A quick peek into some feedback on my research on … the Evolving Roles of ERP and PLM in the manufacturing industry. First, thanks to Oleg for his feedback an continuing the ERP-PLM conversation on PLM Think Tank. Oleg made some very good points and provided some good research on the research. But in the spirit of a healthy debate I want to “myth bust” his response. I will address each of the sections in his response idividually, although I split the first one into three responses.
Responses and Reactions
Managing Innovation (Busted) – The title to Oleg’s report does not reflect the thrust of my paper, but he touches on a topic that is near and dear to my heart. He makes a strong point that innovation can’t be managed. I think the first two responses to his post say a lot, particularly the first one, show that this isn’t the case. No, we are not going to automate innovation with a product line of robots. But the energy and time of smart, innovative people can be harnessed and guided to produce more results by following an innovation process. I call this operationalizing innovation. It is about process. Really.
Distinct Roles of ERP and PLM (Busted) – The point that I was making in my paper is that ERP and PLM serve different purposes. PLM helps drive product innovation, ERP helps execute the business of manufacturing. PLM’s primary role is not managing innovation, it is helping companies innovate, develop new products, and engineer them more effectively. These are fundamentally different purposes. Yes, there is overlap. But there are more differences than overlaps. See the table below for more of my thoughts on this.
PLM as a Module of ERP (Busted) – Oleg disagreed with my statement that “PLM is not just another module of ERP” and points out SAP as an example. I disagree strongly with this. SAP tried to introduce PLM as just another module. If they were successful there would be no market for PTC Windchill, Siemens Teamcenter, or Dassault Systemes Enovia. What has SAP done over the last couple of years? SAP developed a multi-year program to introduce PLM as a complete subystem to ERP instead of a module. See my post Does SAP “Do” PLM? for more on that. Can an ERP vendor provide PLM? Sure. Is it part of the ERP system itself? Not in the near future. Need more proof? Oracle bought Agile instead of developing further on their e-business suite. Busted.
Design and Product Data Management (Confirmed) – The core of PLM is data management. PDM should be rock solid, with very robust security. I do believe that extending to other areas (compliance, costing, etc.) that leverage that core data makes absolute sense. It is like building a house on an unstable foundation, it may look nice but in the end it will collapse.
Cross Funtional Processes (Plausible) – I absolutely agree that processes are organizational. I believe that business processes absolutely come before software and functionality. I also agree that business processes cross enterprise boundaries (click to see the article with that same name). But my point was – and still is – that companies need to choose which processes will be supported by which solution. Yes, the answer can be that some processes are supported by a combination of the two. And I would love to see business process management (BPM) play a role, even to the point of developing composite applications that leverage the functions of each system. But the point is that there are some overlap areas where companies need to choose. There is more to agree with here than disagree, though.
PLM and ERP Integration (Plausible) – I didn’t go into technical integration in my report. Why? Because I believe that it is more important to get the ownership of data and the alignment of business processes right. This includes addressing semantic differences between the systems. The days where we couldn’t get one machine to talk to the other or data was stored in a proprietary format were the dark days of integration. Today, the technical side of integration is “easy.” By “easy” I mean it is a simple matter of time and money, but it is possible. It no longer requires magic. But it does require effort. And there are some good integration stories between ERP and PLM, but currently it is mostly customer or through integration partners. So we are mostly in agreement here (I think).
Where Does PLM Stop and ERP Begin? (Busted) – Oleg says “don’t even try to put this border.” Unfortunately, as a manufacturer you have to. You have to develop a strategy about which system will address which process (again, it can be a combination). From a vendor perspective there are no boundaries, and I am not suggesting some industry standard footprint of each solution. But for an individual implementation? In some processes you have two tools that can do the job, you have to pick.
Summary
So that was a “quick” reply to Oleg’s comments on my recent research. I hope you found it interesting. I hope you found it entertaining. Mostly I hope you (and Oleg) recognize the good spirit in which this is written. Respectful debate is good for all of us. I appreciate Oleg’s perspective even when I disagree. And more often than not, we agree.
