Jim Brown

One-to-One: How is SAP's Formula for Process PLM?
September 26, 2008

I had the chance to talk with ... SAP last week at their ASUG user meeting and analyst day in Nashville, read my first post Can SAP do PLM?  about my general thoughts. Along with the updates on the general SAP PLM offering, which is aimed primarily at discrete manufacturers, SAP gave an update on what they are planning for process manufacturers - for example CPG, food, beverage, household goods, etc. The key difference for these companies is that the heart of their product is a formulation or recipe as opposed to a bill of material (BOM). How is SAP's solution shaping up there?

Setting the Stage
This story can't even be started without one crucial fact - a lot of very large, very prominent process/CPG companies run SAP as their ERP system. Colgate Palmolive, Conagra, Hershey's, and General Mills are a few that I have spoken to recently. Many current SAP ERP customers are encouraged to use SAP PLM (if not mandated by internal IT policies) to take advantage of a single vendor and pre-built integration. For that reason, SAP has a large contingency of process and CPG companies that are very interested in the future of this solution. There are more that would like to use it, or are evaluating it, that are trying to understand where SAP stacks up in PLM for their industry. I am not aware of companies that are seriously looking at SAP PLM that are not currently running SAP.

The Unclear Truth (sorry)
The only clear truth on this matter, as Martin commented on my first post about SAP and PLM, is that it depends. Whether SAP PLM is right for you depends on how you define PLM and what you are trying to accomplish. For the sake of simplicity, I am going to take two extreme examples to show where SAP may or may not work. As with anything that you try to simplify, it will probably come back to haunt me... but here goes:

Example 1: Enabling the Innovator
Our first (fictitious) company has the following characteristics:

• Complex formulations (multi-level, perhaps multi-phase)
• A significant number of iterations of the formula before release
• A significant number of variations of the formula (customer formulas, for example)
• The company would like their product developers / chemists to use the system to help them actually create, calculate, and develop the formula
• The company would like to replace their paper lab notebooks with the system, capturing all of the necessary discovery and innovation electronically
• The company's products and product development processes are highly regulated

For this company, or one with some of these characteristics, they need to have the chemists, formulators, flavorists, biologists, etc. actively using the system in developing the recipe. Perhaps we can say they are looking for "CAD for Formulas" in addition to process and product data management. They will want to store a significant volume of "work in process" designs for historical and search/reuse purposes. These companies are likely to be better off with a vendor that specialized in formula management, such as Enginuity, Infor, or Selerant. Or perhaps Linx/AS, who is developing solution based on SAP's Netweaver platform in this area.

Example 2: Aligning the Organization
Our second (fictitious) company has the following characteristics and priorities: 

• Providing supply chain information (cost, supplier data, sales information, etc.) to the designer
• Easily transferring the recipe to manufacturing or production
• Understanding the impact of a formula change on the rest of the business
• Storing their recipes in a central location for the enterprise
• Currently use SAP for ERP

In this case, the company is trying to integrate supply chain information into the design process and use SAP to manage final formulas. SAP's integration is a clear differentiator for companies like this.

Example 3: The "In Between"
Unfortunately, most companies will fall in between the examples. For these companies, SAP will continue to enhance their capabilities for the hands-on innovators, and the specialists will continue to enhance their ability to integrate easily with SAP (and other ERP systems). These companies will really need to spend some time evaluating. I just discussed this a week or two ago with my good friends at Kalypso who do a lot of consulting for PLM in the process industries, and I think they would agree based on how frequently they hear the question about whether SAP can "do PLM." For most companies, they should likely consider some of the specialists listed above, along with Dassault Systemes (for MatrixOne) and Oracle (for Agile and the Prodika solution acquired by Agile) and Siemens PLM (who are combining UGS solutions with existing solutions from Siemens and working with their customers like Unilever).

The Roadmap
CPG is clearly in the roadmap for the new version of PLM. They are actively looking to customers for their input and guidance. The first release of the new interface it primarily focused toward discrete manufacturers, but there is no doubt in my mind that they have always intended to follow up quickly with process. This new interface will likely come with some new functionality that is welcomed by the installed base, and they have the chance to help define it.

The net is that SAP PLM for the process industries:

a) Is in use and in demand
b) Is not at parity with formulation specialists for enabling chemists, formulators, flavorists, etc.
c) Should be carefully evaluated before use in storing large volumes of "work in process" design
d) Is an option that needs to be considered for managing recipes if you are an SAP ERP user
e) Is a solution worth keeping an eye on as it evolves, and as we all get more experience with how the recent cross-industry advances in the PLM roadmap play out

Still more questions need to be answered on SAP and PLM, it is an important topic. Expect more in the next week or two. If you let me know what you want to hear about, I'll do my best to accommodate. So that's what I hear from SAP, I hope you found it useful. What do you think? What else should I have asked them?

Posted by Jim Brown on September 26, 2008 | Comments (2)