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The ROI of PLM The ROI of PLM “Validating the Possible” April 2011 April 2011 John MacKrell Vice President j mackrell@cimdata com John MacKrell, Vice President j.mackrell@cimdata.com Tel: +1.734.668.9922 Copyright © 2011 by CIMdata, Inc. 1 www.CIMdata.com Copyright © 2011 by CIMdata, Inc. Global Leaders in PLM Consulting
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Page 1: The ROI Of PLM - Aras

The ROI of PLMThe ROI of PLM“Validating the Possible”April 2011April 2011

John MacKrell Vice President ‐ j mackrell@cimdata comJohn MacKrell, Vice President ‐ [email protected]: +1.734.668.9922

Copyright © 2011 by CIMdata, Inc. 1

www.CIMdata.com

Copyright © 2011 by CIMdata, Inc.

Global Leaders in PLM Consulting

Page 2: The ROI Of PLM - Aras

CIMdata’s MissionStrategic consulting for competitive advantage in global markets

CIMdata is the leading independentCIMdata is the leading independent global strategic management consulting and market research authority focused

l i l PLMexclusively on PLM.

We are dedicated to maximizing our clients’ ability to design and deliverinnovative products and servicesinnovative products and services through the application of PLM.

Copyright © 2011 by CIMdata, Inc. 2

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ROI & Benefits are Driven by 3 FactorsRecursive relationship among people, technologies, and processes

Existing business processes may be enhanced using PLMPr

oces

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s

People

Bus

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atio

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Cap

abili

ties

B

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rma CProcessesTechnologies

New processes enhance how PLM is used

For maximum benefit, can’t optimize any one factor!For maximum benefit, can’t optimize any one factor!

Copyright © 2011 by CIMdata, Inc. 3

For maximum benefit, can t optimize any one factor!For maximum benefit, can t optimize any one factor!

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ROI Balance: Costs vs. BenefitsA real and quantifiable analysis is required

Costs are real

Benefits must be real tooBenefits must be real tooSo benefits should, if possible, be estimated in the same method of meas rement Moneof measurement—Money

C B fi

Copyright © 2011 by CIMdata, Inc. 4

Costs Benefits

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ROI HighlightsUnderstanding the impact of PLM

Determine and address business opportunities

PLM benefits received by any two companies will differ—PLM benefits received by any two companies will differunderstand yours

The appraisal method causes the team to better understand the business

Benefits & ROI help management:Make educated investment decisions

Reduce the risk of wrong decisions

Avoid getting the wrong solution

People improve in areas where they are measured

Copyright © 2011 by CIMdata, Inc. 5

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PLM – The DefinitionPLM – integrating people, processes, business systems, and information

Strategic business approachNOT just technologies

Consistent set of business solutions

Collaborative creation, use,management & disseminationAll product/plant definition information – the virtual product MDA AEC EDA CASE analysis documentationMDA, AEC, EDA, CASE, analysis, documentation, …

All virtual product processesProcesses that plan, design, produce, support, … Full Product Lifecycle

Supports the extended enterprise

Spans full product/plant lifecycle, from concept to end of life

Copyright © 2011 by CIMdata, Inc. 6

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PLM Spans the Product LifecyclePLM touches all phases of a product’s life and the entire value chain

Planning

Conceptual Design

Product Engineering ManufacturingPortfolio

Requirements

Planning Engineering Manufacturing Engineering

Simulation & Validation

Management

Build and Produce

Disposal & Recycling

Sales & Distribution

Maintenance& Repair

Test & QualityIn‐service 

Operation

Copyright © 2011 by CIMdata, Inc. 7

PLM Solutions—Information Management across Media, Process, Time, Geography, & Enterprise

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PLM CostsThe obvious side of the ROI equation

Costs Benefits

Copyright © 2011 by CIMdata, Inc. 8

Page 9: The ROI Of PLM - Aras

Cost Model for PLM SolutionsTypical cost elements

PLM software & maintenance

Hardware (additional needed for PLM) & maintenanceHardware (additional needed for PLM) & maintenanceWhat gets charged to PLM?

PLM appraisal selection andPLM appraisal, selection, and implementation planning

Solution implementationSolution implementation

Training

Business and system administrationBusiness and system administration

Copyright © 2011 by CIMdata, Inc. 9

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Software CostsVarious cost aspects exist

Client licensesSubscription licensing may be possible

Or none at all with Open Source

Server licensesf d l dPLM software modules, e.g., document management, parts management, 

product structure, engineering change management, etc.