Do you see it differently? Let us know what it looks like from your perspective.
Please feel free to review more free research and white papers about PLM and other enterprise software for manufacturers from Tech-Clarity.
I tend to agree with your take on these issues. A lot depends on your perspective of the industry. I come from a PLM centric background so I tend to focus on it as the primary technology hub for a product development company. Typically ERP solutions are not flexible enough to accomodate work in process data which is very fluid. In fact some of the PLM solutions struggle with this as well. But the purpose of PLM definitely includes managing innovation. Unfortunately some PLM solutions can potentially quash creativity through cumbersome interfaces and rigid process designs but I don’t think this invalidates the concept.
There is also some signifcant overlap in functionality between PLM and ERP which can cause some confusion but you definitely have to pick the best tool for the job. In my opinion change management is better handled in PLM while some financial and costing functions are stronger in ERP. The key is having a good link between the systems so all users have a clear picture of what is going on as close to real-time as possible. Your points about the link between ERP and PLM being more viable are true but obviously the devil is in the details and this is a tricky piece of any PLM implementation.
Jim, spot on. No need to elaborate – fully agree
Jim, you nailed it right on. I think most PLM-as-a-nice-to-have ERP diehards fail to see the forest through the trees. A lot of it comes from the viewpoint of “my ERP must be rock solid and thus anything that comes into contact with it must just be a slave.” The problem with that is that parts and inventory are obviously the heart of your business but PLM IS your business.
Particularly when you talk about integrating all of your processes together; Product Data to NPD to Change Management and beyond (Quality anyone?) suddenly you are talking about the lifeblood of your business.
Great article!
Jim,
I enjoyed reading your Responses and Reactions and I agree with your comments.
As to the PLM as a Module of ERP – Maybe the word ‘Module’ is the issue. I think we all agree that information/data needs to be shared and there is a need to have an interaction between the two applications. That interaction can be through an Interface or Integration. Interface is basically some type of common contact between the application, i.e. a web browser can act as an interface between PLM and ERP. Integration is more of the use of single data between application and sometimes requires a third application, i.e. a part number table which both PLM and ERP application use.
You talk about SAP and Oracle as examples of unsuccessfull combination, it is true, however, we need to better understand where the failure was. My experience with SAP is limited to the time they have started to develop the PLM module and did not quite understood the diferences as you listed very well in your table. I think Oracle just decided thatt it will be a better business model to aquire PLM and work on some interface to Oracle ERP.
there was another vendor who developed an ERP system for the Electronic industry and expanded it to some PLM functionality taking advantage of the common data used, part #’s, BOM, Change Management. Unfortunetly, the company went out of business with only one customer overseas.
I totaly agree with your comments on Where Does PLM Stop and ERP Begin. It should be driven by the business processes, the end user should be able to perform his/her task regardless of where the information resides or coming from, and that maybe where the User Interface is becoming and important tool. We need to stive to provide the users with the simplest way to perfom their tasks as defined by the business processes and avoid the term “go to the xyz application to do …”. Think of process centric vs application centric.
Jim,
Some interesting thoughts on the same topic from Joe Barkai. Even if he didn’t mention our blogs, it is clearly related to our discussion.
http://idc-insights-community.com/posts/09e5c6439d
Best, Oleg
Stephen,
Thanks for your message. I agree that the devil is in the details with ERP-PLM integration. From my experience, there were two types of devils:
– Technical challenges – Things like getting triggers to execute or ensuring recovery when the integration fails to execute properly can be tricky. Particularly on error recovery, I have seen a lot of people gloss over some of the tricky issues. Even if they decide to print an error log file and fix it manually, I hope they take the “oops” scenarios into account. They can tangle up your database if you aren’t careful.
