PLM, Design Quality and Cost of a Product

February 9, 2010

I want to continue the topic I started yesterday about Value Engineering and discuss how PLM can be potentially used to manage cost of a product. In my view, cost is a very sensitive and complicated topic in the organization. When PLM is normally mentioned as a tool that allows us to manage and optimize product cost, in practice I see the cost topic as pretty complicated. Before discussing what practices I can apply in PLM to manage product cost, I want briefly review product cost components.

Product Cost Elements
There are quite many cost elements. I made some diagram to figure out them below. The main total product cost combined from Direct cost and Indirect cost. The major part of direct cost is material cost. Additional components of direct cost are purchased parts, labor and tooling. Indirect cost combined from Overhead, Selling Expenses, profit and discount. Direct and Indirect costs together can be presented as a product list price.

There is additional cost classification terminologies that apply to elements I just mentioned. Manufacturing cost is  combined of variable and fixed cost. Total cost combined from manufacturing cost and selling expenses. Finally, there is the selling price combined from total cost and profit.

Product Cost, Design Cost and PLM
If we will analyze all cost elements and compare it to the design cost, we can learn that design cost is insignificant in comparison to the manufacturing cost. And this is a very important observation, in my view. On one side, design cost, itself is very small. However, on the early design stages, we have a very significant impact on manufacturing and total product cost. It means that by improving design cost, we can get significant improvements and decrease product cost. It also means, that if the company is using PLM system that allows to estimate a final cost of the product on the early design stages, it can be huge benefits and can influence overall product design and manufacturing.

What is my conclusion today? I think, cost analyzes is something that should be considered as an important part of PLM system implementation. PLM has a potential to become a system to handle all cost related data and provide total cost estimation based on current design options. From what I know, such implementation happens rarely today. My hunch is that PLM implementations and technologies today are struggling to integrate systems that responsible for the cost related information – design, ERP, requirements, supply. I’d be interested to hear what are your practices in the cost management during design phase and later? Does it seem as an important issue for you?

Just my thoughts.
Best, Oleg

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PLM and Value Engineering

February 8, 2010

This weekend I was thinking about Value Engineering and how it can be supported in Product Lifecycle Management. So, just to bring everybody on this same page – Value Engineering. Value Engineering is taking origins in General Electric in WWII and focus on systematic approach of product improvements. For me, Value Engineering is representing a very interesting problem.

The core problem of Value Engineering, as I can see it, is in the process of systematic information gathering related to product development. My short problem definition is how systematically connect product value (worth) and product costs. This is the time when I’m thinking PLM can focus on. Since PLM can connect these two in the very systematic way, it can connect “dots” of product functions in the very early design stages, manufacturing processes and consumers/end users.

So, how do you think Value Engineering is represented today in PLM. My first test is Google. Search for “Value Engineering” and PLM brings very little results. You can see them here. Your result, of course, will be local. From what I’ve seen, Aras was there in the end of the first page. However, in general, I can see, PLM is neglecting Value Engineering as a term. So, I decided to dig inside and see if does it make sense to support Value Engineering in PLM

Definition of Value Engineering
Wikipedia: Value engineering (VE) is a systematic method to improve the “value” of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore, be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements.

Value Calculation
You can calculate the value as worth of a specific product feature divided by cost of this feature development total cost. So, assuming you have all information, you can calculate the value of product you are manufacturing for your users.

Functions and Features Definition
This is something that comes very early during a product design and planning process. As every product, before you start to design it, you are facing your future customers. Based on that you can define what functions you have to put in your product. In the end of this process, you can transform your product functions into product features.

Lifecycle Cost of the Feature
When we’ve done with the initial product features definitions, we need to calculate cost of each feature. However, we need to assume total lifecycle cost including design, manufacturing, support, disposal, etc. This is a place where PLM should effectively come to play since PLM should have all lifecycle information about a product.

