Why PLM and ERP Should Not be Mutually Exclusive
Each application category of enterprise software is studied and scrutinized ad nauseam by a designated group of analysts. Firms, such as Gartner, are highly influential in not only promoting some applications over others, but in directly influencing purchasing activities toward some application categories regardless of the impact of those applications to the firm’s bottom line.
Enterprise Resource Planning (ERP) is perennially one of the largest application categories hyped by both analyst and consulting firms alike. There are a number of reasons for this. One such major reason is that application categories are not endorsed based upon how much they benefit a customer’s return on investment. My research into ERP’s ROI demonstrates that studies performed in different decades show that ERP systems do not have a positive ROI, yet interestingly those same systems were promoted regardless of their financial impact on organizations.
Application categories that are "hot" oftentimes aren’t driven by what is proven to be beneficial; rather, that designation can at times be based upon other factors such as the assumptions an analyst makes about the future of the market, marketing efforts on the part of software firms, and recent trends. As such, many analyst firms should not be solely relied upon as guides for what application categories should be emphasized over others. One example supporting this statement is any application that adds a great deal of value, but is inexpensive and accounts for little consulting revenue will rarely receive support or promotion from the large consulting companies for all reasons obvious.
One of the more under-emphasized, and consequently less promoted, application categories is Bill of Materials (BOM) management systems, also known as Product Lifecycle Management (PLM) systems.
There are some very interesting reasons for this. While ROI is notoriously difficult to calculate, BOM systems have the potential to be enormously strong ROI drivers cross-functionally because of the following reasons:
- BOM management is a complex task that is inefficient and resource intensive unless the right tools are used.
- The fast implementation timelines associated with a few cloud BOM applications all but remove the need for third party consultants.
- Their strong ability to enable so many workers to collaborate cross-functionally.
- The fact that so many systems rely upon BOM information—both in and out.
Effectively Distributing the BOM
The BOM, generally acknowledged to be used by many individuals internal to an organization, is also used as a collaboration tool by many individuals external to the organization. This is a fact that Arena Solutions, pioneer of cloud-based PLM, understood very well early on in its development. It further explains why collaboration has historically been such a strong focus for the company’s go forward applications. Arena PLM can be used as an internal BOM management application, tying together people working across a dispersed organization—even internationally. However, savvy organizations use Arena PLM to change the way they actually work with suppliers (and suppliers’ suppliers) by all collaborating on the BOM. In so doing, they have their own suppliers also log in to Arena PLM, (or effortlessly forward a PDX build package if using Arena Exchange) communicating on one platform and therefore greatly reducing the costs of collaboration. When it comes to the complexities of managing the BOM among numerous suppliers, and having suppliers’ suppliers communicate key information on multiple builds very quickly and securely, Arena PLM is unrivaled, and, in my opinion, has developed the best enterprise collaboration PLM application hands down.
Users, whether internal or to external to the organization, can begin using Arena’s collaborative software very quickly. This point is critical, and is often missed by executive decision makers who don’t work with the software. In order to enable collaboration, an application must have an efficient, effective user interface and it must be significantly superior compared to other accepted methods of interacting, including emailing spreadsheets and design documents.
Arena’s cloud-based PLM platform presents the current state of BOMs based upon the aggregated, organized activity of many users messaging on the status of their BOMs, uploading design changes, refining specifications, etc. It allows any person with access to see the current state of the BOM. It is also supported by Arena’s advanced, yet simple-to-use security model, which allows an outside user to see only the subcomponents that they are bidding upon, even if the overall BOM has thousands of components, subcomponents or raw materials.
When estimating the ROI, a combination of effects must be calculated. One is the magnitude of improvement. So how much does the application on average improve the efficiency, improve decision making, etc. that drives profitability for those that use the system? The second factor is to determine how many users can in fact, expect to receive that average improvement. Arena makes its users far more efficient and effective in managing the BOM. It reduces rework, improves the ability to collaborate with suppliers, improves data integrity, improves visibility to the BOM, and associates disparate types of data in a powerful assignment to the BOM record. All of these BOM data types can be navigated with incredible flexibility within Arena PLM.
In the end ERP and PLM systems are complimentary tools that can communicate with each other, yet support distinct business needs. Utilizing them together provides companies a more cohesive and efficient manufacturing process with fewer oversights. To learn more about this check out this article ERP and PLM: How these systems work together for manufacturing success.