Has SAP Become a PLM Factor to Be Reckoned With?

Even at the recent SAPPHIRE NOW 2011 conference, it became apparent that much of SAP’s innovation has lately come from its blockbuster acquisitions of Business Objects and Sybase. The major headlines of the conference were along the lines of in-memory analytic applications (SAP HANA, anyone?), mobility, on-demand/cloud applications, and so on. But SAP has also been doing a boatload of tacit and less publicized innovation in-house. At the event, we learned of major new SAP products (recently released or slated for future release) in the realms of supply chain management (SCM) and product lifecycle management (PLM). Both product suites are expected to reach parity with leading best-of-breed counterpart offerings.

As for the latter, SAP had introduced some PLM functionality into its renowned enterprise resource planning (ERP) system long before the software category “PLM” was minted, per se. The SAP PLM solution, which is embedded into the ERP environment and was developed in-house, is built on a solid and scalable data model, and includes the modules Document Management, Material Master, Bill of Materials (BOM), Project Management record, and all related PLM objects.

SAP has leveraged this solid foundation and built a business process-oriented solution suite to support product innovation and product development processes for the entire lifecycle of its products. The vendor’s approach is to provide a solution that allows customers to strive on innovation and become more efficient while adhering to product compliance considerations. As such, SAP’s research attributes a new product’s failure to the following:

  1. Misaligned innovation—due to disconnected business processes and information amid marketing, engineering, procurement, manufacturing, and service constituents
  2. Growing product development efforts and costs—due to lack of a single version of the truth
  3. Inadequate compliance—due to disparate point solutions associated with an incoherent approach to sustainability and regulatory requirements


Strategies to Fight the PLM Challenges
To avoid such issues, companies should institute consumer-driven and sustainable innovation, and thereby link their strategies to the innovation process. Market leaders encourage and foster “open innovation,” where customers’ input and feedback is solicited and fostered. Leading innovator companies also ensure company-wide portfolio management processes, analyze the financial impact of the portfolio, and create feasible and lean project plans. According to the MPI Group, 30 percent of market leaders generate 25 percent of their revenues from new products, versus 70 percent of laggards that generate 5 percent of their revenues from new products.

Moreover, global price and time pressures demand efficiency in new product research and development (R&D). Companies must leverage information from the entire enterprise, collaborate in a secure environment, develop digital prototypes, increase the re-use of information, and ensure seamless information exchange across the value chain. According to SAP’s Value Engineering survey of 2010, market leaders have an annual revenue to R&D spend ratio of 115, versus 61, on average, for laggards.

Last but not least, product compliance and regulatory mandates lead to quality excellence. Companies must keep up-to-date with regulatory requirements, introduce “embedded” compliance processes, reduce the risk for noncompliance by leveraging experience, and leverage information from the enterprise to support decision making. According to SAP’s survey, market leaders have 20 percent lower quality costs for new products, compared with the laggards.

In summary, the #1 goal for manufacturing companies around the world is to reduce the “time to profit” for new and enhanced products. Thus, Portfolio Optimization capabilities help with boosting open innovation, freeing up time for creativity, and enhancing efficient execution. For their part, Product Development Efficiency capabilities help with managing and synchronizing all product-related information, from an initial idea stage to delivery. Finally, Quality and R&D Excellence solutions should help with providing comprehensive and consistent product data management (PDM) across the value chain.


Key SAP PLM Processes
The SAP strategy entails an end-to-end process-centric approach for the following product development aspects: Continuous Product (and Service) Innovation, Integrated Product Development, and Embedded Product Compliance. With its embedded analytics, collaboration, as well as quality and compliance management capabilities (within the governance, risk, and compliance [GRC] suite), SAP is in a great position to have a complete view of the project and to increase product profitability at any stage in the product’s lifecycle, from ideation to after-market service.

Key areas of focus for SAP PLM continue to be portfolio and program management, wherein is included idea and requirements management, BOM management, product service, and product quality. Major SAP PLM 7.0 enhancements include improved user interface (UI) and information search, improved product and portfolio planning, better role-based decision support across the product lifecycle, improved product intelligence (analytics), and stronger support for engineering design data handover to manufacturing and service (and feedback flow).