Worth of the feature
The most important point. You need to estimate what is the worth of each feature for customer. However, it is not a simple task. You can use historical information, get an online survey, use any other information. I have to say, that when you live in Google-era, you may have lots of alternatives to get this information than when you had before. Of course, it depends on the type of products you manufacture. You may check QFD (Quality Function Development) methodologies. I found it very practical approach. As soon as you have done with worth of the features, just go and get a balanced view of your product value.

PLM Benefits
What I think, can be ultimate PLM benefits. If you have successfully deployed PLM system, you have a good chance to have lots of information you need already in your system. If your PLM covers requirements, you need to have a functional breakdown. If you PLM is linked to manufacturing, you have a good chance for costing information to be available.

PLM Challenges
The biggest challenge, is that PLM integration with the rest of the company is somewhat that not happening in all organizations. Most of PLM systems are still focused on engineering processes and connected well to customer’s, sales, marketing and, even, manufacturing functions. However, by focusing on value engineering, we can provide additional “values” to get things done in PLM way.

What is my conclusion today? Value Engineering has obvious values and benefits for the organization. However, ability of PLM systems to manage all information is critical. What is very important is to have cost information inside of PLM. Value Engineering approach can be, in my view, used as one of the PLM strategies in the organization to solve real problems.

Just my thoughts…
Best, Oleg

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Do I Need An Invitation To Join CAD/PLM Cloud?

February 5, 2010

Last week was very cloudy in Southern California. I’m sure you understand…  I’m talking about SolidWorks World 2010 in Anaheim, CA. It was time when SolidWorks presented their technological preview and first SolidWorks PLM on the cloud (SolidWorks Product Data Sharing). However, I want to start from a very interesting twitter message I’ve got at the time SolidWorks presented.


I can understand this twitter message from Arena. Arena was the pioneering cloud PLM solutions since early 2000s. It was called OnDemand back that time.  Finally, cloud apps started to appear in the mainstream presentations of vendors like Autodesk and SolidWorks. However, read Arena’s message and blog. Arena is looking how to organize work between SolidWorks’ new cloud solution and Arena’s Bill of Material products online. And this is very interesting turn that requires future discussion and understanding.

Interoperability Tabu and Cloud Openness
This is one of the most widely discussed and prohibited topics in CAD/PLM industry. In the very competitive world, CAD and PLM companies have hard time to maintain communications, formats and data exchange to provide a solution to their customers. However, introducing of cloud can bring a new voice in the story of interoperability. Internet and cloud, obviously perceived as the most open space. It will be very interesting to see how CAD/PLM solution on cloud will develop their openness skills in the future.

How Many Clouds Do We Need?
This is the question that I had in my mind when I’m thinking about future PLM cloud solutions. What will be the communication in the cloud and between clouds? How customers using SolidWorks will be able to use Arena PLM solutions? How SolidWorks on cloud will work with apps from Salesforce.com? How multiple CAD systems on cloud can be connected to the cloud solution from PLM and ERP vendors that I’m sure will depart to the cloud universe?  Those and many other questions I have in my mind. I’m sure we are about the right time to start discussing it.

What is my conclusion today? In my view, the cloud time is coming. We will see massive introduction of first solution on the cloud from CAD and PLM vendors. However, I hope we will not create multiple “PLM clouds” in the way we created multiple CAD files and PLM Databases. I hope, we’ll find a better solution to do so. Just my thoughts…

I’m looking forward to have more cloud-related discussions with you. And I posted about cloud before. If you haven’t had chance to see them, take a look below:

Cloudy PLM: Roadmap Into The Future

PLM Architecture: Get Off My Cloud?

Where is PLM on Industry Cloud Map?

Where is the PLM shortcut to the cloud?

Should PLM take Excel to the Cloud?

Host PLM Data using Cloud Services

How will PLM applications change when they move to a cloud?

Best, Oleg

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Do We Need To Manage CAE Data in PLM?

February 4, 2010

I want to discuss CAE today. CAE is considered as a technology to support engineers in tasks such as analysis, simulation, design, manufacture, planning, diagnosis, and repair. CAE considered as a mainstream technology applied for design and manufacturing. In my view, CAE is one of the major sources of engineering information in the organization.

