Category Archives: Product Management

A Kick-Ass Direct PLM Sourcing Solution for Manufacturers: Part I

In this post I’m going to lay the foundation required to introduce you to a new direct sourcing solution if you’re a manufacturer – regardless of industry – who manufacturers, or outsources the manufacturing of, complex parts and assemblies. (In other words, if you’re in aerospace, automotive, defense, heavy machinery, high-tech, medical device, or diversified manufacturing, you may want to read these posts carefully.) This isn’t to say that it’s not useful for the sourcing of simple parts or assemblies, or that it can’t be used for indirect materials (with some caveats), just that the true power of this solution is not recognized unless you’re sourcing (at least moderately) complex parts and assemblies.

This is a distinct solution from the standard sourcing suites that is offered by the likes of Emptoris (acquired by IBM, sunset in 2017), Iasta (acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric), and Procuri (acquired by Ariba, acquired by SAP); the on-line marketplace solutions like Alibaba or the manufacturing focussed MFG.com; and even the PLM focussed solutions of Agentrics (acquired by NeoGrid) and UGS (acquired by Siemens). Not to say that these are not great solutions, the first set are great solutions for indirect materials and simple direct materials; the middle set are often perfect at identifying potential suppliers and, especially in the latter case, for sourcing simple parts or assemblies; and the latter set are really good for PLM management within your company, but in one way or another, all fall short when it comes to complicated manufacturing and the sourcing of complex parts and assemblies, especially when you’re global.

The reason that this is the case is that sourcing an assembly is not like sourcing a straight-forward commodity, raw-material, or service. It’s not just a matter of performing your market intelligence to come up with a should cost model, executing spend analysis to identify the potential savings opportunity, posting an RFI to identify potential suppliers, creating an RFP to qualify suppliers, sending out an RFQ to get initial bids, (potentially) running an auction to determine final bids and the suppliers eligible for an award, and using decision optimization to determine the final award, which is then contracted. Sourcing a complex part or an assembly is much more involved.

When you’re sourcing a complex assembly or part, both you and your suppliers have a lot of complexity to deal with. First of all, you need to know how many basic parts exist in the sub-assemblies and sub-parts, how many instances of those basic parts exist, and what raw materials and manufacturing processes are required to make those parts. Then you need to identify and find all of the specifications and drawings and make those available, in a secure and controlled way, to your potential suppliers in formats that they can understand and work with. Then you need to enable collaboration between your sourcing professionals, design engineers, the potential suppliers’ production engineers, and the potential suppliers’ sales professionals. The potential suppliers’ production engineers will invariably have questions on the design, process, and materials and require clarifications to determine what will be involved to make the part. Then the potential suppliers’ sales professionals will no doubt have questions regarding the precise specifications and quality requirements of the raw materials so that they can provide accurate quotes based upon the feedback they get from their engineering team. (Does the bolt have to be hardness 5, or will hardness 4 suffice?)

Then something will invariably cost more than you expect, or can afford to pay based upon what marketing thinks sales will be able to sell the product for, and your combined sourcing and engineering team will have to collaborate with the combined sourcing and engineering team of the (potential) supplier(s) likely to get the award to come up with a new design or manufacturing process that will meet costs. During this process, a plethora of new documents and versions will be created and need to be tracked in a manner that is instantly accessible by all parties as soon as they are available. Then you’ll actually have to collect the quotes at the basic part level and be able to automatically roll them up into quotes for the sub-assembly and assembly and be able to compare, at each level, across suppliers to determine which supplier gets the assembly, which suppliers get the sub-assemblies, and which suppliers get the basic parts. And if you are sourcing a complex assembly with hundreds, or thousands of parts, this is no easy feat.

Furthermore, this is not something you can easily do with a standard sourcing suite, even if its on-demand and even if it is augmented with an on-demand Product Information Management (PIM) solution such as that offered by Arena (even though this is a great solution for PIM – and works great even for complex parts during a joint design phase), marketplace, or traditional PLM solution.

This is because standard sourcing suites are not designed for the management of design drawings, CAD/CAM models, and PLM and also since very few handle complex bill-of-materials with hundreds or thousands of parts (as they are designed to handle events with small to moderate sized bundles well), marketplaces are not designed for complex sourcing, and traditional PLM is not designed to be collaborative on-demand over the web.