Software maintenance or subscriptionpAnnual fee, usually a % of value of installed SW

Database management softwareFor meta‐data

Other:Application integration

Copyright © 2011 by CIMdata, Inc. 10

Application integrationView & markup, collaboration, etc.

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Selection & Implementation CostsThese costs are usually much more than the software itself

Internal costs for system selection, appraisal & justification, implementation planning

Internal cost of subject matter experts

Cost of lost user productivity (time away from job)

External consultancy

Training (internal and external)

Data and process modeling

Integration with applications

Tailoring and/or customization

Data capture & cleaning

Copyright © 2011 by CIMdata, Inc. 11

Business and system administration

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Cost FactorsMain cost drivers for the implementation of PLM

Number of users & sites

Implementation phasingImplementation phasingBy solution, group or project

Number of PLM solutions to be deployedNumber of PLM solutions to be deployedPDM, visualization, DMU, collaboration, CAD, Dig. Mfg…

Quantity of legacy data to be cleaned & movedQ y g y

Number of other systems to be integrated (CAD, ERP, business planning, etc.)p g, )

Level of tailoring needed

Training

Copyright © 2011 by CIMdata, Inc. 12

Training 

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PLM BenefitsMetrics quantify the benefits in the ROI 

Costs Benefits

Copyright © 2011 by CIMdata, Inc. 13

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Metrics Help You Understand…Some of the reasons why metrics are important

When, where, and how people are using PLM

The effect of PLM on the business & its processesThe effect of PLM on the business & its processes

How well the business objectives for a project have been satisfiedsatisfied

If sponsors are receiving a return on investments

A th t d i tAreas that need improvement

Requirements for future implementations of technologies & processesprocesses

The ongoing success of your business solutions

Copyright © 2011 by CIMdata, Inc. 14

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Nature of MetricsMetrics should meet a number of criteria

They should measure direct cost, time, count savings

They should be measured both before and after the project isThey should be measured both before and after the project is implemented (to set baseline)

They should be reported automatically (vs manually)They should be reported automatically (vs. manually)Facilitate the process

Assure timely reporting

They should be evaluated to ensure they don't create an unwanted behaviorCan they be manipulated to show inappropriate results or hide problems

Do they violate how people are motivated

Copyright © 2011 by CIMdata, Inc. 15

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Guiding Your PLM ProgramIndicators of program progress provide direction

PLM project metrics track the PLM program’s progress

PLM business metrics help you understand how well the PLMPLM business metrics help you understand how well the PLM program is supporting the enterprise’s business objectives, e.g.,Cost

Quality

Time to marketTime‐to‐market

Both indicate how to adjust the PLM program’s scope & timing to maximizeprogram s scope & timing to maximize your return on investment

Copyright © 2011 by CIMdata, Inc. 16

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Example Benefits Example ranges of benefits based on actual experiences

Time‐to‐manufacturing—10% to 50% reduction

Engineering change process—10% to 70% reductiong g g p

Design review process—50% to 80% reduction

Increased productivity 10% to 20% increaseIncreased productivity—10% to 20% increase

Product development costs—25% to 40% reduction

New part numbers—5% to 15% reduction

Time to find information—75% to 90% reduction

Design errors—10% to 25% reduction

Time‐to‐design—15% to 70% reduction

Copyright © 2011 by CIMdata, Inc. 17

Travel cost for design—20% to 35% reduction

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Benefits for Business PerformanceWin against the competition

Enables innovation, predictability, company flexibility, and better managementRespond more swiftly to new challenges, new markets, etc.

Good management depends on rapid access to full and up‐to‐date informationinformation

Companies first to harness PLM will raise barriers of entry for their competitors

E bl i ti ith t iEnable communications with partner companies

Support global manufacture, assembly, or service

Support global product execution

Companies who continue to ignore PLM will learn ll b i f h i bi i

Copyright © 2011 by CIMdata, Inc. 18

all about it from their biggest competitors

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Benefits for Business PerformanceQuality Initiatives

PLM enables Quality Assurance  Uphold a reputation for excellence and reliability through product lifecycle

Quality impacts legal, contractual, liability, cost savings, competitive, human resource, and environmental issues

Support total quality management initiatives & other initiativesSupport total quality management initiatives & other initiatives

ISO 9000 Objectives:ISO 9000 Objectives:ISO 9000 Objectives:ISO 9000 Objectives:“To supply quality products that don’t come back, to “To supply quality products that don’t come back, to

customers who do.”customers who do.”David HoyleDavid Hoyle——ISO 9000 HandbookISO 9000 Handbook

