Are we going to see both PLM and ERP living in harmony integrated seamlessly? Such a fascinating question posted by Engineering Live article written by Bob Hillier of Design Rule caught my attention few days ago.
Despite what some industry voices may say, PLM and ERP go hand in hand in most leading manufacturing companies.PLM manages the innovation and design process, while ERP ensures quality products are manufactured in a timely, cost controlled manner once a product has been engineered and approved. Both systems have distinct purposes, but they also have a number of overlapping capabilities, which is where some of the confusion can originate.
Some of my readers can chuckle probably seeing another PLM-ERP article. Here is a thing – I found the topic of PLM vs ERP is even more important in the future of engineering and manufacturing software. And this is a reality – majority of mid-size companies according to IBM statistic are already running ERP software.
According to an IBM study, 97% of mid-sized companies are already running an ERP application. This is because ERP was the first to establish itself as an essential business tool, however without PLM the ERP system is likely to consume and manage inaccurate data from design and engineering, which delivers minimal or no improvements to the business.
PLM systems are mostly playing catchup. Accuracy of engineering data and the need to “feed” ERP system is a value proposition PLM companies are using for many years. The value is clear and PLM vendors are trying to sell it for the last 10-15 years. Unfortunately. the success of such approach is questionable. Small manufacturing companies are not rushing to buy PLM systems, which potentially brings significant cost and what even worst – complexity. The last one is killer and many manufacturing companies are opting to some manual processes to bring data from CAD to ERP. Excel is a key element in these processes. Spreadsheets are playing a role of mediator to transfer engineering BOM to ERP.
In addition to that, most CAD systems today are coming bundled with PDM systems. Even more, new cloud-based CAD systems such as Fusion360 and Onshape are coming with embedded PDM systems. CAD file management was one of the important PLM value proposition for many years – it was a place to start PLM project. Without CAD file management, PLM value proposition is basically down to engineering BOM management and data transfer to ERP for most of companies.
So, what is the future for these companies. How PLM and ERP systems will play together. Is there are a better way than bringing PLM software and integrate it with ERP systems? Modern cloud-based technology can open some additional opportunities we didn’t think about before.
1. ERP system will expand to include engineering BOM management functions. ERP systems will expand to provide PLM-ish functions and integrate with CAD. It is not a new option.It can be even easier today with cloud based API and services available for some ERP systems and cloud CAD systems.
2. Integrated cloud-based services. Cloud-based services to integrate engineering data managed by CAD and PDM systems with ERP. Such services can become an affordable option for many mid-size manufacturing firms. Ease of integration using cloud software can be helpful to achieve the integration.
3. Consolidated PLM+ERP. New class of systems combining some functionality of PLM and ERP systems to become a solution for mid-size manufacturing firms. Such systems can replace existing ERP software by introducing cost effective modern cloud-based solution.
Each option I mentioned above has pros and cons. The diversity of ERP systems operated by mid-size manufacturing companies is very high. Until recent shift to cloud-based software, ROI from replacement of these systems cloud be slow. But these days situation can be different. IT shift to cloud software can introduce an opportunity to bring new connected systems better adapted to the realities of manufacturing business in 21st century.
What is my conclusion? PLM vendors were trying to play catch up with ERP software long enough following “integration” pattern. It had some success, but the status quo of mid-size manufacturing companies didn’t change much for the last 10-15 years. Cloud technologies and new business models can introduce a new opportunity to integrate and consolidate systems, streamline processes and offer new standards in ROI for these projects. Just my thoughts…
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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.