Introduction
In
Part One of this series, we discussed Product Life Cycle Management
as a proven concept in the discrete industries and as a growing concept in process.
In this part, we explore the business motivations for PLM in process enterprises
by reviewing business strategies. In part three, we will look at requirements
for Process PLM decisions.
The business strategies reviewed are:
-
Accelerating Time-to-Market
- Increasing
the success rate of new products
- Increasing
the profitability of products
- Increasing return
on assets
Accelerating Time-to-Market
Time-To-Market is the delay between an idea, from the marketing department or a customer, to the general availability of the product. The compression of this time leads to greater responsiveness to market demand, greater market share and greater profitability. Time-To-Market can be broken into two periods, idea to final product design and the decision to commercialize the product to its availability on the market. Speeding Time-To-Market encompasses both time periods.
Time-To-Market is not only important for new products. The Director of R&D of a leading food company tells us that 50% of her R&D efforts are for new products. The remaining 50% are on changes to existing products. These changes are demanded from a variety of reasons including cost reduction programs and reacting to changes in raw material supply.
To speed Time-To-Market, a comprehensive approach is required. The business processes involved include many internal and external organizations. Internal organizations often include marketing, R&D, production, quality and others. External organizations may include third party R&D, testing facilities, customers, suppliers, outsourced manufacturing and others. These many organizations must be managed as a single entity sharing in a single process with a single view of the product and project (with the appropriate security concerns.)
Speeding Time-To-Market requires providing the creative team with appropriate productivity tools. Providing the chemist, flavorist, food engineer, nutritionist, and others with the right tools increases productivity and speeds Time-To-Market. These tools include the ability to identify existing materials or products with appropriate or similar characteristics, formula analysis and balancing tools that help to more efficiently develop the optimal formula, label generation tools to comply with regulatory labeling requirements, and more. In addition, the integration of administrative functions into the processes can minimize unproductive administrative workloads.
Once the final product is approved for commercialization, the task of transferring the product from R&D to full commercial viability is required. Much of this task is a transfer of technology. The product and processes must be transferred to the appropriate system or organization, be they internal or external. The appropriate plant or plants must be selected for production and the product data and processes transferred and implemented. This includes plant and corporate level systems like ERP, SCP, quality, MES and others. Automating the technology transfer is a key weapon in speeding Time-To-Market.
Increasing the Success Rate of New Products
In some markets, like CPG and food, the failure rate of new product introduction is very high, one source places it a 70%. A major motivation for Process PLM is decreasing the rate of failure or increasing the rate of success.
The most obvious way to increase the success rate is to not bring the failures to market. Actually, killing off products or projects that are doomed to failure as early as possible is a key to many objectives. This requires a management approach that looks at all projects and products as a portfolio to be managed together. It requires tools to evaluate the competing projects and products objectively.
These management tools must address the development process itself. Which projects are behind schedule? What are the steps to be initiated once a particular step in the process is approved and who approves. These management processes must be automated thought workflow approaches to define and ensure best practice, reduce handoff times and to allow for clear accountability and continuous improvement.
To be successful, a product must meet the needs of the customer. The marketing organization or customer defines these needs as a set of requirements. These requirements can include final product cost, physical or chemical specifications, customer perceptions and others. These requirements must be used continually to project the success of the product. A key is the early identification of "losers" to maximize the attention spent on the eventual "winners."
Increasing the Profitability of Products
Estimates state that up to 95% of the life cycle cost of products are determined in the product development cycle. Therefore, cost reduction must be a focus on this cycle. Process PLM allows people and processes to focus on those details that enhance profitability. Some examples include:
-
Least Cost Recipe and Packaging - Recipes and packaging can
be developed with optimal costs or existing products can be re-designed to
reduce costs. Since many industries show packaging cost to exceed the recipe
cost, an integrated, total cost approach to recipe and packaging is required.
- Material
Substitution and Consolidation - By providing the ability to eliminate
redundant materials and suppliers companies can reduce product costs; increase
quality and lower overall inventory investment.
- Design
for Manufacturability - Total production cost can be optimized through
comprehensive product design that includes production issues.
Increasing Return on Assets
The return on assets objective requires the intelligent and effective use of those assets. Where a product is produced impacts the return on manufacturing assets. The selection of the internal or external plants requires an understanding of the production needs of the product, the production capability of the plants and an intelligent matching of these two. With trends towards outsourced production, this ability becomes a key decision making tool.
Summary
The motivation to exploit Process PLM approaches is focused on competitive issues. By speeding Time-To-Market, increasing the success rate of new products, increasing profitability and return on assets, a company succeeds in beating their competition. In the upcoming third installment of this series, we will convert the enterprises' motivation for Process PLM into requirements.
About
the Author
Olin
Thompson is a principal of Process ERP Partners. He has over 25 years
experience as an executive in the software industry with the last 17 in process
industry related ERP, SCP, and e-business related segments. Olin has been called
"the Father of Process ERP." He is a frequent author and an award-winning speaker
on topics of gaining value from ERP, SCP, e-commerce and the impact of technology
on industry.
He
can be reached at Olin@ProcessERP.com.