Support TQM:Support TQM:Total Quality ManagementTotal Quality Management

Copyright © 2011 by CIMdata, Inc. 19

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Benefits for Business PerformanceRegulatory issues

PLM supports industry regulations and requirementsIndustry requirements, e.g., QS 9000, FDA, RoHS, WEEE, REACH … regulations

Environmental, health, and safety considerations

Provides access any time, anywhere to valid information and proves the capability to satisfy regulators

PLM maintains a traceable system of record

Copyright © 2011 by CIMdata, Inc. 20

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Benefits for the OrganizationFacilitate effectiveness of the organization

Improve corporate communicationsIntegrate product development across divisions of a company 

Break down geographical barriers

Provide concurrent access to all enterprise resources

Access to all product data (e g the technical library) from every deskAccess to all product data (e.g., the technical library) from every desk

Support organizational changeCorporate reorganizationsCorporate reorganizations

Acquisitions

Implementing concurrent engineering & other initiatives

Business process re‐engineering

Automation and enforcement of new business processes

Copyright © 2011 by CIMdata, Inc. 21

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PLM Building KnowledgeCreating & managing your intellectual assets to enable innovation

Intellectual Intellectual AssetsAssets

Traditionally, the knowledge Traditionally, the knowledge of the organization is the of the organization is the

(Incorporate (Incorporate Principles)Principles)

of the organization is the of the organization is the sum of that which is held sum of that which is held by its peopleby its people

Knowledge(Patterns)

Information(Relationships)

( )

Data(Items)

( p )

Copyright © 2011 by CIMdata, Inc. 22

Adapted from Knowledge Management by Gene Bellingerhttp://www.systems-thinking.org/kmgmt/kmgmt.htm

( te s)

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Data Reuse Creates ValueYour intellectual assets need to be leveraged

Allow product developers to easily re‐use parts, designs, & processes

“Up to 80% of the work done in an engineering department is“Up to 80% of the work done in an engineering department isidentical or very similar to work done previously”identical or very similar to work done previously”identical or very similar to work done previouslyidentical or very similar to work done previously

From Research by Arthur D LittleFrom Research by Arthur D Little

The more your data is used and reused the more value it produces for your enterpriseRe‐use proven designs with confidence

Avoid prototyping and testing

Avoid re using failures and repeating the same old mistakes

Copyright © 2011 by CIMdata, Inc. 23

Avoid re‐using failures and repeating the same old mistakes

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Benefits for UsersPLM is attractive to users

PLM is a consistent data source: one place to look

Provides shared access to dataProvides shared access to data

Links dataInter‐data relationships provide a more complete view of informationInter‐data relationships provide a more complete view of information

Powerful search facilities—by attributes, browsing, full text retrieval

Visibility to all product information through a common source

Copyright © 2011 by CIMdata, Inc. 24

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Benefits for UsersEmpowering the organization with the right information

Empowers workersProvides easy access to knowledge & expertise

Reduces  burden of administrative tasksAutomates tracking

Records who, what, where, when, etc.

Automatically links related information (e.g., viewable data to geometric model, models to specifications), p )

Transfers BOMs to ERP, avoid re‐keying

Automatic versioning and revision tracking 

Encourages use of a common terminology

Improves personal productivity

Copyright © 2011 by CIMdata, Inc. 25

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Benefits for the Product or ServiceImprove customer’s perception of products & services

More quickly respond to customer queriesNavigate through data

Search and find

Discover related information

Costs

100%Defined CostsFacilitate rapid product 

improvements early in product development cycle

50%

product development cycleWhen the big decisions are needed

When committed costs are high and 

TimeEngineering Manufacturing After-Sales

0%

incurred costs are low

Copyright © 2011 by CIMdata, Inc. 26

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Benefits for the Product or ServiceFacility production and maintenance

Facilitate longer production runsCut time‐to‐production, time‐to‐commissioned

Benefit from profit margin on additional production

Gain value from larger market share for the product

Cut plant down‐time with PLM and project managementIf the “product” is a plant or facility, cut non‐productive time

Opportunity to improve planned maintenanceOpportunity to improve planned maintenance

Facilitate hand‐off of product dataA petrochemical plant owner‐operator estimates the cost of movingA petrochemical plant owner operator estimates the cost of moving information between hook‐up & commissioning into operations at $10 million

Copyright © 2011 by CIMdata, Inc. 27

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Benefits for Business Process Streamline design reviews and approvals

Provide a formal mechanism to evaluate product developments at major milestones

Allow many users to see product data and make comments on that dataReview the design rather than merely its documentation