CAE coverage includes:

  • Stress analyzes
  • FEA
  • CDF
  • Kinematics
  • Event simulations
  • Process simulations

However, the topic I want to discuss today is an intersection of CAE and PLM. To be more specific about what system supposed to manage CAE related data? In my view, this topic is heavily missed in most of PDM and PLM systems. Most of them are completely focused on CAD models, drawings and, lately Bill of Materials. At the same time, CAE, as a massive producer of engineering information about a product is not covered. What I found that high-end CAD systems have a more dedication to this topic, but still not enough, in my view.
What are the aspects of CAE that need to be covered by PLM as a data management platform:

  • Keep references on results of calculations and analyze. It will allow to have all relevant product records in one place.
  • To support variation of product data in case of work on alternative designs, configurations, etc.
  • Keep the historical record of analyzes for audit, regulatory and solving customer’s critical situations.

I found these capabilities undervalued and will be interested to hear about your experience and opinion.

Best, Oleg

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How To Clean PLM From Complexity Disease?

February 4, 2010

This short prompt today was driven by presentation on SolidWorks World 2010. What is the evolution path of PLM? For the last time, we heard lots of statements that PLM came to the maturity point. Now customers can understand and see PLM value for businesses and for industry. However, as we can see from this chart, the next thing after PLM is “Lifelike Experience”.

Is it something that will take towards the COOL trend? On the other side, may be this will be the way to take off PLM buzzword and release the PLM business from the complexity disease?

Just my thoughts… What is your opinion?

Best, Oleg

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Faltered Licenses and Future PLM Business Models

February 3, 2010

In my view, we are observing the major disruption of enterprise software business models ever. Since yesterday’s post FREE and COOL trends in CAD/PLM I had chance to have quite many discussions with my colleagues about possible new innovative business models in product lifecycle management. I have to say, that COOL option seems something that considered as simpler one. However, FREE option is something that raising many interesting questions and opinions. In my view, the most powerful business models need to be dumb simple. Let think about that. The PLM business fundamental, as a typical enterprise business today is presented by ability to sell licenses, maintenance and services.

Licenses. These are the basics of enterprise software business – expensive licenses and focus on the business value proposition. This model worked well for many years. This is still the most used business model in the enterprises.

Maintenance. In my view, this is the first source of revenues for enterprise software vendors in the bad economy. It is obviously depending on how your customers hold back against recession, but maintenance revenues is definite pain relief for many vendors these days.

Services. The ultimate way to customize your product and support all customer needs. The relative weight of services in each industry shows, in my view, the maturity of products and adoption level for mainstream deployment.

Before talking about the possible options, I want to bring some very interesting article in UK’s Independent. You can see it here. Oracle is suing small rival providing services for Oracle customers. Without going in details, my hunch is that services become a more important component of enterprise business. Similar to what happens with IBM when they were enforced by Microsoft to re-build their business around services, we can see similar signals in the current enterprise business outfits.

So, what are possible directions in the future business models I can see?

Subscription Models
In my view, the most straightforward. You are not paying for licenses, but pay for subscriptions. The obvious advantages are to simplify user adoption and decrease upfront cost for customers. On the dark side of this model is customer’s feeling to “pay for bug fixing”, which moves customer satisfaction level down. This model is actively discovered by providers of Open Source and Free Software providers.

Reverse Models
This is something that can really improve the subscription model. Let’s make subscription model to work in reverse. In this case, customer will pay a subscription fee if software works. What will happen in case of problems? Yes, customer stops paying. Does it sound weird? Maybe, but I found similar models are working in different industries like, for example, in medical services in China.

Advertising Models
This is the most fascinating one. I think, relationships between advertising and enterprise need to be researched from the beginning in 2000s. There are several factors that will drive the future change in this space: cloud applications, subscriptions and online business. My hunch is that advertising money can be turned toward payment for enterprise software vendors and PLM’s unique potential, here is in the ability to manage complete product information including interaction with customers and suppliers during the whole product lifecycle. Yes, to prevent some comments – it may not work for all industries. However, industries like consumer products, telecommunications, high-tech, apparel has a huge potential to use it in the future.

