Again three busy weeks and I envy my colleagues who had the time to write a blog post on a regular base.
Two major topics kept me busy:
- explaining the complete PLM scenario from concept (initial BOM), through CAD, through EBOM and MBOM to a final shipped product. I will come back on this topic in future posts as it even goes beyond my old post: Where is the MBOM. To be more detailed in the future
- analyzing ROI and predicting ROI for various PLM implementations. And this is the topic I want to share 2 experiences with you, and I am curious for feedback or other viewpoints
Where is my ROI, Mister Voskuil?
Some years ago I supervised a PLM implementation and I only was involved after the company had already implemented their 3D CAD software (SolidWorks) after years of 2D AutoCAD. The reason for my visit was that the technical manager was a good guy in monitoring the productivity of his engineering department.
And then he showed me some statistics. Working with AutoCAD 2D was defined as the baseline. Implementing SolidWorks brought initially a drop in their drawing output (pay attention to the wording) but after 6 – 9 month the started to be more efficient with SolidWorks and at that time the output was rated at 120 % (or sometimes even more due to more and enhanced product modeling)
Then came the SmarTeam implementation and again the output of the engineering department dropped and going down to 70 % and after a year effort of the SmarTeam implementing VAR, they were still not happy as output was below 100 % still.
Conclusion from their side: There is no ROI on implementing PLM
In the following discussion, we discovered that the working methods of the engineers had changed. Less freedom in adding data, incomplete information as the integration with SolidWorks enforced a more strict methodology to the CAD users (who of course complained). The effect of the changed working procedures was however that downstream tasks should have been eliminated. In production preparation 4 people were in the past completing, checking the engineering BOM coming from the design department. They fixed the mistakes and then typed them all in another order into their ERP system for production.
It appeared that those 4 people had a much easier job – first of all, they did not complain. Data was immediately on release of the design sent to the ERP system – no manual interaction – and there they could pick-up the EBOM and adapt it for production. There was less search work to do – as the designer already provided validated input plus there were no typos anymore. Amazingly these 4 people never complained to their management that they could do more, they kept on having their ‘busy’ days.
Morale 1: Measuring ROI in a single department (often a mid-market characteristic) does not give you a good understanding of PLM benefits. PLM once implemented correct, affects the whole organization
We know there is ROI, but where is it ?
As you noticed, a less confronting customer, as we all feel being involved in a successful PLM implementation going in the right direction. Yes, perhaps a little to slow, but the advantage is that people start to see the benefits of a ‘single version of the truth’ – we haven’t reached the advanced scenarios yet as I mentioned in the top.
But now we tried to measure, as I also wrote in previous posts, if you had your organization under control before PLM, in that case, you would be able to measure the impact – after 6 months / after 12 months / after 2 years?
It is like climate change, statistics demonstrate there is a trend and I believe we have an impact on this planet. Still, skeptics (luckily less and less) explain to us that it is just a normal climate variation, and after 10 – 50 years we will have a new ice age. Not sure if these people are optimists or …….. it just does not fit in their lives
But PLM is somehow the same, we see it has an impact, we measure and try to explain, especially in the mid-market companies, skeptics is a natural survival mechanism as you cannot risk to be too optimistic. (This is how startup’
So in our situation, we started to fill in spreadsheets which brought huge benefits. Imagine searching goes much faster – let’s say instead of 1 hour per day we need only 10 minutes per day per employee. We have 120 people per day searching for data, does it mean we can do it with 20 people instead? Or what would these people do in the remaining 50 minutes per hour?
Right, they will find other work to do – less stress, more time to chat with colleagues, have a coffee and above all, they won’t complain. People are flexible in filling their day and if the company is lucky some of the ambitious people might fill their day with innovation or other relevant improvements.
Morale 2: Even if there is an indisputable ROI on a PLM implementation, the management should analyze what should be the impact on the organization. Invest more in creativity/engineering instead of quality assurance? In the mid-market, this might be perceived as a bad sign – as the quality is key. But how much money would we make on a high-quality product that no-body buys anymore?
