How PLM can solve problem of global BOM transparency

Business is going global. It is not only for large manufacturing companies these days. As a result of cost pressure and searches for new market opportunities, manufacturing companies are looking how to optimize their businesses. Distributed engineering, manufacturing and suppliers environments – reality of manufacturing these days.

However, outsourcing and future development of supply chain also brings additional challenges. Distributed environment and supply chain collaboration bring additional level of complexity. Combined with growing regulatory requirement it resulted in significant pressure on manufacturing companies to provide transparency of product information for regulatory purposes.

CSRWire article Complying with Supply Chain Transparency: Underlying Issues Lead to Regulation Backlash brings an interesting perspective on the need of manufacturing companies to expose bill of material information across supply chain. Here is a passage I captured:

Currently, there is a gap in the product information shared between the two [contract manufacturers]. The nature of that model is such that retailers either pick from a catalog or provide product specifications and tolerances for manufacturing but never see the finished product’s bill of materials.  That becomes a challenge for documenting environmental and social compliance requirements, as the data stays solely in the contract manufacturer’s product lifecycle management system.

It made me think about how to make product information available downstream in every manufacturing organization and across supply chain. Majority of PLM systems deployed today are focusing on the needs of engineering departments. It serves product development and implementation of engineering-manufacturing collaboration. Which leaves supply chain and contractor manufacturing out of focus. Below, I outlined some functional and business requirements PLM system and vendors can follow to solve the problem of BOM transparency across supply chain:

1- PLM systems need to be deployed beyond engineering organization and become easy available for suppliers and contractors.

2- Bill of Material tools need to support product information beyond development and engineering. It raises the question of manufacturing bills and sub-contractor bills.

3- PLM business models should be adapted to serve new type of users – suppliers and sub-contractors.

According to CSRWire article, manufacturing companies are ready to pay a lot of money these days to solve regulatory compliance issues. It becomes very sensitive for small and medium size organization that cannot afford additional regulatory expenses and extensive paper work related product transparency. I liked the following quote explaining that:

If large corporations are struggling with compliance and transparency, how can small- and medium-size businesses manage these regulations and pressure? Many simply can’t afford it. It puts small and medium businesses at a competitive disadvantage. It’s a time, cost, effort and resource issue. The corporations will figure out a way to do this cost effectively. The bigger companies can help evolve the tools, systems and practices. I don’t think anyone has a comprehensive solution right now. The small- and medium-size businesses still have to comply but if we keep piling compliance cost on top of compliance cost, it becomes unsustainable.

What is my conclusion? There is an opportunity to solve regulatory problem of manufacturing companies of all sizes (and specifically small manufacturers) by providing cloud PLM system making Bill of Material transparent for everybody in supply chain of contractors and manufacturers. Two main challenges here – robust BOM tools capturing manufacturing and contractor information and easy to deploy tools with affordable licenses. The opportunity is on the table. The note for PLM vendor strategists. Just my thoughts…

Best, Oleg