One-to-One: How is SAP's Formula for Process PLM?

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?