“making the right business case for plm in supply chains” mark frohlich associate professor of...
TRANSCRIPT
“Making the Right Business Case for PLM in Supply Chains”
Mark Frohlich
Associate Professor of Operations and Supply Chain Management
PLM Consortium - 2015
2 PLM Consortium - 2015
Presentation Agenda
▪ Quick Overview of Annual Manufacturing Study▪ PLM in the Engineering and Business Schools▪ Business Case Models for PLM▪ Q & A
3 PLM Consortium - 2015
Annual Indiana Manufacturing Study
▪ Manufacturers of all sizes
▪ 9th Year, State-wide Survey
▪ Spring – Summer 2015 Underway
4 PLM Consortium - 2015
Industry Types (2014 Survey)
5 PLM Consortium - 2015
Next Year’s 2016 Study
▪ No PLM questions ever in our survey
▪ I honestly don’t think any major business school is currently surveying managers regarding PLM
▪ For 2016 we’ll include a PLM section
▪ ~10 Months (April 2016) to figure out what questions to ask
▪ I’ll be asking for your help with those questions…
6 PLM Consortium - 2015
PLM Should be of Interest to Survey Participants: Type of Products
7 PLM Consortium - 2015
Product Lifecycle Management (PLM):Two Engineering Perspectives
Source: Initiative for Product Lifecycle Innovation (IPLI)
Cyclical Nature Numerous Processes & IT Systems
8 PLM Consortium - 2015
Product Lifecycle Management (PLM):Two Business Perspectives
Product Definition Product Development Product Launch
Time
Wor
kloa
d
Low
HighTotal Project
Costs
Management’sability to “kill” or
redirect theproject
Manufacturing
R&D/Engineering
Marketing
9 PLM Consortium - 2015
Product Lifecycle Management (PLM): Two Business Perspectives
10 PLM Consortium - 2015
PLM is Not a New Business Topic!
“Exploit the Product Life Cycle” HBR 1965 - Theodore Levitt
11 PLM Consortium - 2015
The Business Case (or “Analytics”) for PLM
As with most business case models there are 3 PLM options:
1) Traditional Approach: Building the most accurate model possible
2) Scenario Approach: Forecasting “Worse”, “Expected”, and “Best” cases
3) Using a New Analytic: Hopefully (!) building an even more accurate model using a different technique
12 PLM Consortium - 2015
The Business Case for PLM:Traditional Approach▪ PLM business case typically built around Return on
Investment (ROI) model
▪ Goal is making these as accurate as possible
13 PLM Consortium - 2015
The Business Case for PLM: Traditional Approach
Costs
Initial planning▪ Scope the program /align stakeholders▪ Justify the investment
Implementation▪ Software licenses▪ Hardware infrastructure▪ Configure / customize applications▪ Format and migrate legacy data▪ Integrate to downstream applications (e.g., ERP,
SCM, etc.)
Ongoing expenses▪ Software maintenance▪ Hardware maintenance▪ User training▪ Change management costs
Gains
Improved time-to-market▪ First-mover advantage▪ capture more revenue early
Operational efficiencies▪ Less duplicated data & checking for inconsistencies▪ Less searching for information & fewer processing
errors▪ Less rework (from out-of-date information)
Lower material and production costs▪ Reduced prototype costs▪ Reduced scrap costs▪ Increased procurement leverage▪ Reduced tooling expenses
Lower compliance risks▪ Expedited product recalls▪ Minimized civil penalties, legal fees, etc.,
14 PLM Consortium - 2015
The Business Case for PLM:Traditional Approach
Supplier Manufacturer Distributor Retailer
The Problem: PLM’s relevance varies across supply chains
Note the “transition” from manufacturing to services
15 PLM Consortium - 2015
The Business Case for PLM:Scenario Approach▪ Palisade’s @Risk Software
▪ Novelis Case http://www.palisade.com/cases/Novelis.asp
16 PLM Consortium - 2015
The Business Case for PLM:A New Analytic?
▪ Black and Scholes (1973)▪ An “option” is the act of choosing or “the freedom of
alternatives”▪ A “real option” exist when managers can influence
the size and riskiness of a project’s cash flow by taking different actions during the project’s life
▪ Managers always look for “real options” in projects▪ Value of a “real option” increases with uncertainty
Conventional View
“Real Option” View
https://www.youtube.com/watch?v=lwoCGAqv5RU
17 PLM Consortium - 2015
The Business Case for PLM:A New Analytic?
▪ Real options theory is starting to be used to make better on- vs. off-shoring decisions (e.g., Suzanne de Treville at HEC - University de Lausanne - https://hbr.org/2010/10/it-may-be-cheaper-to-manufacture-at-home)
▪ Cost-based models (e.g., ROI) always “advise” off-shore▪ Real Options modeling the value of “flexibility” and “short lead-times” often “advise” keep
manufacturing on-shore▪ Can we use real options to model PLM in supply chains regarding the value of things such as “speed
to market”, “painless recalls”, or “closer partner coordination”?
18 PLM Consortium - 2015
Questions and/or
Comments?