Executive Summary

The global economy has been turbulent for the last couple of years but the automotive industry, in particular, has been encountering the most challenging environment. Market dynamics are changing rapidly, thus forcing the auto makers to change their business strategies and to implement them successfully in order to stay competitive. Auto parts makers are further squeezed as they need to satisfy more diverse product requirements with low room for errors in a relatively much shorter time span. As radical technological trends are inevitable, harnessing this opportunity will enable companies with innovative products to gain market share. Product cost management software

The following key trends have been shaping the auto industry:

Auto-crisis: The latest crisis led to excess inventory and massive debt accrual for a number of big automakers in the US and Europe. At the same time, strong growth and a healthy economic outlook in BRIC nations has helped their local companies make headway into local as well as international markets. The financial landscape is forcing the big auto companies in the US, Europe and Japan to rapidly shift their strategy and to innovate faster in order to compete with the Asian auto and auto part makers.

Globalization: The opening of the international trade boundaries has helped companies expand into new growing markets such as Asia; however, it adds to the complexity of satisfying different types of local customer requirements making auto development complexity increase manifold.

Alternately, globalization is also increasing the threat of serious competition from Asian OEMs that are buying the anemic divisions of western OEMs thereby leapfrogging into gaining intellectual capital that can be easily exploited in conjunction with their cheap labor.

Quality, reliability and product differentiation to suit the local market at lower prices are becoming essential to a successful product portfolio. While protecting intellectual property rights, internal collaboration as well as that across the global supply chain has become paramount.

Regulations and sustainability: Increasing focus on pollution and fuel economy regulations is forcing companies to look beyond gas engines as there is a limit to reducing the emission and increasing fuel efficiency using conventional engines. With the maturity of battery technology, electric cars are changing the landscape rapidly and may even make the hybrid cars less relevant in the coming years. Safety issues can lead to costly legal battle and product recalls for the auto manufacturers. Companies need to exceed the government controls standards for their own good.

Technology: The vehicle landscape is changing rapidly. Newer technologies in auto battery, increased numbers of electronic components and control systems, software/hardware integration etc. are redefining the marketplace. Increased technological innovation along with shrinking product development cycles is overburdening the auto industry.

Cost: One of the biggest challenges is to lower the cost while maintaining high quality with a faster rate of product innovation in global marketplace, increased number of product types to suit local markets, and compliance with multiple set of regulations in different markets.

How does Product Lifecycle Management (PLM) help?

To address the automotive industry challenges brought about by the pace setting trends, companies need an in-depth understanding of trends impacting their specific business areas as well as a disciplined system and non-system based strategy formulation and execution strategy.

For the system based strategy, a complete solution must be flexible, robust and integrated utilizing Customer Need Management, Customer Relationship Management, Quality Management, Supply Chain Management and Product Lifecycle Management. A holistic system management approach is the right roadmap for auto companies but since business revolves around the products or services a company offers, PLM could be the single most rewarding area to focus on in system implementation.

Integrated or standalone, PLM solutions should be given a priority as it can deliver:

Integrated design with product record
Collaborative distributed design and feedback loop
Manufacturer, Supplier and Customer Collaboration
Building the right product the first time using distributed manufacturing
Tracking and minimizing cost
Protecting intellectual property
Maintaining regulatory, environmental and corporate compliance
Tracking product portfolio, product and project lifecycles
Closed loop quality feedback
Corrective and preventive action
Driving innovation at a faster pace
Increased profitability
PLM Vendor Selection

A number of PLM systems are available in the market today and a careful analysis is required with respect to cost and benefit analysis while selecting the PLM Vendors. While it may be difficult to quantify the benefits of PLM savings as a result of PLM deployment, it can be calculated using a matrix of the following criterion:

  • Cost
  • Software and Hardware
  • Business Process Designing/Re-engineering
  • Implementation and support
  • Integration and synchronization with ERP and other system of product records
  • Training and Change Management
  • Benefits
  • Business problems solved e.g. collaboration during new product introduction, change management and CAD management, proprietary information security and access to new markets due to product compliance
  • Quality gains e.g. reduced quality related recalls, quality action requests etc.
  • Process efficiency gains e.g. efficient searches and part reusability, new product introduction time reduction, change management time reduction and data entry related improvements.
  • Return on investment

An in depth cost and benefit analysis matrix can help companies estimate the ROI as well as the overall impact of PLM on the overall productivity.

CAD vs. Non-CAD PLM criteria

Often CAD design becomes the center of attention while selecting PLM systems in engineering centric sectors such as the automotive industry. Electrical Computer Aided Design (ECAD) and Mechanical Computer Aided Design (MCAD) are definitely critical for engineering functions but the PLM solution must extend across various functional areas in the extended supply chain.

PLM software with strong engineering collaboration and CAD integration capabilities to automate the item/BOM creation in the ERP/PLM system should be seriously considered while selecting the right PLM vendor. The best-of-the-breed PLM software with a complete enterprise solution and integrated service oriented architecture capability can easily outdo just the CAD based PLM systems in overall collaboration and efficiency gains.

On one hand, CAD based PLM vendors Dassault Systemes, PTC, and Siemens offer integration from CAD to their own PLM while lacking integration with the other CAD tools. On the other hand, software tool like Oracle Agile with non-CAD PLM tend to be more flexible in integration with all the major CAD tools and also provides Application Integration Architecture (AIA) to propagate the Product /BOM data into the ERP systems. This can be particularly important for those organizations following a growth by acquisition strategy, as hard to replace CAD systems in acquired/merged entities can be easily integrated with the central PLM and the ERP systems of the parent company thereby reducing the cost substantially.

To sum up, completeness of out-of-the-box features, user-friendliness, integration capabilities, high degree of configurability and extendibility in the product suite are particularly important in the vendor selection as using multiple PLM system can prove costly and can lead to an inconsistent user application experience. Architecture, data model and process standardization must be integral of the long-term strategy in the PLM system business decision.

PLM Solutions

Companies may be in different phases of the maturity spectrum to formulate, adopt and implement PLM strategies; however, a long term perspective should be taken on how the business will morph, thereby, creating a need to deploy future solutions that will forge the way to stay ahead of the competition.

Auto companies should look into adopting flow-based PLM solutions where streamlining the business processes is the main focus. Business flows can span across the cross-functional business area as well as the product modules. Some of the key business flow solutions can be outlined as:

  • Customer Need to Product Formulation
    Product design is usually originated by the marketing or product development team who comes out with either a new product concept or requirement(s) expressed by the customers. Customer needs can be captured from forums, enhancement requests, CRM and quality systems or any other documents. Such requirements can be converted into products using collaborative efforts and cross functional interactions.
  • Requirements to New Part Introduction (NPI)
    Once a product idea is approved internally, the part is created in the system. Product bill of material configuration, supplier part numbers, manufacturer’s part number, attachment and other associated detailed attributes are added to the part number as a part of the NPI process. Workflow driven processes greatly facilitate the progression and reduce the time frame while increasing data accuracy.
  • Design to Release
    Any good change control process to manage the product lifecycle phases should be workflow driven to increase efficiency, streamline the process and track changes. Various workflows based change types can be used to manage the product, structure, MPN change/ bulk change processes and automatically implement changes upon approval.