Allow users to see product definition information

Supports review teams having a collective competency greater than that of the designersE g include representatives ofE.g., include representatives of marketing, purchasing, manufacturing, servicing, test, inspection, reliability, quality assurance

Copyright © 2011 by CIMdata, Inc. 28

q y

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Benefits for Business Process Improve change processing (1 of 2)

Make changes earlier in the processImproved access to design information

Work with more up‐to‐date information

Support concurrent processes

Reduce cost of managing and tracking changes

Establish & maintain procedures for the identification, d & l f ll hdocumentation, review & approval of all changes across whole product life cycleEngineering Change RequestEngineering Change Request 

Engineering Change Order

Engineering Change Record

Copyright © 2011 by CIMdata, Inc. 29

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Benefits for Business Process Improve change processing (2 of 2)

Major process for control of a product Implement using workflow

Tracks the impact of a changeCost and time

Part and document relationships

Where used investigations

Ripple effect: one change can require anotherNC

3D

PART

Ripple effect: one change can require another

PLM captures the approval or rejection of a change for audit and historyand historyPLM enables electronic comment/markup 

PLM enables rapid communication of changes

Copyright © 2011 by CIMdata, Inc. 30

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Benefits for Business ProcessIncrease efficiency by streamlining processes

Improve the purchasing cycleEffective purchasing depends on managing data and processes as well as good cross‐functional communications  

Speed work ordersWork orders, with all relevant reference documentation and data in a folder, distributed electronically

Unify multiple BOMsUnify multiple BOMsE.g., engineering, manufacturing, purchasing

Allow use of multiple part numbering (customer, supplier, internal)

Copyright © 2011 by CIMdata, Inc. 31

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Benefits for Business ProcessIncrease efficiency by streamlining processes

Improve cross‐functional integration and collaborationThe purchasing cycle ‐ profit from larger discounts, fewer suppliers, reduced inventory, fewer errors resulting in scrap

Change management cycle

S d i iSpeed response in emergenciesPredefine processes to access a complete data set

Encourage & enable continuous improvementEncourage & enable continuous improvement of processes

Enable business transformationEnable business transformationSupport process change & integration with lower risk

Copyright © 2011 by CIMdata, Inc. 32

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Examples of MetricsApplicability & importance vary by company & PLM project

Business Metrics PLM Project Metrics

Time to access data Software delivered against planTime to access data

Plant down‐time for maintenance

Software delivered against plan

Tasks completed on time

Cost of IT resourcesCost of changes

No. of standard parts/no. of special parts

Number of processes (workflows) implemented

Quantity of legacy data migratedp p

No. of successful bids/month

Tooling costs or assembly costs

Quantity of legacy data migrated

Number of licenses delivered

Number of users implementedScrap, inventory rates, or re‐work rates

Warranty costs returns or MTBF

p

Number of users trained

Number of PLM solution errors d

Copyright © 2011 by CIMdata, Inc. 33

Warranty costs, returns, or MTBF reported

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Benefits of Open Source

Minimize cost of PLM licensesLower capital expense for PLM shortens payback period & lowers up‐front risksrisks

Be clear that just because you don’t have to buy PLM licenses, you don’t have to buy the infrastructure (database operatingyou don t have to buy the infrastructure (database, operating environment, visualization tools, other product design software, etc.) 

Reduce software maintenance & tailoring costs

Reduce Total Cost of OwnershippDecrease initial start‐up costs & ongoing costs

Result is improved ROI, achieved more quickly with better 

Copyright © 2011 by CIMdata, Inc. 34

Internal Rate of Return (IRR)

Page 35: The ROI Of PLM - Aras

Parting AdviceHow true it is!

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

Fred Menger, chemistry professor (1937- )

Copyright © 2011 by CIMdata, Inc. 35

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CIMdata Strategic consulting for competitive advantage in global markets

World Headquarters3909 Research Park Drive3909 Research Park Drive Ann Arbor, MI 48108, USA

Tel:+1.734.668.9922Fax:+1.734.668.1957

Main Office - Asia-PacificTakegahana-Nishimachi 310-31

Main Office - EuropeOogststraat 20

Matsudo, Chiba 271-0071 JAPANTel: +81.47.361.5850Fax: +81.47.362.0472

6004 CV Weert, NLTel:+31 (0)495.533.666

www.CIMdata.com

Serving clients from offices in North America, Europe, and Asia-Pacific

Copyright © 2011 by CIMdata, Inc. 36

g p


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