So, what is my conclusion today? We are going to see continues disruption of enterprise software business soon. These are my thoughts. Does it make sense to you? I’m looking forward to our future discussion.

Best, Oleg

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FREE and COOL Trends in CAD/PLM

February 2, 2010

I want to propose an unusual theme for our PLM discussion. Let’s talk about trends related to manufacturing and software development. Few months ago, I prompted about “Free” as a best future price. If you haven’t chance to see this post, you can find it here. During the past years, we can see significant changes in the market about how people are looking on consuming products and software. It drove me to think about two major trends we can observe these days: FREE and COOL.

FREE Trend
I think, Free became much stronger for the past few years. Internet played a massive role to the transition of market to different variants of “Free Models”. The biggest driver, in my view, is that Internet made a lot of things available for much lower cost. It is related to the ability to provide services, long tail market, freemium business models. If I’m looking on the software market, Free trend, developed a massive awareness toward “free software”. Google as an absolute leader in providing various types of free software and services created the perception for increased availability of “software for free” and alternative business models for business software.

COOL Trend
This is another, opposite to free trend. Market of “cool stuff” is growing and manufacturers of the product and services on this market drive significant attention. People want to use cool gadgets, software and other products. Part of this “cool” trend is increased interest to the market of custom-developed products, etc. It is absolutely clear, that manufacturers of cool stuff (doesn’t matter computer devices, other products or software) are getting increased market share and exposure. What is adjusted to the “cool stuff” is also premium price for all these products. The obvious leader of “cool” trend for me is Apple .

CAD and PLM Market
Now let’s back to CAD/PLM. On one side, everything that related to CAD and 3D is obviously and absolutely COOL! The potential of 3D is huge and software manufacturers drive people to additional exposure of cool 3D stuff. When it comes to the combination with cool devices (such as Apple computers) we can see a magnification of “coolness effect”. On the other side, market of enterprise software impacted by a significant influence of free business models. “Open Source”, not efficiency of today’s software production, deployment and maintenance, high cost of custom implementations and adjustments. Enterprises are looking for alternatives to today’s business models and Free drives their attention. Enterprise PLM is definitely impacted from this trend.

So, what do think? What will be leading trend for tomorrow’s CAD/PLM? Cool or Free? If you are listening to the company like Dassault Systems, cool is a clear leader. On the other side, Aras, providing free license (or open source) drives increased attention from customers and analysts in PLM domain. What will be the final combination of cool and free? I think we are going to discover it during the next few years and this is going to be COOL and FREE show :) …

Just my thoughts. What is your opinion? Are you on the FREE or COOL side of the world?
Best, Oleg

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PLM vs. ERP: Weird or Different?

February 1, 2010

Discussion started last week with Jim Brown got me think more about ERP and PLM. I have to say, this is not a new topic, but thinking about it, I’m always finding new angles to see differences between ERP and PLM viewpoints. I want to make some breakdown on how things different in both systems, but before, I’d like to suggest you to watch the following video from TED.

Identification: Documents, Parts, Item Masters

When you think about identification systems, you can clearly see that PLM and ERP starts from different foundations. PLM (especially systems that got founded around CAD) think first about Documents and related Parts. Even for systems that taking Item centric approach, definition of Item is pretty much similar to Document. On the opposite side, ERP is all about Item Master, Bill of Materials and Dates (!). Everything starts and ends with “The Date”. Without the assumption about what date you are talking about, you won’t be able to get anything done in ERP.

Versions vs. Effectivitiy

The main identification mechanism in PLM systems is a version. Documents, Parts have versions on it. This is how work-in-progress environment works. Whatever you change, you put version on it. On the opposite side, everything is effectivity oriented. You have a date on everything you are going to change. This date will show when it is effective. It is pretty complicated to combine these two opposite sides to work together.

