For success to follow, PLM requires a focus on business processes

Product life-cycle management (PLM) solutions are nothing new—after all, they've been around for years. The difference today is that manufacturers now better realize the scope involved.

"As manufacturers look creatively and strategically at ways to drive top-line growth, they know that success doesn't simply come from having the right product at the right time and in the right place," says Tim Hanley, managing partner of the diversified manufacturing and industrial products division of New York-based Deloitte & Touche USA. "Instead, success comes from properly managing the entire life cycle of the product. Of course, that's challenging because it involves far-reaching operations that include materials, supply chain, logistics, inventory, and distribution. And with ever increasing demands and expectations from consumers, there's considerable pressure for shorter life cycles. So we're seeing more traction on how product development and product life cycles are managed."

Companies now pay more attention to product-development cost, and length of product relevance—consequently identifying challenges such as the cost of production that may be outpacing viable price increases, Hanley says. As a result, many manufacturers start concentrating on effective pricing.

However, simply passing cost increases on to customers isn't the best answer, and going beyond price setting and price execution capabilities gets complex when competing in a global economy wherein a product must have lower price points in some countries than in others, Hanley says.

The software sophistication necessary to analyze costs and determine pricing has indeed elevated, yet Hanley cautions that the issue isn't solely based on deploying an IT solution. Studies indicate that many companies make significant investments in new product development, but lack effective follow-through. Manufacturers set uprevenue-enhancement initiatives, and want to target price-setting strategies and the execution of those strategies in the field. Driving new revenue with new products and then executing a disciplined pricing strategy will obtain the kind of balanced pricing the marketplace will allow—but it first requires a focus on business processes, says Hanley.

"Lean manufacturing requires the use of manufacturing solutions along with a business process redesign, and the same holds true for PLM," Hanley explains. "As manufacturers make investments to drive revenue enhancement, they need to combine IT with business process improvements. The result is having the right IT solutions in place to determine the correct price for product, and business processes with rules in place to enforce correct price execution."