How to connect PLM to manufacturing profit?

How to connect PLM to manufacturing profit?

Manufacturing profit

One of the most complicated questions when selling PLM is to prove ROI. The topic was debated so much in the past, I decided to stop blogging about it. Check my old blogs about PLM ROI here (http://beyondplm.com/tag/roi/).

Old day of PDM/ PLM, vendors were trying to sell ROI. I check my old articles and found this picture. It is amazing and you probably smiling, but 10-15 years, sales actively promoted ROI from PDM.

Fast forward in 2019. I had many conversation about PDM implementations with manufacturing companies. Many of them are small and growing manufacturing companies. None of them are asking about PDM ROI. They said – I need PDM in order not to track my CAD file revisions and not to lose them after I make changes. Simple? Yes… No need ROI. The companies asked about ROI 15 years believed them can manage files in folders

Getting back to PLM… Chad Jackson of Lifecycle Insight caught my attention by his new video about PLM soft returns. Check it out. I like it, because practically he is saying – Nobody wants to talk about soft returns and productivity anymore.

Chad is promising to come back with another video about “hard returns”. We will see soon hopefully. Here is my take about PLM ROI.

1- Cost of running an engineering activity. Engineers need to have tools. Nobody is asking why do you need CAD system, compiler or text editor. You just need one or many.  Give them a tool they like and pay for these tools. Give them large screens, comfortable chairs, and tools they like period. There is a cost to support engineering. There is a cost to keep engineers happy. Just do it.

2- Cost of running the process. You need to run a process and measure it. You cannot manage something you cannot measure. You need to know how long takes ECO turnaround. You need to know how many of ECO is driven by customers, failures, suppliers, etc. So, you need to have a tool to measure activities and communicate. There is a cost of good tools, but they will allow you to work and will keep you out of jail when your product will kill or poison somebody.

3- Sales support. There is only one way to make a profit – to sell your products. So, to make it happen there are a bunch of activities to support.  The goal of IT to give support to sales and marketing. It can be a cool video of a product that doesn’t exist yet or it can be a date when a product can be delivered to a customer. These things can close deals. Focus on these tools and make sales happy. Ask sales about their pain and come with solutions.

How to get out of the cost center? In my view, it can be done by connecting products to money. Think sales or expenses. In my company OpenBOM (disclosure – I’m co-founder and CEO), we connected Bill of Materials directly to purchase orders. Nobody likes to order the wrong parts or wrong quantities. Nobody likes to miss lead time or a single supplier of a critical part. When Bill of Materials is connected to purchase order without retyping and copy/pasting data, you connect this activity to money. Saving on purchase orders gives you control of product cost

What is my conclusion? PLM is stuck in the cost center. Nobody likes to be a cost center. Everyone likes to be a profit center. So, to connect your engineering tools to profit center. Connect PLM activities to money, expenses or anything else that you can measure the direct impact on company revenue and profit. If you cannot do so, focus on how to make engineers extremely happy. Just my thoughts…

Best, Oleg

Disclaimer: I’m co-founder and CEO of OpenBOM developing cloud-based bill of materials and inventory management tool for manufacturing companies, hardware startups, and supply chain. My opinion can be unintentionally biased.

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