PLM investments pay, even in a down economy

CIMdata research of companies that have implemented PLM solutions indicates that typical ROIs range from 100 percent to 300 percent.
By Ed Miller, CIMdata June 22, 2009

Companies continue to invest in Product Lifecycle Management (PLM) as one of the best ways of surviving the current economic slump and strengthening their competitive position when global markets rebound.

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Given the harsh business climate, many organizations are emphasizing smaller, targeted PLM investments that provide the fastest bottom-line benefits for controlling costs and improving operational efficiencies.

Even as these short-term priorities dominate the current market, leading companies continue to focus on initiatives that support their long-term strategies for business success – initiatives such as harmonization of global processes, quality improvement, and others that help them manage the increased complexity of products and value chains and improve their competitiveness.Whatever their approach, companies need to develop a business justification for PLM that includes a thorough evaluation of total cost of ownership throughout the life of the system versus enterprise-wide benefits.

Too often companies focus on up-front acquisition expenditures and fairly narrow departmental savings. Such a limited return on investment (ROI) appraisal can discourage companies that don’t realize the far-reaching business benefits of PLM, or disappoint them later with unanticipated expenses.In determining total cost of ownership, companies generally have little problem figuring acquisition expenditures for software licensing, training and hardware infrastructure.

But these up-front costs can be small compared to on-going expenses for items such as support, maintenance, upgrades, system expansion, system administration, and customized software.

Some of the highest hidden costs are associated with organizational process changes to support business transformation. Properly implementing PLM requires workflow and associated procedures and standards to be closely examined within the company as well as in the supply chain and partner organizations. Such assessments should be performed for the entire product lifecycle and can be far-reaching, with organizational and process change investments typically representing some of the most demanding drains on PLM budgets.

These costs amount to a significant level of commitment, and final figures can appear daunting. If PLM is properly implemented, however, huge business benefits can far outweigh these expenses.

Accessing data in seconds instead of hours or even days increases personal productivity significantly, for example. And the ability to streamline workflow and improve overall operational efficiency has the potential to save time and money on the group and department level. The greatest savings arise from organizational improvements, with systems enabling collaboration across the extended enterprise and leveraging information throughout the product lifecycle. CIMdata research of companies that have implemented PLM solutions indicates that typical ROIs range from 100 percent to 300 percent. Of course, some companies have not achieved these returns, while others have far exceeded them.

The benefits for overall business performance from properly implementing PLM solutions are enormous, allowing companies to increase market presence and profitability through improved customer relationship management, increased ability to respond faster to market changes, delivery of more innovative products, better management of resources and more.

The positive impact of such sweeping change can be staggering, which is why organizations worldwide continue to implement PLM during even the difficult economic times that we are currently facing.

Ed Miller, president of CIMdata
Ed Miller is president of CIMdata , an independent worldwide firm providing strategic consulting to maximize an enterprise’s ability to design and deliver innovative products and services through the application of PLM strategies.

 

Read more from Ed Miller in MBT .