As SAP systems contain much of the business data of a company, the vendor is in a great position to provide customers with the comprehensive product information they need to model product launches within the confines of balanced supply and demand, as well as track product successes and quality issues. Companies need to know the amount of a particular product they are producing and the exact resources they are using in order to ascertain the big financial picture. Features of the acquired Business Objects provide the critical product intelligence capabilities in this regard.


Continuous Product and Service Innovation
SAP provides solutions from the ideation stage, through creation and evaluation of portfolios, to execution of projects, including direct integration to financial and human resources (HR) data. In this area, the vendor offers the code-named “SAP Edison” product (for idea management) linked with SAP StreamWork for social collaboration within a community.

These modules are integrated with SAP Project and Portfolio Management (SAP PPM) 5.0, which in turn can be linked with SAP Business Objects for real-time portfolio analytics (see figure 1). For customers that need to connect different project management solutions, SAP provides capabilities to connect third-party project management applications with SAP, thereby orchestrating project management business processes. The vendor offers the SAP Enterprise Project Connection product for this process.

SAP PPM 5.0 is the central component that manages product portfolios, enhancing understanding of portfolio metrics. This fully integrated component of SAP PLM can be used across product development to mange projects and resources, and to increase the visibility of product development projects. It is no secret that companies want to connect with their suppliers during the design phase, through a simple and secure collaboration platform, particularly in the automotive and hi-tech industries.

As the next incarnation of the combined former SAP xRPM (Resource and Portfolio Management) 4.5 composite application for portfolio management and cProjects 4.5, SAP PPM 5.0 offers comprehensive project management functionalities, including resourcing, task management, and reporting. It is positioned as the foundation for decision flow management (DFM), with predefined innovation process templates, such as ideas, requirements, materials, and documents, as well as for strategic financial, resource, and portfolio analytics.

Figure 1.

Future releases of SAP PLM will likely feature portfolio monitoring and decision-making support enhancements to monitor ongoing projects at both the portfolio and program levels. The idea management capability “Edison” will likely move from the early adoption phase to standard release, and will be more integrated with SAP PPM and SAP StreamWork. Finally, project management orchestration enhancements will be more tightly integrated with Microsoft Project Server 2007/2010 and with Oracle Primavera.


Integrated Product Development
This is SAP’s end-to-end process approach for the product design process, which includes sourcing, as well as design handover to manufacturing and service department. SAP PLM’s latest releases significantly extend support for product design and handover to manufacturing. SAP has also introduced support for early design with product structure management capabilities. Furthermore, SAP has introduced direct and indirect collaboration capabilities with a detailed access control mechanism.

SAP PLM enables access to all product relevant information from the entire enterprise with embedded analytics in all user screens, thereby supporting the decision-making process from beginning to end (see figure 2). In addition, the vendor has introduced the unique concept of semi-automatically synchronizing product structures between engineering and manufacturing. The SAP PLM 7.01 solution (which is deployed via the SAP Enhancement Package 5 for SAP ERP) provides all these capabilities for discrete and process manufacturing and consumer packaged goods (CPG) industries.

In its early days, SAP PLM has not necessarily enabled the co-design of products, but rather the sharing of information. Thus, future product releases will likely feature the ongoing product structure synchronization between engineering BOM (EBOM) and manufacturing BOM (MBOM). Along similar lines will be the Visual Assembly workbench for routing operations management (with visual support to assemble and create routings [working plans]) and the BOM Redlining capability for easier collaboration on planned changes (by documenting changes directly inside the BOM UI) and visual identification of proposed changes.

Figure 2.

Other enhancements planned for future release are harmonized status and release management for key PLM objects (to support release processes and manage status transitions, preconditions, system actions, etc.) and a streamlined Web-based UI (called Document Browser) to manage documents (check in/check out) and document structures. What still remains to be developed is complex knowledge modeling (versus simple data management), with only one design model that has all necessary product variant information, such as constraints, rules, and processes.


Embedded Product Compliance

The first and foremost step in ensuring product compliance occurs early in the product design phase, well before release to production. From the moment of innovation, a company must ensure that the desired materials, approved manufacturers, and details, such as projected energy consumption levels and substance recyclability, meet all known compliance requirements for the target markets.