(You might point out the UGS solution, which I wrote about in this post back in March, and it’s a good solution, but when you get down to it, it’s a relatively weak integration between separate suites of products built at different times for different purposes with different toolsets on different platforms compared to a solution built from the ground up to tackle the direct PLM-based sourcing of complex assemblies head on. Considering the number of mergers and integrations the UGS solutions have gone through, it’s impressive that they took the solution as far as they have. Whereas the UGS solution model is good for those companies who already have one or more of the tools that have been integrated and need an easy stepping stone to get to the next level, the from-the-ground-up model is probably a better way to go for those innovative companies that do not have any of the solution sets or are willing to change the way they look at PLM and Sourcing and take a new, integrated, approach.)

Furthermore, when you are dealing with the sourcing of complex assemblies, it’s usually not the raw material costs you’re concerned about, since these are fairly constant around the globe, but the production costs – which usually boils down to the labor. Auctions have little value beyond the most basic components (such as screws, nuts, and bolts) since the only wiggle room the supplier will generally have is their margin. There are not a lot of (complex) constraints, as you don’t have a lot of leeway, so complex decision optimization is usually not required – it’s really just looking for the lowest landed cost, which is easily computed, while making sure any diversity or dual sourcing constraints are met. So, beyond RFx and (at most) simple optimization, for the most part, you don’t need complex sourcing functionality. And where you are concerned about raw material costs, you’ll do a spend analysis project outside of the individual assembly sourcing events to benchmark your expected costs, which will then be fed into each sourcing event. As for contract management, the contract is fairly simple – provide the required assembly in the designated quantity at the designated time – since all the details are in the appendices which consist of the design documents and CAD/CAM models. So, tracking the design documents, the award, and a single attachment that represents the standard terms generally accomplishes the required level of contract management. And the project management that is required is not really sourcing project management but PLM project management – sourcing project management is just a subset that consists of the quoting phase and final award selection.

Thus, if you are a manufacturer – be it aerospace, automotive, defense, heavy machinery, high-tech, medical device, or diversified – there is a good chance that your current solution for sourcing, if you have one, is likely not meeting all of your needs. Furthermore, to meet your more complex needs, you likely need a new type of direct sourcing solution that was designed to manage your PLM needs from day one. In part II, I will introduce this solution to you. Stay tuned.

(P.S. In order to prevent anyone from ruining the surprise, and to insure all related discussion is centralized in one place – in the forthcoming post II, I’ve disabled comments for this post. Thank you for your patience.)

The Arena Solution

The effectiveness of your Product Lifecycle Management (PLM) solution and its ability to manage the information associated with the entire lifecycle of a product from conception, through design and manufacture, to service and disposal, can be the difference between costly inefficiency and profitable efficiency. However, the complexity and cost associated with many traditional PLM solutions often puts these solutions out of reach of most small and mid-size companies. That’s why the on-demand PLM solution from Arena deserves due consideration from any product manufacturer looking to increase their efficiency and productivity and why sourcing and procurement professionals should be familiar with it, and its benefits, since the greatest cost reductions result when sourcing is involved in product development from day one.

Arena, founded in 2000 by ex-manufacturing executives who needed an easy to use, affordable, and quick-to-implement PLM solution that could take advantage of the internet as a delivery mechanism to allow for collaboration both within and beyond their four walls, is different from traditional PLM providers in that it is easy to implement, easier to use, and accessible to all of your partners, to whatever extent you want it to be.

Whereas a typical behind-the-firewall PLM solution is often challenging even for trained power-users, as expensive as SAP (comparative speaking), and significantly complex and time-consuming to implement (with implementation and configuration cycles of six months to two years not uncommon – and sometimes only for basic functionality), small to mid-size users of Arena can often be up and running in a day, with the most complex implementation maxing out at about a month.

Arena also has all the traditional benefits of an on-demand solution – including no large up front cash outlay, economies of scale, free upgrades, rapid responsiveness, and collaboration in addition to an ultra-configurable fine-grained security model, cirriculum-based on-demand training, and multiple role support to allow you to buy just the capabilities you need for each user. This makes the application very secure as you can control, right down to the domain and IP address, who has access to what and when the information expires and ultra-deletes, very useable as a user can access just the training resources she needs when she needs them, and makes the application very affordable as a company only has to pay for full access for the users that need it.

Furthermore, Arena is a very stable company with over 300 customers from garage shop operations all the way up to entire divisions of companies like Xerox. Many of these companies use the application across departments and with suppliers and partners distributed all over the globe. And when you factor in that they do a quarterly analysis on application usage on a customer-by-customer basis to determine not only what customers are using what features but what customers are not using the capabilities they paid for, so that they can contact those customers and find out what they need to improve either in the application, the training materials, or the customer support, you know that they’re not going anywhere.

