Research Rap: Complementary Roles of ERP and PLM in Innovation

A quick peek into some research on …
the respective roles that ERP and
PLM play in product innovation. This is not brand new
research, but I believe it is just as
relevant today as when I initially wrote this almost 5 years ago.
Why? Not much has changed - with a couple of notable exceptions
(SAP and Oracle).

The Research
The research identified two clear and distinct sets of
business processes that companies use to drive product
profitability. These two sets of processes include:

• The Innovation Cycle - characterized by rapid
  iteration
• The Execution Cycle - characterize by a more
  linear, repeatable process

These cycles are different, and require different solutions. PLM
and ERP were developed - and have since evolved - to meet the needs
of each of these cycles. Is there overlap? You bet. Processes like
engineering change are consistent challenges to coordinate between
these two meta-processes. But for most companies, there is
a clear hand-off point where a design is released to
manufacturing (and external suppliers, for that matter)
where ERP takes over.

Below is a table extracted from the research that helps to show
the differences between ERP and PLM. These differences are what
make each the best solution for their respective set of processes -
execution or innovation.

Updating the Viewpoint
So what would I change now that five years have passed? Not much.
One other interesting fact from the research (and confirmed by a
later benchmark I conducted at Aberdeen Group) is that most
companies would really rather have one enterprise solution that
covers all of their innovation and execution needs.
Unfortunately, at the time none existed. I would love to say that
five years later that had changed drastically, but it has not. What
has changed? The desire for an integrated solution clearly has not
changed, but:

• PLM vendors such as Dassault
  Systemes, PTC and in
  particular Siemens PLM
  have progressed their integration to ERP, focusing mainly on SAP
  due to it’s market prominence in ERP
• Oracle acquired Agile,
  giving them a PLM solution (two actually, including Prodika) that
  will be further integrated with Oracle ERP over time, but is also
  being sold into other ERP environments (again, including SAP)
• SAP has announced and is
  progressing on their own SAP PLM
  roadmap

Having said that, none of the above are clearly
differentiated enough to serve as the “one integrated
answer” that many companies are looking for. So for now,
the best solution is likely a hybrid of ERP, potentially
some PLM from you ERP vendor, some best of breed PLM suite
solutions, and some best of breed point PLM solutions.
Sorry, I wish there were a cleaner answer than this.

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