The SAP PLM application, part of SAP Business Suite, retrieves information from the SAP Environment, Health, and Safety (SAP EHS) Management application and displays it as a side panel. SAP PLM ensures that all design decisions take materials-related compliance information into account, whereby design specifications must adhere to applicable industry standards and government regulations, along with any customer-specific compliance requirements, before prototyping or production activities commence. Ensuring compliance and quality management during the early design phase helps achieve the following:

  • Detect supplier noncompliance before production
  • Minimize scrapping
  • Decrease the risk of accidents with volatile substances or materials
  • Lower the number and cost of hazardous materials violations

As pointed out in a blog post on the TEC Blog, owing to the tight integration of SAP PLM application (including SAP Sustainability and SAP EHS) with the SAP GRC suite, SAP is certainly ahead of the curve in compliance. New product development for SAP PLM involves capabilities in recycling administration (to support compliance with package recycling regulations) and compliance with global safety and labeling regulations. The latter will provide improved support for electronic Safety Data Sheets (eSDSs), simplified sample label handling, monomer or polymer support in substance volume tracking, and introduction of transport indicators in dangerous goods management.


Process PLM Considerations
In 2010, SAP acquired Technidata and thus improved its REACH (Registration, Evaluation, Authorization and Restriction of Chemicals), RoHS (Restriction of Hazardous Substances) Directive, WEEE (Waste Electrical and Electronic Equipment) Directive, and GHS (Globally Harmonized System) compliance capabilities. Prior to the acquisition, Technidata was an SAP-endorsed regulatory solutions provider with more than 300 customers. SAP PLM handles product and process definition via recipe formulations, product specifications, and product label management. For more info on the exacting PLM needs of process manufacturing industries, see TEC’s recent blog post series.

SAP PLM for process manufacturing industries also shares a set of core PLM capabilities with its aforementioned discrete counterpart, such as Document Management, BOM Management, Workflow, etc. In addition, the product benefits from the aforementioned SAP PPM and Project Management execution tools, and is a fully integrated component of SAP ERP with integrated change management (including alternate formulas and version management) and integrated quality management (see figure 3).

For an SAP-centric process manufacturing customer, SAP PLM provides strong PDM, PPM, compliance, and much recently improved formulation capabilities. The product has very strong capabilities in formula and recipe creation and in validating labels, which represents a good chunk of a formulator’s work. SAP PLM is thus gaining strength in the process manufacturing industries and will give the CIO more reasons to mandate SAP.

Figure 3.

For SAP PLM 7.1, the company has planned enhancements in handover synchronization and reconciliation (from R&D [recipes] to manufacturing and specification database data entry) and change management. A slew of improvements are also forthcoming for recipe, formulation, and labeling needs, as well as collaborative recipe process creation. SAP does not have a PLM solution for fashion and apparel, and its “softline” manufacturing customers in this industry use partner solutions (or best-of-breed providers such as TradeStone, NGC, PTC FlexPLM, and Dassault ENOVIA MatrixOne). A few SAP customers use some PLM functionality for private label production (e.g., recipe management, etc.).


What SAP PLM Solutions Managers (and Customers) Say?
We recently had the chance to discuss the SAP PLM state of affairs with long-standing SAP PLM solution managers Hans Thalbauer and Thomas Ohnemus, who have been with the company for more than 10 years and 7 years, respectively. Our questions and the SAP PLM team’s responses are as follows:

TEC: What is SAP PLM’s differentiating value proposition?
SAP PLM: Specific SAP PLM differentiators are the following:

  • SAP PLM is embedded and fully integrated within SAP Business Suite, including ERP for manufacturing, SCM, supplier relationship management (SRM), and CRM
  • Embedded analytics—brings all relevant product-related business information to the engineer
  • Direct collaboration
  • Product structure management—to manage all kinds of product structures (BOM) from concept to design, manufacturing, and service
  • Product structure synchronization—entails semi-automatic reconciliation of engineering BOM with manufacturing BOM
  • One PLM architecture and solution for requirements of both process (recipe management) and discrete (BOM management) industries
  • Change management across the value chain
  • Integration to all leading authoring tools

In other words, it is the “Value of ONE,” because only SAP can provide:

  • one seamlessly embedded solution for the entire product lifecycle,
  • one synchronized product structure, between development, manufacturing, and service,
  • one version of truth for Project Controlling and Portfolio Management,
  • one change management record across the value chain, and
  • one universal decision support model based on embedded analytics.

