PLM and ERP: Key Differences, Benefits, and Challenges
Modern enterprises require an array of technologies working in sync to achieve their production, quality, and financial goals. In manufacturing, two of the most fundamental systems, the integration of which is a critically high priority, are product lifecycle management (PLM), and enterprise resource planning (ERP).
What is PLM? What are the benefits of PLM?
PLM is designed to manage the development and on-going support of discrete products across the entirety of their lifecycles. The conception, product design, engineering, prototyping, manufacturing, and service aspects of a product all fall within the domain of PLM. Where collaboration and innovation in product engineering are critical, particularly in complex designs, PLM is not only useful, but mission critical.
What is ERP? What are the benefits of ERP?
As critical to product development as PLM is for manufacturing enterprises, ERP is generally more comprehensive. Its scope includes a broad array of business disciplines and processes. Supply chain management, finance and accounting, personnel, customer relationship management (CRM), and more are unified within a single system. This drives increased efficiency through seamless management of the myriad interdependencies between these domains. ERP aims for process streamlining and automation, as well as data centralization, to better inform decision making and improve resource management across the enterprise.
PLM vs ERP
The difference between PLM and ERP is each manages different aspects of business operations. For manufacturers it’s important that the systems communicate with speed and clarity once integrated. The full optimization of each relies on the success of the other, and their relationship is synergistic. The tandem value proposition of an integrated environment is only fully realized when they are effectively integrated.
How do PLM and ERP systems work together
When well-aligned, PLM and ERP in modern manufacturing can be fully complementary, each preserving but also compounding the value of the other. While there are many different commercial PLM and ERP systems available, and most undergo some configuration particular to the business, the “division of labor” between the two systems working together is straightforward. PLM manages the product’s lifecycle from conception through final production-ready design, with ERP assuming more direct influence when the product is ready for manufacturing and distribution. Though information is passed back and forth throughout, the systems perform their tasks discretely.
How to integrate PLM and ERP?
Where challenges often arise is in the temptation to use one system for a job which is the proper domain of the other. For example, with respect to data – the lifeblood of every digital thread-based environment – companies may see ERP as the one repository for all data. In fact, the manufacturing enterprise will be better served when the PLM system is the resource for all product-specific data across the enterprise – not just engineering data, as legacy thinking might suggest.
When considering or planning your ERP/PLM integration, you need to pick the right tool for the right job. To preserve as many of the discrete benefits of each system as possible, each must be deployed against the tasks and functions for which it is best suited.
What are the benefits of PLM and ERP integration?
When PLM and ERP are properly integrated, each tending to the tasks and functions for which it’s best suited, the business is in the best possible position to realize its maximum potential. In effectively linking together upstream and downstream processes, as well as user groups working in different systems, real gains are made in areas like efficiency, cost, compliance – as well as the productivity and quality improvements that follow.
Increased efficiency
PLM/ERP integration eliminates many of the inefficiencies of re-entering data, which is often compounded by the human error inherent to that process. Beyond that immediate and obvious benefit, though, the PLM system can consistently capture and accurately share, in real time, bill of material (BOM) and product data among all the functions that need it. This results in the linking of upstream and downstream processes mentioned earlier, rendering them more efficient and productive.
Improved collaboration
This same linking of processes and departments eliminates much of the friction of traditional communications systems, the natural result of which is improved collaboration. Decisions, actions, and intentions within the product design team, for example, can be understood in real-time by procurement teams, so any necessary supplier adjustments can be made smoothly and accurately. Given its strengths as a collaborative tool, PLM in particular is increasingly an engine for accelerating innovation within and beyond design engineering.
Reduced cost
It soon becomes apparent that these improvements in efficiency, collaboration, and innovation reduce costs significantly. These cost reductions can in turn amplify competitive advantage, helping the enterprise capture more of the available market and improving margins on all sales.
Increased customer satisfaction
Happier customers are another measure of successful PLM/ERP integration for manufacturing enterprises. Helping customers better understand the impacts of product design and manufacturing decisions helps them plan their own businesses more effectively. And resulting improvements in product quality strengthen the bonds between manufacturer and customer – as well as their respective brands.
Regulatory compliance
The imposition of complex regulatory regimes, further complicated by regional and industry-specific differences, is an increasingly costly burden for manufacturers. The integration of PLM and ERP can provide a robust framework for ensuring regulatory compliance and mitigating its impact on profitability. Compliance processes are streamlined through the centralization of data, and the improved access this provides.
Consistent data handling also helps ensure accuracy, and reduce errors across the enterprise, while improved change management capabilities enable the business to effectively adjust and react to shifting compliance requirements. Traceability and accountability are enhanced, as are reporting capabilities, all of which help the organization identify and address potential compliance risks. In aggregate, these compliance-related benefits result in additional cost efficiency, given how expensive compliance tends to be.
Challenges of integrating PLM and ERP
As beneficial – even mission-critical – as the integration of ERP and PLM is, just like with any major technology initiative, getting there can present challenges. Alignment of business expectations, adequate internal training, and including (as appropriate) third-party partners in the process are activities that may seem ancillary to the central technological processes, but can significantly enhance – or, if neglected, impair – the success of the project.
Core technology challenges include contending with changes in the way data is formatted and defined across functions and ensuring that integrated or transferred data is “clean” for the envisioned integration. The system must also be structured to support version and release management, since these kinds of changes will not happen simultaneously to all components of the overall IT environment. The combined system must continue to function in aggregate through the upgrade processes.
Understanding, preparing for, and proactively addressing these challenges will help your integration be set up for success. Defining the right strategy for integrating PLM and ERP, with particular attention paid to ensuring that each system is assigned the jobs for which it is best equipped, will yield a smooth transition of data and processes from product development through production and distribution, and beyond.
PLM and ERP frequently asked questions
While every manufacturing enterprise will vary in its business goals and approach to ERP integration, several questions frequently arise.
Do you need both PLM and ERP?
For discrete manufacturers seeking sustainable competitive advantage, the answer is almost always yes. When well-integrated, the “division of labor” between the two systems will generate the best results for each, and as noted above, they will work together in a way that’s powerfully complementary. Additionally, one can take the next step to integrate PLM, ERP, and MES to form a cohesive, modern manufacturing system.
Is PLM a part of ERP?
No, although they work together in some senses as a unified system. As noted above, PLM is a discrete software tool developed to manage a product’s lifecycle from conception through production and service. ERP manages a broader array of business processes, fueling PLM with needed data – while itself drawing from PLM the data it requires to function as intended.
Should a company implement ERP before PLM?
Not necessarily. The decision to implement either system as the first step in an integration depends on many factors – principally current strategy and business objectives. As mentioned, ERP systems are more broad reaching, involve more functions and departments, and therefore can be more costly and time-consuming to implement. However, if the enterprise is primarily focused on managing supply chains, inventory, operational efficiency, and financials, starting with ERP may be the right strategic choice.
If, on the other hand, issues like product development and design, accelerating innovation, regulatory compliance, and time-to-market are top priorities in the near term, PLM can be the most logical starting point. As a first step, PLM implementation is also less complex, generally less costly, more focused, and faster to implement – thus potentially delivering “early wins.”
How can I best prepare my business before PLM and ERP integration?
A strategically conceived, precisely planned, and carefully executed implementation plan is everything to a successful enterprise system integration. While, as already emphasized, every business will be distinct, a few general considerations apply to staging any successful project. Understand early which tool will be most effective, post-integration, at achieving each objective that the full integration is expected to facilitate. And when planning the interface between the two systems, consider how product data can flow smoothly across other applications, accommodating relative units of measure, currencies, all vendors in the supply chain, and other data variables.