Put PLM and ERP next to each other in a Google search and you’ll discover a seemingly endless archive of definitions, essays by industry experts, and debates assuring you that with more digging you’ll be allowed into the inner circle of combined product lifecycle management (PLM) and ERP wisdom. The truth, however, is that understanding the relationship between PLM and ERP is a bit like understanding the relationship of peanut butter and jelly; they go together well, but they aren’t substitutes for one another.
The reason that so much ambiguity surrounds the interplay of the systems is twofold: First, PLM and ERP mean different things in different industries which has created an air of uncertainty in regard to their value as enterprise investments. Second, the two are complementary but are not necessarily dependent on each other to be successful as a team. By observing recent trends in PLM and ERP consulting we can see that traditional methods of separating the two systems are being proven obsolete by companies that are learning to respect and capitalize on the differences between them.
Two Legs, One Body
In my last article I spoke with Jim McKinney, PLM Leadership Practice Manager for CIMdata, about his opinion on the new direction of the top PLM solutions. He recently published an article on his blog about the relationship between PLM and ERP in which he offers a cogent definition of the two systems:
PLM manages the virtual product and ERP manages the physical product. The virtual product must ALWAYS match the physical product, and thus the two must be seamlessly connected. This requires integrated systems that include sophisticated configuration management tools to accommodate changes and updates.
McKinney’s definition is at once an easily comprehensible explanation of their relationship and an insight into the changing nature of their roles. In the past, PLM and ERP data were segregated due to the apparent uselessness of design data for manufacturing and vice versa. Today, integration of design and manufacturing data has become the hallmark of the value that PLM and ERP can add to a company. To better understand how information from such different departments can engender mutually beneficial results, McKinney points to a recent article by Arena Solutions:
With a PLM system in place, a company can manage product data including items, bill of materials (BOMs), approved manufacturer lists (AML) and product files. A PLM system also enables a company to track any changes to product information and communicate revisions to the supply chain.
With an ERP system in place, companies can track orders from receipt through production and delivery in order to gain a better understanding of inventory levels, delivery lead times and production bottlenecks.
Based on Arena’s interpretation of each system’s role, the potential benefits of integration come as much from its prevention of miscommunication as they do from its mutual catalysis. First, because each system informs the other of its weaknesses instead of trying to hide them, accommodation and adjustment become far easier and help to avoid hiccups in planning or oversight in design. Second, each system benefits from faster feedback from the other, creating a perpetual loop that includes design, production and evaluation, and ultimately contributes to a better end product.
The Chicken and the Egg
Though there is still debate about the need to integrate PLM and ERP, there is a far more heated discussion about the best way to execute integration. Efficiency-minded manufacturers view ERP as the foundation upon which other systems like PLM can stand, but cannot conceive of the reverse while engineers fail to understand how the means of production can exist without a system to inform them. While there are companies that use ERP alone or both systems separately, Arena suggests that PLM must be the first step to achieving successful integration:
Establishing your manufacturing process with an effective PLM system before integrating with a compatible ERP system will minimize organizational inefficiencies and transition costs as well as optimize the capabilities of each system across the entire organization.
This seems an obvious conclusion, that having a plan will lead to fewer unexpected speed bumps in the road ahead, but this may not have been possible only a short time ago. I spoke with Oleg Shilovitsky, Senior Director of PLM and Data Management at Autodesk who graciously allowed me to quote his blog in which he recently spoke about his experience observing companies during the integration process:
I can see PLM and ERP integrations fail in many companies because it relies [too much on] old and outdated integration principles. These old principles [rely] on data ownership and [the] business of protecting data in a boundary of enterprise applications.
Shilovitsky refers to this change as the transition from “data ownership” to “data publishing”. In an organization whose model is one of data ownership, PLM and ERP each try to assert themselves as the exclusive progenitors of data that drives company decision making without revealing their findings to the other. In the data publishing model, PLM and ERP operate independently but constantly inform each other by publishing their findings as if they were researchers working in the same field. As Shilovitsky puts it:
After you [have] accomplished [the] “data publishing” concept, you don’t need to transfer data. You just find [the] right data using model qualifiers. It [simplifies] the business logic and helps to establish more reliable data integration mechanisms.
To conclude that all failures at or refusals to integrate PLM and ERP are simply misguided would itself be a misguided assumption, however, as it would be equally incorrect to assert that peanut butter and jelly must always be eaten in the presence of the other. For the reason why, we must return to the fundamental purpose of each system as it exists independently.
Innovation or Imitation?
To return to McKinney’s definitions, the purpose of PLM is to manage the virtual product and the purpose of ERP is to manage the physical product. This is a perfect marriage for a company developing new products and sending them to market, but what if your product already exists? McKinney makes a valuable point in noting that many businesses seek only to imitate, not innovate, and thus don’t need PLM:
…those companies without the goal of creating new and creative products, but only cheaper “knock-offs” will want to invest more in ERP. Products without much 3D CAD and those that have little engineering IP may not need a ton of PLM.
McKinney’s observation is also a caveat; too many companies fall into the trap of believing that they are beyond the need for investment in product development and fail to keep up with their more innovative competitors. Much like trying to convince the last few stragglers to let go of VCR and adopt DVD, it could be said that if PLM is not already a necessity in the minds of manufacturing companies, it soon will be. Already companies like SAP and NGC Software are realizing that integration can produce better results when PLM and ERP come from the same developer and there is reason to believe that the trend of software providers offering both will continue to grow. This is not to say that the two should be conflated, however, because the businesses that benefit most from their potential will be those who respect their differences.
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