PLM value gap emerges

Departments - Features

A small fraction of A&D companies achieve exceptional return from their PLM investment. Learn the difference between those few value leaders and the majority who struggle to break even.

January 29, 2014
James Roche

The aerospace and defense (A&D) industry has invested heavily in product lifecycle management (PLM). However, outside of a few exceptions, the results of that investment are uninspiring. This was the conclusion of a CIMdata survey of 90 respondents from 64 A&D companies. The interviewed companies range from aircraft OEMs to Tier 2 suppliers. Our analysis found that the exceptional few companies getting results from PLM investments are not statistical outliers. They are, in fact, leaders who understand the key prerequisites for achieving breakaway value from their investment.

It is somewhat surprising that so few are achieving significant return, given that most A&D companies were early adopters of PLM. On balance, these investments have yielded some of the most advanced and productive engineering environments in any industry. However, while engineering is well-served, PLM in the rest of the product lifecycle functions falls short in most cases. Process and information flows are still largely fragmented. Information systems are layered with complexity and redundancy. The full value of PLM is not realized.

For those interested in understanding what distinguishes these leaders, CIMdata’s research has captured the demographics and identified several critical characteristics of these companies.

Throughout the past few years, PLM technology capability has increased at an accelerated rate. Managers in leader companies benefit from this increased value potential by assigning ever-higher value objectives and breaking from traditional investment strategies.

From this research, CIMdata has established a new key metric for assessing the effectiveness of a company’s PLM investment. The divide between the value required and the value received is what we call the expectations gap. Leaders achieve value from their PLM solution that is much closer to value required

Their expectations gap is much smaller than for the general population.
 

PLM for nimble companies

Why is it important for PLM to expand beyond its roots in engineering? Aircraft and defense-related vehicles today are the most complex ever devised. At the same time, regulatory requirements are severe and growing.

In commercial aircraft, for example, almost every aircraft might be a different configuration that is certified individually. Not only must each configuration be designed and validated – an engineering function – but each must also be manufactured, delivered, and supported in an ever-growing regulatory environment.

Meeting these challenges means managing the configuration beyond engineering into production, support, and retirement. These are PLM functions and need to be recognized as such.

It is also true PLM does not replace a company’s enterprise resource planning (ERP) or material requirements planning (MRP) system. PLM adds to those systems by providing the product design, manufacture, and support definition and the progressive configurations of the product through this lifecycle.

Why is it so important? Companies that are followers in their PLM implementations will be seen as less responsive relative to peers that are leaders in using PLM. Leaders with more capable and broadly deployed PLM installations will be more nimble in reacting to changing market pressures and regulations.

For example, effective PLM helps with the turnover of leased aircraft, a more common situation today than ever. In addition, when the inevitable quality or recall issues pop-up, PLM-savvy companies will be able to trace issues faster and provide answers and fixes more quickly. They are able to understand maintenance issues faster and more completely and able to take action proactively. Because effective PLM installations allow these companies to be efficient, coordinated, and flexible, they will emerge as the preferred suppliers in their industries.
 



 

Leaders & followers

Although we asked a number of questions to understand PLM installations in general, the answer to one question highlighted a striking difference. We asked respondents to rate themselves in how effective they were in “countering challenges to PLM program success.”

While the bulk of respondents claim to have countered these challenges only partially or not at all, one group claimed to have met these challenges completely. This characteristic correlated with the expectations gap we measured – those that countered the challenges to their programs gained the most value from their PLM installation.

Other notable demographic details bear mentioning:

  • PLM Value Leaders tend to be larger, though not exclu- sively so. Sixty percent had more than $10 billion in revenues. Follower companies closely match the general population’s size distribution closely, 34% with more than $10 billion in revenue.
  • Leaders are mostly OEMs. Of the Leaders, 80% are OEMs, and 20% are Tier 1. Follower companies are further down in the ecosystem, with 50% who are OEMs, 14% are Tier 1, and 36% are Tier 2.
  • Leaders tend to spend more on PLM. Leaders spend on the high end, with 63% spending more than $5 million annually on PLM. Followers spend significantly less, with only 7% spend- ing more than $5 million annually.
     