Jos Voskuil's Weblog 
8 comments
Comments feed for this article
June 16, 2009 at 6:31 pm
olegshilovitsky
Hi Jos, Great investigation and analyzes. But, I’m sorry, you sounds like cannot justify PLM ROI without going to the organizational scope? Is it right conclusion? – Thanks, Oleg.
Oleg hi, investigation is on-going – i am somehow in the middle, so hard to conclude, but a first thought might be that often mid-market companies focus too much on their departmental ROI and indeed often the benefits are organization-wide as that is where PLM has impact
LikeLike
June 16, 2009 at 9:06 pm
yml
Hello Jos,
I have been working on collecting such evidence of the ROI that have been created by a PLM implementation. The output have been pretty surprising since they happens to be where we didn’t expect them at first : accelerate the change management process by more than 30 % and reduce the rework on the tooling before launching the production.
For both of this area it has been relatively easy to go from % to $. However what is important there is that PLM does not come of a defacto ROI because it there. It should be seen by the management as a very powerful tool that allow a company to measure and improve their ability to execute their change management process during the life cycle of their product.
Regards,
–yml
Hey Yann, welcome back and you bring indeed two interesting points to the discussion. Like Oleg mentions the benefits you measured were on the change process and the second topic I liked a lot is that PLM is an enabler to measure and improve the company’s processes
many thanks – Jos
LikeLike
June 17, 2009 at 7:28 am
Bhushan Teli
Hi Jos;
I dually agrees with what you say “Measuring ROI in a single department does not give you a good understanding of PLM benefits”.
Keeping aside the Financial parts of ROI – we can see many Non- Financial Benefits or Indirect Benefits or soft sides of PLM Implementation.
1. “Knowledge Capturing” – Many organizations are facing problem of Employees near to their retirement. They will retire with huge experience & knowledge with them gained in many years. In Asian region problem of higher iteration rate? – Employees swap organization very frequently.
Capturing the experience & knowledge of such Employees is must for any Organization. with PLM in place some part of their knowledge can be captured & put in process.
2. QS/TS/ISO/CMMI certification – If Organization is going for these certifications in that case they have to do lot of documentation work; to prove they are following unified & standard process in their organization, – with PLM in place there is very less documentation needed even – certification review- interview are smooth.Benighted – getting certified with less effort. In other terms it gives confidence to go for these certification [If PLM is followed religiously… ]
Thanks Bhushan. Regarding your first point I agree on that as an important driver, however the discussion there is beside storing it in PLM, how do you make it retrievable ? This often requires in addition a more strict way of working (mandatory data to add / to link) which the current workforce is seeing as a pain. Also I agree on your second point, having PLM installed and in-practice should be a sales argument for these companies to promote their quality and control of their products. Best regards Jos
LikeLike
June 17, 2009 at 5:16 pm
David Chadwick
Hello Jos,
I enjoyed reading your real world experiences of trying to measure ROI for PLM – it was good that you found a customer who had already analyzed the productivity of his design team – in my experience this is surprisingly uncommon! I would encourage anyone involved in the PLM pre-sales process to ask the prospective customer what metrics they have on their current productivity – and if they do not have this data then to measure their current performance – you then have a better chance of making an ROI calculation and justifying further development of the PLM implementation.
I like your reference to the “soft side of ROI” – one example I have seen in this area from one of our customers is how PLM has helped them be more responsive to their own customers – for example keeping track of exactly what they delivered to a customer so they can respond better to requests for modifications and service issues.
