Research Rap: ERP and PLM - Better Together

A quick peek into some research on …
the complementary roles
of ERP and PLM comes from my own
Tech-Clarity research library and highlights the
respective roles of ERP and PLM for manufacturers.
The research is from a while ago, but based on recent conversations
is still an important topic for manufacturers to consider. And, it
is a topic that still has some confusion in the marketplace.

Where ERP Shines
Re-reading the report after
some period of time away from it, I chose to include this portion
as is from the report. This is as true today as it was then:

The primary value of ERP comes from
integrated business processes. ERP came to prominence at a time
when companies were focusing on streamlining the flow of
transactions and information across departmental boundaries.
Functions that were previously handled with narrowly focused
software solutions were incorporated into a broader view of the
flow of business. As departmentally-focused decisions and ways of
doing business were being re-evaluated—or
reengineered—ERP provided a structure to help different areas
of the business work more effectively together. The way that ERP
helped to break down departmental barriers was to focus on two
central themes—managing orders and financial
control.

In short, ERP has been focused on managing transactions
and providing business insight. These capabilities have
grown (through enhanced business intelligence for example) but at
the core processes are still primarily transactional in nature and
the focus on content management is low.

Where PLM Shines
Again, I will excerpt from the report:

The primary value of PLM, similar to ERP,
comes from integrated business processes and information. The flow
of work and data required to manage a product through its
lifecycle, however, are by their nature not as linear and
structured as those addressed by ERP, which focuses on
transactions. This is not to say that product research, design,
development, introduction and management processes should not be
disciplined. Innovation-related processes still clearly benefit
from streamlined processes flows, data sharing, visibility, and
centralized information. But the requirements to manage the product
innovation processes rely much more on flexibility and the ability
to manage large volumes of information and complex relationships.
To make matters more challenging than ERP, the data does not lend
itself to be stored in simple table structures, but relies on
complex geometric models in Computer Aided Design (CAD) and more
free-flowing information found in documents. The power of PLM,
therefore, comes from the ability to effectively provide enough
discipline and control on the product innovation environment to
allow people to share information and follow best practices, while
simultaneously providing a flexible, dynamic environment that does
not hamper the creative process.

PLM manages processes, for sure, and helps companies make better
business decisions. At the core, PLM focuses on managing
product knowledge. The other key point is that while PLM
captures the IP derived at every stage of product
development, ERP is primarily interested in the resulting product
when it is released to manufacturing. This is a key
difference that sometimes gets lost until an ERP administrator
realizes that the number of product revisions in the ERP database
will grow exponentially.

The Big Unanswered Question
To now that I have said PLM and ERP are complementary, some
might assume that means that you can’t get PLM from you ERP
vendor. That is not necessarily the case. Most notably
Oracle acquired Agile and
SAP has been investing heavily in
their PLM roadmap. So it’s not quite as simple as “buy PLM
from PLM vendors and buy ERP from ERP vendors.” But it’s
also not as simple as dictating that you buy PLM from your
ERP vendor and expect to be successful. Unfortunately, you
will need to spend some time deciding what you really want from PLM
and evaluating available solutions. Agile is a very nice suite of
PLM capabilities for verticals like electronics, medical devices
and food&beverage - assuming you are trying to implement a
primarily supply chain driven PLM program. SAP has developed some
core PLM functionality and has a roadmap to deliver more. These are
worth a look, but shouldn’t be selected blindly without considering
other options. What you (potentially) save in license costs
and integration effort might be a small factor when you look at
total cost of ownership and (more importantly) the benefits you are
trying to achieve.

As the report says, “In the same way that a generic business
strategy does not apply to all companies, no one application
strategy is right for a given manufacturer.” So you need to do the
work to understand your business and the opportunities available to
you, and then find the best solution to support it.

So that was a quick peek into some recent research on ERP and
PLM, I hope you found it interesting. Do you see it differently?
Let us know what it looks like from your perspective.