Innovation On The PLM-ERP Edge

This post was born as a consequence of on-going conversation with Jim Brown of TechClarity. Jim and I have a long history of discussions on different topics offline, and we are in agreement on many of them. However, in spirit of what Jim called “healthy debates”, I’d like to open our conversation online. I’m sure it will be beneficial for us, and I hope you will find it interesting and practical in the context of thinking about strategy for PLM and ERP implementation planning.

If you haven’t seen our previous posts, I’d recommend you to go and read them first in order to have a taste of context:

PLM vs. ERP – Don’t Manage Innovation!

Mythbusting PLM/ERP Integration

PDM/PLM and ERP are two topics and domains that continue to magnetize huge amount of the attention. In my view, it was true for the last 20 years, and it continues to be true these days too. In the spirit of getting away from three letter acronyms (TLA), I’d like to put below one of the best references on the way to present discrete (or manufacturing) concurrent engineering positioning from the David Ullman’s book: The Mechanical Design Process.

What I like in this process is that it clearly presents the level of the connections in manufacturing enterprise, including logical dependencies between three major domains – Design, Production and Business.

ERP and PLM Domain
In my view, PLM was born in the middle of the Design domain, in the beginning as a system to manage Product Form (CAD) and lately by systems and modules to manage materials (BOMs), functions and facilitate connection with outside domains. The best example I can bring here is the ability of PM to connect market requirements with business needs. If you will ever have a chance to see a successful integration between business/market models (i.e. Sales Configrator) and PLM, you can see how it can be beneficial. So, within the time PLM outgrows Design domain and spread out into some functions related to production and business. In parallel ERP, was “an accounting child”, born to calculate, forecast and provide clear answers on how health your business can operate. Started from Sales, Finance, Prices, Costs and Risk, followed by successful development of MRP and MRP-II topics and, finally, becomes ERP as we know it today.

Roles of PLM and ERP
As every healthy business systems, both ERP and PLM are trying to grow and Production Domain is an obvious common target for both PLM and ERP. Since PLM came from managing the form and materials in product design, the ability to manage product and work-in-process data are much better compared to ERP. At the same time, ERP holds very strong on the ability to mange operational environment. In the very competitive business environment, both domains failed to collaborate successfully and, instead of taking route to manage openness and process transparency moved to the “marketing excellence” by starting to invent slogans like innovation and execution. But, unfortunately, devil is in details and after agreeing about “roles” and “focuses”, you will get back to bits and bytes of design data, EBOMs, MBOMs and processes that span across the organization.

ERP Business in PLM
With the clear competition state of mind, ERP vendors are trying to push technical limits of ERP foundation to manage product design and work-in-progress design information. As much as they come to the business having fewer design roots design roots, the chances to successfully stretch ERP data models and infrastructures are more successful. When you almost cannot see automotive OEM or supplier that decides to manage design product configuration in SAP PLM, you probably will be more lucky to see high tech and telecom companies managing product engineering and manufacturing BOM in ERP. Also, companies tried to reduce the cost of “process management” by concentrating it inside ERP process infrastructure.

Border Between PLM and ERP
I think, to define the right border between PLM and ERP is a very complicated task. I’m almost sure, the results will be very different for various companies even in the same domain. There are lots of factors such as existing systems, implementation, history, legacy stuff, new projects. You can find companies pushing towards implementing CAD/PDM bundles and move process oriented environment towards ERP. You may see companies that put PLM as a global product development environment worldwide, while ERP is local and specific for business in the specific countries. So, I’m sure there are some patterns we can discover. However, try to establish this boarder will be heavily overused by marketing and competitive efforts and in the end will be disruptive for industry. I think PLM and ERP need to establish some common infrastructure and maybe be even open initiatives that can simplify the exchange of the information and process flowing between systems in the organization.

What is my conclusion today? PLM and ERP are a very complicated topic. There are multiple levels of influence starting from completely technical, moving to IT-related  and ending up with very emotional aspects. I hope Jim and I helped you to navigate and find your path in your future PLM/ERP projects.

Getting back to Jim’s post, there is one topic left- innovation. I want to touch it in separate discussion. I will call it my “Golden Eggs Innovation Strategy”. Stay tuned :)…

Best, Oleg

PS.

It was good to see the same day Joe Barkai (twitter @joebarkai) from IDC Insight joined our discussion with Jim on twitter and IDC blog: ERP vs. PLM: Debating The Wrong Question?

…So now we are debating PLM vs. ERP.  Some of these discussions have a very strong, and, in my opinion, incorrect undertone of IT architecture debate: who owns what data repository, where are the boundaries, what are the integration points, and so forth.  One blog discussion attempts to separate ERP as the “execution engine” from PLM, which is “innovation focused.”…