Thanks Dave and hi. In one way we are all looking for ROI justification, but as Oleg told me this morning: “What is the ROI on buying an iPhone” Apparently there we do not need to justify 🙂
Best regards
Jos
LikeLike
June 18, 2009 at 12:53 am
My Slice of PLM Single Version of Truth « Daily PLM Think Tank Blog
[…] my conclusion? I was reading Jos Voskuil’s blog post about PLM ROI yesterday and thought about why ROI for PLM is not obvious. My take on this today is that, […]
LikeLike
February 18, 2010 at 5:11 am
Vijay R Shrawage
I feel quantifying the ROI in terms of money and resource w.r.t. to specific department is not correct. Management should look for benefits which are available at company level. PLM offeres ROI which are recurring in nature. e.g. Reduction in “Time to Market” for every New Product Introduction.
Beside PLM offeres collaborative approach which helps to share up-to-date information across all functions. It is difficult to quantify this benefit in Money and Resource.
Vijay hi,
I fully agree with you from the strategic poin tof view and if you read many of my post I describe that the implementation of PLM should be a company wide activity and be measured in that manner too.
As my target audience is the mid-market, there are often no resources for this approach and departments need to justify the benefits for PLM themselves. For several of my customers, this approach lead to reasonable and confirmed ROI
Best regards
Jos
LikeLike
July 31, 2011 at 1:33 pm
maheshberi
Hi Jos ..
I liked your analysis and noticed it is common to see customers struggling to measure sucess of their investment. More often PLM is viewed as strategic push of either Corporate or engineering IT.
While I have seen a case of large OEM where in the intent has been right to get business value.
The examples you mentioned data accuracy, reducing search time, removing duplicate entry by retiring multiple reduant systems etc … Eliminate excel for BOM .. all other host of silos … to get single version of truth.
However midway through the implmentation of BOM information in PLM we are seeing the reverse trend .. PLM actually is increasing designer work load. First reason being despite eliminating excels and silos .. business rules and methods cannot be eliminated overnight. Example part revisioning and master … If options to maintain adhoc numbering are not closed .. we still end up in situation where it takes time to search..
Another aspect is flexibility … In some ways I see flexibility and accuracy as two balancing goals.. With excel and system without forced rules .. things go faster because it is uncontrolled .. Yes, there is design rework .. and hours of reprinting and late issue. But user adoption is faster, as they control the data.
With PLM and enforcement of rules .. it becomes a efficiency problem (locally) as they loose ability.. This is especially true in cases PLM is phasing out legacy systems and upstream is stil un controlled.
Finally .. as you mentioned .. time is the key. To realize .. full circle and broader picture, perhaps we need to wait … and maybe by then people move on to next big thing !
Thanks,
Mahesh
Mahesh thanks for your real-life feedback – yes it is always the balance between the short-term (user acceptance) and long term (more balanced and reliable work) The fact that PLM means a change for the organisation and the way people should work cannot be neglected – even with the highest usabillity – it is about changing tasks people need to perform and reward and measure them in a different manner too.
success Jos
LikeLike
September 8, 2011 at 6:53 pm
Mila
Hi,
I wanted to respond to these statements in the post:
1. “Yes, there is design rework .. and hours of reprinting and late issue. But user adoption is faster, as they control the data”.
I can’t see this as “flexibility”. This is the root cause of high cost and inefficiencies that PLM is supposed to target. Yes, indeed, the traditional work flow is faster from the user perspective–because they know how to do it. They’ve been doing it for years. Any change requires learning time and breaking into. No one can expect to have PLM adopted overnight and a slow-down and some degree of disruption is inevitable. Management’s responsibility and commitment should be to provide enough resources for user training and “mentality change”.
2. “PLM actually is increasing designer work load. First reason being despite eliminating excels and silos .. business rules and methods cannot be eliminated overnight. Example part revisioning and master … If options to maintain adhoc numbering are not closed .. we still end up in situation where it takes time to search”
Again, this is not PLM problem. The required changes have not occurred. If this happens it means that PLM overlapped with old processes. As Jos says in his blogs, and I couldn’t agree more, PLM starts with “change”–in people thinking, in process structure, etc.
LikeLike