PLM, ERP and the death of over the wall engineering

plm-erp-death-of-thraw-over-the-wall-engineering

Do you remember "throw over the wall of manufacturing" statement? This is a traditional engineering world. Pretty much sequential. Engineers are doing their job and throw it over the wall to the next stage. Traditional manufacturing was driven by sales forecast. This is was the world that formed a traditional domains of PDM/PLM and ERP. The engineering job was a black box – product design delivered to manufacturing. Manufacturing people supposed to take design and make it work to production. The processes required lots of back and forth communication. The result you know – skyrocketing cost of change requests, suboptimal design and after all production delays.

There are lot of changes in manufacturing environment these days. One of the most interesting example is growing number of smaller manufacturing companies / startups. I wrote about that few months ago in my post – Why Kickstarter projects need PLM? Today, I want to speak more about that. LineShapeSpace article – Manufacturing Inventory Management: How Much Inventory Do You Need? caught my attention. The question sounds obvious. However, article speaks about looking on inventory from completely different perspective – engineering and growth.

Growth is an essential part of every startup. This is probably one and the most important goal to stay focused on. However, the specific part of manufacturing company is the cost of parts and size of the inventory. To hack the growth path is not simple. To go on the wrong path means to literally to die. Here is my favorite passage from the article

This mismatch is expensive. It usually means high inventory carrying costs while you chase down a lot of little customers and invest resources into getting—and keeping—their relatively small orders. The inverse relationship impacts cash flow and energy level significantly, as well as your ability to feed yourself. Long term, this kind of business will most likely be a hobby, not something that sustains you, absent significant investment or luck.

In order to develop a successful product and find a right inventor path, you need to re-think a traditional engineering-manufacturing process. No more over the wall process. You need to design for optimal manufacturing, sourcing, inventory and many other factors. Which means engineering and manufacturing team to work together. My hunch, there is no traditional PLM/ERP boundary any more. Here is another quote to emphasize that:

“We used every fancy prototyping technology, investigated multiple production scenarios, and ultimately landed our production with great manufacturing partners near Hong Kong…utilizing ‘traditional manufacturing’ for production [was] an ordeal to set up, but yields quality, repeatable parts thereafter. The decision to move at this scale of production required that we grow a global sales and fulfillment network.

That wasn’t exactly an ambition for a first our product…but it’s certainly an interesting, if occasionally harrowing, game.” The takeaway from all of this? Do your best to match the inventory risk to your channel risk. It’s a lot easier, faster, and cheaper to go back to the design drawing board than it is to return a container ship to China.

What is my conclusion? We are going to see the world of manufacturing changing in front of us these days. It may change (and probably already changing) the traditional engineering, production planning and manufacturing boundaries. What was true in an old PLM/ERP world will change. The new forms of manufacturing will require re-thinking of current software. Interesting time for PLM and ERP analysts, product managers and vendors. Just my thoughts…

Best, Oleg

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2 Responses to PLM, ERP and the death of over the wall engineering

  1. Jos Voskuil says:

    Oleg – I fully agree with your statements and I believe that indeed the startups are making it possible to happen.

    Established companies have a hard time to change and pull down the walls as managing a matrix organization requires different skills and people

  2. Jos, thanks for your comment and support. Indeed, we see lot of changes in manufacturing ecosystem these days.

    Just a note- I’m migrating my blog post to http://beyondplm.com – you might consider following me thee –> http://beyondplm.com/2014/07/31/plm-erp-and-the-death-of-over-the-wall-engineering/

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