We win because the goal of reducing time-to-market (TTM) for new or enhanced products can best be achieved with a solution that supports the entire product lifecycle and minimizes structural changes and break points.

TEC: How large and widespread is SAP PLM’s install base?
SAP PLM: We have more than 8,000 customers in discrete and process manufacturing and CPG industries in all regions.

TEC: How about providing multi-tenant on-demand PLM solutions?
SAP PLM: SAP’s strategy is to provide on-premise, on-demand, and on-device solutions that are orchestrated to support business processes. We already provide the combination of on-demand and on-premise solutions, by linking SAP StreamWork (on-demand) with SAP Edison (on-premise) and SAP PPM (on-premise) with SAP BusinessObjects Explorer (on-demand).

TEC: What are your (or partner) solutions for computer aided manufacturing (CAM) and plant simulations?
SAP PLM: Besides the handover process, as described above, we provide manufacturing planning capabilities with SAP Complex Assembly Manufacturing Solution (SAP CAMS). In addition, we work with partners for plant simulation and visualization, such as Right Hemisphere.

TEC: What were the major highlights and messages from your recent PLM user conference or similar events?
SAP PLM: Customer quotes are along the lines of “SAP has made huge progress with the latest SAP PLM solution.” But rather than brag about our capabilities, here are some actual customer quotes:

“SAP Easy Document Management and cFolders Applications have improved our processes tremendously. We’ve gained better control of our documentation and can collaborate more effectively.”
−Christian Matsson, Application Specialist, Vattenfall Business Services Nordic AB

“Thanks to SAP PLM, we can now mange all of our technical documentation effectively throughout the lifecycle of our processing facilities and supply disposal systems.”
−Günter Schuster, Senior Engineering Manager and PLM Project Lead, Siltronic AG

“SAP PLM helps us stay competitive. Without it, we could not keep up with our competitors in China and India.”
−Anton Wüest, PLM Manager, Rieter Textile Systems

 “Introducing SAP RPM boosts R&D performance toward more efficiency and predictability and supports fact-based business decisions for increasing future added value for Oerlikon Leybold Vacuum.”
−Jörg Trommer, Research & Development, Oerlikon Leybold Vacuum GmbH

“Using SAP PLM has allowed us to create one source of truth for our product information. It integrates our system so that anyone using SAP throughout the company will be looking at the current and correct data without trying to synchronize multiple systems.”
−Patrice Pergolski, Manager of Engineering Systems, Greenheck Fan Company

“SAP Environment, Health, and Safety Management has made us more confident in our ability to comply with today’s regulation as well as all the new ones that are emerging constantly.”
−Karen Murphy, VP of Environmental and Safety, Ashland Inc.

TEC: What is your collaborative E2.0/social tools strategy in PLM? What are your views on Dassault Systèmes’ Exalead acquisition for enterprise search?
SAP PLM: We have embedded the SAP enterprise search capabilities in our PLM solution—so this is the core of our solution and not an “add-on.” Furthermore, we offer social as well as mobile capabilities. And, we have already mentioned SAP StreamWork.

TEC: How do you plan to “win the hearts and minds” of engineering departments that love their 3D CAD/CAM offerings (which SAP doesn't have) and that tend to also go for the CAD provider's PLM offering? Why should they go for SAP PLM?
SAP PLM: We have the vision of providing 3D visualization and communication capabilities for all asset- and product-related processes for the entire enterprise. Our strong belief is that 3D is not just for engineering departments—but the entire enterprise. This vision also includes user-centric workplaces for engineering and R&D.


SAP has an enviable customer base and some marquee PLM customers by capitalizing on its ability intersperse data about financial results, resources, products, and workflow in its product intelligence capabilities, thereby enabling key product development strategy and execution decisions. The enhancements in SAP PLM 7.0 should entice many discrete and process manufacturers to take a closer look at replacing existing best-of-breed PLM offerings with SAP PLM.

SAP PLM can play an important role in improving the efficiency of ongoing production, service, and support of released products. Current and prospective customers of SAP ERP might want to explore the capabilities of SAP PLM 7.01, as SAP’s ERP software already includes a significant percentage of SAP's PLM capabilities.


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