     

What leaders do

Several characteristics seem to make leaders different and explain why they get more value from their PLM investments. These range from more engaged upper management to an understanding that the value of PLM lies in a broad implementation across all of a company’s functions, not just the engineering department.

These non-engineering functions include program management, supplier management, maintenance and repair, digital factory functions, and sales and distribution. Setting high expectations, aggressive schedules, and larger budgets all contribute to exceptional success.

Some of the more important characteristics we observed were:

Leaders’ management is broadly engaged and expects higher value from its PLM investment. One possible explanation of a low expectations gap is that company management did not expect much in the first place. Meeting low expectations would be easy. In fact, the opposite was true. Managers at leader companies assigned high value expectations for their PLM installations, and apparently got it. By expecting more, they seemed to have gotten more.

Exactly who expects more matters. We found that the importance assigned to PLM by engineering and non-engineering users alike is about the same for leaders and followers. What differentiated leaders from followers was the importance assigned by managers up and down the management chain.

Leaders’ PLM investment is across the full lifecycle scope and on a fast track. PLM value leaders’ investments in PLM are broad in scope – well beyond engineering alone – and on a fast track compared with iFollowers.

Value leaders invest heavily in such functions as customer collaboration, compliance to standards, and knowledge management. They prioritize PLM enablement of global programs and collaboration (70% vs. 38%) and lifecycle design (60% vs. 28%). In contrast, the dominant priority by far for followers is “faster, better, cheaper.”

Leaders are concerned about cultural issues as the greatest challenge. PLM value leaders have a different perspective on the challenges to success of their PLM programs. Leaders identify cultural and practice differences as the most serious challenge to their success compared to followers (50% vs. 30%).
 



 

How to become a leader

There are three key points to investing to emerge as a leader in PLM, to develop a nimble, organized company that smoothly manages products from concept to disposal.

First key: Executive commitment to PLM as strategic to the business. PLM value leaders have strong commitment from management at all levels. For these companies, the PLM program starts with the executive sponsors and a clear articulation of their business objectives and expectations. However, attitudes within many aerospace companies today are burdened with negative perceptions of value attached to the idea of PLM – some due to past bad experiences and some due to narrow positioning of PLM investment as an engineering system upgrade. For these companies it will be necessary to recalibrate the attitudes of corporate executives before strategic PLM investment impact can be achieved.

A PLM champion within the company can address this challenge by sponsoring some form of PLM business value definition activity to establish and communicate the strategic business potential of PLM to the company.

This obstacle is more common in companies with a long history of PLM investment, which may explain why PLM value leaders tend to be younger companies with less mature PLM installations.

Second key: A full enterprise perspective and a fresh look at technology. PLM value leaders have recognized that technology capability is expanding at an accelerated rate. Much of this new capability is beyond the traditional core supporting engineering activities. The increasing value potential of this technology trend is profound. Leaders are combining technology evaluation with an expanded business analysis. This results in PLM visions, strategies, and solution definitions that encompass all functional areas and communities across the extended enterprise and the complete product lifecycle. In fact, PLM value leader investment priorities lie outside of the traditional core.

Third key: Urgency and speed. PLM value leaders tend to invest heavily and on a short timeline. It can be argued that if the first two keys are in place, then urgency and speed are a naturally occurring consequence.

Committing to a PLM transformation should not be taken lightly, but neither should it be dismissed or delayed lightly either. Becoming a leader requires commitment, a willingness to expand vision beyond engineering, and urgency. The reward is a responsive, nimble, competitive organization.

 

CIMdata
www.cimdata.com

 

About the author: James Roche is a senior consultant, Aerospace & Defense Practice Manager at CIMdata, a global product lifecycle management (PLM) education, research, and strategic management consulting firm. He can be reached at 734.668.9922 or j.roche@cimdata.com.