Arena is particularly suited to the mid-market that they’re focussed on. Their on-demand model allows them to offer a flexible pricing model that can support three guys in a garage all the way up to large mid-market companies and their focus on the Product Information Management (PIM) aspect of PLM allows them to offer a PLM for mere mortals solution that anyone can (learn to) use. So if your mid-market company is looking for a PLM solution, make sure that the candidate solutions are those that can also be used by sourcing professionals like you and consider pushing to have Arena added to that list. After all, when it comes to on-demand, there just aren’t that many PLM providers, and fewer still that built their solution on-demand from the ground up. In the former category, I believe there’s PTC’s Windchill solution, which is resold by IBM, and Oracle‘s hosted Agile solution (which isn’t really true SaaS), but in the latter category, and I’ll admit I’m not an expert in the PLM space, I don’t know of any other on-demand PLM solutions that were built to be on-demand SaaS from the ground up.

The Top Three VI: Straight to the Bottom Line

Today I’m thrilled to bring you a guest post from Doug Smock, editorial director of Global CPO (.com) and co-author of On-Demand Supply Management and Straight to the Bottom Line.

First I’d like to thank Michael for the invitation to participate in the blogathan. I’ve spent most of the last three years since I left Purchasing magazine writing two books about what I consider to be the biggest issues in the procurement world, and have already vented my spleen about such critical issues as CEO involvement/buy-in as well as world-class metrics (since 99.9% of all procurement departments I’ve visited have terrible metrics).

For this, I’d like to touch briefly on the need in American companies for greater cross-functional collaboration between procurement and engineering. The primary goals need to be reduction of specifications’ complexity, introduction of new ideas throughout the supply base, better understanding of “could” costs, improved management of products through their entire lifecycle, and dramatically improved product quality and user-friendliness.

When I first joined the staff of Purchasing magazine in 1977, we used to run a special issue called Value Engineering in which we ran reports of how teams of purchasing and engineering professionals met to reduce costs or improve performance of existing, or even brand new, products. I once visited Buell Motorcycles in East Troy, WI, and saw how product development began with a talk by founder Erik Buell on his vision for a new sports bike: the cost target, speed, look, and feel. Engineers and purchasing professionals then broke into platform teams and met with key supplier partners to develop components. One team replaced a 21-part front section of assembled metal pieces with a sleek-looking, stronger and cheaper single made through an outsourced metal molding process. When I returned to Purchasing as Chief Editor in 2000, I couldn’t really understand why the Value Engineering issue had disappeared. It also seemed to disappear at many companies in the blitz of wonders related to dotcomism.

That’s a shame because what suppliers bring to the table is incredibly powerful in this process. I saw it recently in the newly designed Cabrio and Duet line of laundry products from Whirlpool, where suppliers proposed solutions to technical problems that internal engineering teams felt were irresolvable. I hate to kick a dog when it’s down, but this to me is the most lamentable of all of the problems with the American automobile industry. Bob Lutz, currently chairman of GM North America and former head of Chrysler, once famously commented: “I was amazed (and a bit appalled) at the lack of functional integration at the companies I worked for.”

I know the blogs focus a lot on software, but I’d like to see a little more emphasis on blocking and tackling at the company level.

Editor’s note. Bold was introduced to help draw out Doug’s key ideas. Also, our blogs do occasionally tackle more than just software, and two posts in particular I’d like to point out are Jason Busch’s “Selling the Value of Procurement to the Business”* on Spend Matters [WayBackMachine] and Tim Minahan’s “Selling Supply Management to the C-Suite: Make it Personal” on Supply Excellence [WayBackMachine]. Also, keep your eyes on the eSourcing Wiki [WayBackMachine]. More content is on its way, including a wiki on perfecting your pitch for a procurement project to pointmen.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Understanding UGS

During my whirlwind Dallas tour, I met with UGS the day before Siemens publicly announced the acquisition, which took the media world by storm. (See Jason’s “UGS and Siemens”* post on Spend Matters, for example.) Not wanting my post to get lost in the shuffle, or confused with yet another analysis of what the takeover means for UGS, I decided to wait a while before moving forward with a post.

My goal was to understand how UGS, who I’d primarily associated with Product Lifecycle Management, was going to take the sourcing and spend management world by storm … which I assumed to be their intent once they signed on as a Spend Matters sponsor.

UGS believes that sourcing, or at least sourcing of direct goods, is really an extension of PLM and that an integrated collaborative environment where everyone has access to the same information, and the same world view, is the ultimate key to sourcing success. This is why they acquired eBreviate, a former player in the e-Sourcing space known for their e-RFX and e-Auction capabilities. And this is why they are working hard to integrate all of the sourcing tools that they acquired from eBrieviate into their TeamCenter for SRM (Supplier Relationship Management) solution. (The basic e-RFX and Auction tools have already been integrated.)

