking at information flow is a good place to start. For the most part, today’s cross-functional teams will be using a bunch of disparate, stand-alone systems, or even manual communications. According to Burkett, addressing that fragmented environment requires the implementation of a PLM strategy that consolidates those systems, using a modern architecture that allows the PLM solution to communicate with other enterprise systems.
“Buy a PLM solution that can talk to the CRM system to capture customer feedback, to the ERP system to capture cost information, and to the
supply-chain system to expose bills of materials that can be reused, or for advanced planning and scheduling,” Burkett says.
Giving everyone access to information is old-school. Today, creating automated workflows as the data changes is what it’s all about.