Changes

This is last in top three core different fundamentals of PLM and ERP, but for sure not least. When you think about changes in CAD and PLM, you can be pretty flexible. You can always get new version of almost everything you are doing. World of PLM structured information comply with your will to change, and you are getting to the next level. The previous one easy becomes obsolete. The life is absolutely different on ERP side of the world – everything you want to change – think dates. Your manufacturing system is up-to-date to manufacturing life. All your change may and will impact manufacturing production systems. All processes are formal, requires ECN/ECOs, signatures, confirmation, etc.

So, Where we can go from here?

These bits and bytes are, in my view, fundamentals of differences between two worlds of PLM and ERP. On the upper levels, buzzwords of execution and innovation are flying, but here inside Bill of Materials, Parts and Items are struggling to live together and magically represents the same product company is doing business on. I think it is very logical that everything PLM people like to see as normal, seems different (or weird) on ERP side. Opposite is also true. Now, my question is how to balance this system? There are few possible ways, and I will try to analyze them.

Data Exchange

This is the old and straightforward way to do PLM/ERP business. If you’re familiar with “drop over the wall” approach – here you go. Just drop Bill of Material from PLM to ERP and forget. But, I’m not sure this is the most efficient one.

Process Orchestration

The most complicated. You don’t care about data first – you think the process wise. This is the right way to do business in the organization. However, compare to the construction industry, if you build you house on the badly prepared foundation (enterprise data) you are in the high accident zone.

Mashups

This is the potential alternative. This option is not developed much these days. Instead of fighting about how to own data, let’s try to focus on how to consume data in the way that users will be less worry where information resides and more focused on decision making. However, this option is still requiring a lot of investigation and research.

What is my conclusion today? It is hard to say “where PLM stops and ERP begin”. Things are getting connected, weird and unbreakable if you want to insure your organizational processes are running smooth. And this is probably less about PLM, ERP and even other systems. This is about how your organization work. And connecting it to the video you had chance to see before, think about your product and not about how it represented in different siloed systems.

So, how do you see? Does it make sense? What are your experience and view on how things need to be connected?

Best, Oleg

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Innovation On The PLM-ERP Edge

January 30, 2010

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.”…

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Who Can Generate 3D/PLM Content For Apple iPad?

January 28, 2010

Well, it happened. Apple stretched up iPhone in size, removed camera and phone features. So, we have iPad now. What does it mean for people that live design and manufacturing word? Below are some of my thoughts about that. Since, I haven’t had chance to keep it in my hands yet, I cannot say for sure. But it looks cool. Technical characteristics seem reasonable for device you don’t know exactly how to use. When all my work is on cloud/server/laptop, I don’t know what will be justification to have up to 64GB flash.

Let think about what is the possible implication for 3D/PLM world. This device is not for design. Absence of a camera creates some limitation for the application like 3DVIA Mobile and all other applications that want to merge physical and virtual life. This device is probably too expensive to be used on the shop-floor and manufacturing. Potentially, I can see iPad can be used instead of slim laptops, for reviews and by mobile users.

So, do you think iPad life in PLM will be limited? No, I don’t think so. The opportunity will come when we will start generating content that can be easy consumed by iPad. Today, most of the content in design and manufacturing is tuned for desktop computers – CAD and other design systems are desktop oriented, data management and process oriented systems are, for the best case web oriented. What should be done to make this change and make a content to be consumable on iPad?

Think Content
Let’s start thinking about content around us. Design, Simulations, Bill of Materials, Project reviews, Change requests. How to get this content on such a cool device like iPad? Content will be the major driver for people to start using it.

Think Cloud
Today most of the information is somehow located in our desktop applications. Even when we have the data management system (EDM, PDM…), these systems bring information to your desktop and this is becoming a place where we can consume it. We need to re-think it and move to the cloud (public, private… It doesn’t matter- just go away from desktop). In this case, we will start thinking about how to consume it on different devices according to our needs.

Think Mobile
The main benefit to be in the office is to speak with people – not to be connected to the network. You need to be able to connect to network anywhere and get content you are looking for.

So, what is my conclusion? There is a long way to go, but I think PLM needs to think about content. It will allow long life for IP, we generate with multiple devices. Devices will come and die, but content will be forever with companies that create it.

Just my thoughts.
Best, Oleg

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