– Functional challenges – Things like deciding which system is the master for part numbers or where different types of BOMs will be developed and stored take a lot of thought and planning. Also, deciding where to handle the overlap processes. You bring up the great example of engineering change. PLM is great at helping define and approve the ECO. But then there are decisions about when it should take effect that require inventory and order data from ERP. ERP planning needs to know how / when it will become effective – at inventory use up? on a specific data? on a specific serial number? So the answer for ECO is probably “both” – and depending on how comfortable you are pulling ERP data into PLM even the effectivity should be defined in PLM and executed in ERP. But I know that decision would be a 2 hour meeting (maybe more than one meeting) with lots of heated debate on both sides of the argument.
Picking between the two types of issues, I feel that (today) the technical challenges are easier to resolve.
Thanks again for your perspective. I guess the other way to look at it is that I research and write for a living these days and don’t have to do any technical integration. Of course it seems easy to me, I am not the one that has to pull it off and make it work!
Best,
Jim
Jesse,
I agree that PLM is the lifeblood of your business. But I also agree with the ERP camp that if you can’t take orders, procure the right materials, plan your production, and get the product shipped/invoiced properly your business will suffer? I guess this is where you say the “heart” of your business is. So I guess we can’t choose between our blood and our heart, so we need both.
Where I get concerned is when I see people compromising one for the other. As you say, when you start integrating all that PLM does you recognize it is a huge enterprise system on its own.
Quality is a hugely interesting topic to me. There, you have ERP, PLM, and Quality Management Systems (QMS) that can all play a role. I wrote about that in “Fight or Embrace Best-of-Breed in Manufacturing Systems” and there is a deeper link there on Quality Lifecycle Management (QLM) http://tech-clarity.com/clarityonplm/2009/best-of-breed-manufacturing-systems/. Some very interesting issues come up with quality (not to mention costing…)
Thanks!
Thanks for the feedback,
Jim
Eldad,
Thank you. Just to be clear, I am not saying that ERP companies can’t bring PLM to market. I believe they could. The question is are they motivated to build as deep and functional of a system as a best-of-breed vendor is? Do they have the business case to do it? What it would take for an ERP vendor to really win in PLM is an investment. Oracle invested in Agile and has spent quite a bit of effort on integration. SAP is spending a lot of time/effort/money on their new generation of PLM solutions. It is more a matter of will than capability. The best-of-breed PLM players have a huge head start, particularly for engineering-centric businesses as opposed to supply-chain-centric businesses.
There have been a number of smaller players that have developed ERP-PLM hybrids for specific industries. Some of those have been very interesting. But I have not seen one gain significant market traction yet.
My prediction? The lines will continue to blur over time, and the overlaps will get bigger. What do you think? Will there be a hybrid solution available in the next 5 years?
Great discussion, thanks,
Jim
Oleg,
Thank you for passing the link to Joe’s post along. I have some reaction to it, but it appears you need to be an IDC client to comment (or maybe I was missing something).
Also, I would like to point people to your post “Innovation On the PLM-ERP Edge” http://plmtwine.com/2010/01/30/innovation-on-the-plm-erp-edge/. Other than having a different view on the history of ERP (which isn’t very relevant to this discussion, so I will save it for a discussion over a drink at a conference) I mostly agree.
Thanks for the debate.
“PLM helps drive product innovation, ERP helps execute the business of manufacturing. PLM’s primary role is not managing innovation, it is helping companies innovate, develop new products, and engineer them more effectively.” — I couldn’t agree more. Although the functions do go together, they serve inherently different purposes.
Usually, our clients feel that they need to determine in which area they need to invest first – ERP or PLM (and it’s many times PLM first). However, some clients go for the whole package, from a to b: PLM, global sourcing AND ERP, because they feel that they need improvement in everything from product innovation and design to a more efficiently executed manufacturing system – and that requires an integrated ERP and PLM system.
Jeff,
You bring up an excellent point about global sourcing. Sourcing is an area that has elements of planning and product definition (tied to PLM) and purchasing execution (tied to ERP). I have seen some overlap between PLM systems and global sourcing which are very interesting.
I think we spoke some time back when I was with Aberdeen Group, I believe you work with consumer goods/apparel companies. This is definately the case in apparel, given the rapid timelines and sourcing involvement in developing products.
Best,
Jim