In their solution, a part specification sits in their TeamCenter solution. It might be designed in the TeamCenter solution, or in one of the design tools that UGS provides (which integrated with TeamCenter). When it’s time to source materials, the sourcing professionals can log into their TeamCenter application which integrates with the design team’s TeamCenter application and allows the sourcing professional, in one window, to access the specifications and demands. From here, they can run reports, access templates to build an eRFX, access other e-Sourcing tools, and run analysis on current and historical data. They can then publish the e-RFX and receive responses through the tool for analysis. Once they receive responses, cost information can be fed back into the system and the design team can choose to re-design the part, or change the specifications. Furthermore, once an award has been made, the system can be used to collaborate with the suppliers to identify cost-saving design improvements.

Considering that product cost management is a difficult process (just read Eric Hill’s guest posts over on Spend Matters: “What’s the Nature of Your Business?”*, “The Fourth F153″*, “Product Cost Models: An Introduction”*, “What Product Cost Models Are Not — Mythbusting”*, “The Fundamental Dimensions of a Cost Model”*, “eBay and BoB: Cost Model Methodology Cost Modeling Part 1 of 3″*, “The Oracle of Delphi: Empirical Statistical Models Cost Model Methodology Part 2 of 3″*, “Elementary My Dear Watson: Mechanistic Models Cost Modeling Methodology Part 3 of 3″*) that involves systems engineering, requirements, procurement, design, bill of materials, processing costs, service and warranty costs, etc. etc. etc., having one system that everyone in the organization involved with the life-cycle of a part can use to get a common viewpoint could prove to be quite invaluable.

Now I have to admit I do not know how useful or viable their solution is outside of the manufacturing and engineering sectors, but given the size of that marketplace, the dearth of advanced sourcing solutions for the space, the fact that almost every advanced sourcing solution is different (but then again, almost every approach is focussed on a different problem), they definitely have a large potential market in this space alone, and for now, I’m sure that’s more than enough.

So grab your board and keep an eye on the water. I’m sure they’ll be making waves before the year is over. And for those of you in a manufacturing design company, they might just be the waves you want to surf.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Enterprise Manufacturing Intelligence

Informance (merged with QlickiT, acquired by Catalyst IT) just released their Enterprise Manufacturing Intelligence Solution for manufacturing companies eager to accelerate improvement initiatives, drive operating strategies, and obtain actionable insight for operational performance.

According to their press release, their EMI solution delivers the top-three critical capabilities required to drive better business decisions:

  • multi-site performance analysis
  • enterprise visibility of production financial performance
  • data aggregation from multiple plant facilities

The solution consists of two modules:

  • Informance Manufacturing Strategist
    • What if Scenario AnalysisEvaluate strategies and the impact on KPIs based on real time data.
    • Bi-Directional Information FlowAllows for the development of strategies and day-to-day operating tactics.
    • Real-Time Performance MonitoringA solid foundation for closed-loop process improvement.
  • Informance Enterprise Alerts
    • Proactive NotificationsAutomatic warnings if the enterprise is in danger of missing a metric at any level – facility, asset, or resource.
    • Dashboard MonitoringManage issues globally from a single access point.

According to Informance, this allows your enterprise to:

  • Unlock Capacity
  • Increase Productivity without additional Capital Investment
  • Reduce Inventory and Labor Costs
  • Decrease Working Capital

since it can now

  • accelerate, sustain, and benchmark operational performance initiatives such as lean manufacturing, Six Sigma, and TPM,
  • drive operating strategies at the executive level into execution tactics at the plant level, and
  • provide intelligence in the form of actionable insight from actual data.

So what is Enterprise Manufacturing Intelligence? According to Informance, it is a strategic decision support system providing real-time visibility and a consolidated view into your entire manufacturing operations with powerful analytics, exception-based alerting capabilities, and integration to enterprise systems to give corporate decision makers control over all aspects of your manufacturing operations.

Whether or not you choose to define Enterprise Manufacturing Intelligence, or EMI, this way is up to you. What I can tell you is that these capabilities are important, since inefficient operations can cost you a lot of money. That’s why I’ve invited Sudy Bharadwaj, CMO & VP of Solutions Consulting, formerly of Aberdeen, to explain to us precisely what Informance EMI is and how it can help your manufacturing organization, or your contract manufacturer, increase productivity and save money.