Saturn Electronics & Engineering Inc.'s growth strategy hinges on software. The privately held maker of electronic components in Auburn Hills, Mich., wants to play in the global leagues to better serve its big manufacturing customers. For starters, Saturn has set up shop in the Philippines. There, some 40 engineers pick up work that is still pending when their U.S. counterparts head home at day's end. Adding a second day shift means Saturn can deliver products faster and more cheaply.
To make this transpacific collaboration go smoothly, engineering director Paul Fleck invested more than $1 million in two programs -- one coordinates the online design process, the other watches over product-development costs. It was a gutsy move for a company with less than $400 million in revenues. But Fleck expects the new software from Agile Software Corp. (AGIL) to pay for itself within 18 months through a combination of cost savings and new business.
Saturn is just one of a growing crowd of midsize manufacturers spending big bucks on the industry's latest craze: product life-cycle management. PLM is unleashing a revolution in product development, with tools for improving everything from design and engineering to manufacturing and field service -- even final disposal of discarded products. Market researcher CIMdata Inc. pegs PLM's sales this year at nearly $15 billion, heading to more than $20 billion in 2008.
In the 1990s, PLM was used mainly by automotive and aerospace giants. Early versions of the software were pricey integrated suites, but PLM vendors now offer separate modules, like the two that Saturn bought. Moreover, to small companies, PLM's promises sounded too much like the hype surrounding previous enterprise-software programs, which often didn't live up to their hoopla.
So what's different about PLM? That's simple, says Monica A. Schnitger, a senior vice-president at market researcher Daratech Inc. PLM emphasizes new-revenue generation, or top-line growth, as opposed to cutting costs. "Most companies have done about as much cost-cutting as they can. The best way to increase revenue is to get better products to market more quickly."
That potential has universal appeal across all manufacturing sectors, not just in high tech. "Top-line growth is the key benefit," concurs Stephen A. Segal, chief information officer at Canada's Loewen Windows, which makes wood-framed windows and doors for luxury homes in a factory near Calgary. For its first PLM module, Loewen last year plunked down $150,000 for a Catia computer-aided design and engineering (CAD/CAE) system from IBM (IBM). "Since everything we build is made to order, our lead times are typically four to six weeks," says Segal. "If we can knock off one week, the payback from faster revenues will be in the millions of dollars every year."
For large companies, PLM's product-portfolio management tools offer a different route to better top-line numbers. "At companies with complex portfolios, like Nike Inc. (NKE) or Stanley Works (SWK), the key thing you want to understand is which products are worth investing in," says James E. Heppelman, executive vice-president at Parametric Technology Corp. (PMTC), a PLM supplier in Needham, Mass. "PLM can tell you that," he says, by correlating the better-margin items with market intelligence on what's likely to sell.
Some small and midsize companies that have been slow to see the light are getting pulled into PLM by the bigger manufacturers they serve. "Once they get a little experience, they see the benefits, too," says Robert M. Nierman, president of business strategy at UGS PLM Solutions, a unit of Electronic Data Systems Corp. (EDS). "There's a trickle-down effect from the aerospace and auto industries, which bit off PLM first."
In the 1990s, Detroit had a huge anchor weighing down product development: incompatible CAD and product-data management (PDM) systems, where designs are stored with information on materials and CAE data. At General Motors Corp. (GM), each division had its own CAD and PDM system, and most couldn't talk to their counterparts in other departments, notes Michael Burkett, research director at market watcher AMR Research Inc. So when a CAD file got passed to a CAE system and then to a factory computer, the data had to be manually translated. Not only did manual reentry waste time, it led to countless errors. By the late '90s, the car industry's bill for fixing these goofs was running around $900 million a year, according to a study by the National Institute of Standards & Technology.
GM became a PLM champion when it started to clean shop in the mid-1990s. Product designs and related data were then stored on 1,500 different servers, says Burkett. Just consolidating that army of computers has saved millions in annual maintenance costs. In addition, GM launched a sweeping program to standardize its CAD and PDM tools so designs could flit instantly and flawlessly among computers. As GM brought in PLM software and insisted its suppliers follow suit, its product-cycle times steadily shrunk, from 44 months to the current 18 months.
PLM is also curbing the plague of engineering change orders. Such changes have been an eternal curse on factories everywhere. Detroit still handles some 300,000 orders of this sort each year, at an average cost of $50,000 each. And that can get multiplied tenfold if time and money must also be spent to revise the so-called jigs and fixtures that hold parts in machine tools or on assembly lines. "The PLM agenda," says Eric Sterling, a UGS vice-president, "is to make sure it's right the first time, before you build anything."
Right-the-first-time designs: It's the mantra of both analysts and new PLM converts. "Getting the design right produces numerous benefits," says Oliver Masefield, vice-president for engineering at Eclipse Aviation Corp. The Albuquerque startup is developing a small twin-jet plane -- and leaning on a full-blown PLM suite to coordinate with suppliers in Japan, China, and Britain that will build the wings, nose section, and fuselage. Eclipse's supply chain will be guided by virtually perfect digital prototypes. "We model everything down to the minutest detail," Masefield says, "including each and every rivet."
VIDEO: Digital prototype of landing gear from Israel Aircraft Industries'
Galaxy aircraft created using UGS PLM Solutions' NX design software,
validates that the system functions properly and can sustain the plane's
Source: UGS PLM Solutions
Engineering-analysis tools that plug into CAD systems can now create digital prototypes so functionally realistic that Floyd Rose, head of Floyd Rose Guitar Co. in Redmond, Wash., didn't bother to build a physical prototype of an electric guitar he unveiled in 2001. He just used his Catia-created model to begin production -- and moved up the launch date by several months.
In fact, when CAD equipment is linked to PLM's oversight capabilities, the system can become smart enough to suggest its own designs, which engineers then tweak. That's how Delta Marin, a marine-engineering company in Turku, Finland, developed a new bridge for big container ships. Designers fed into the computer the maritime regulations for visibility over and around the containers stacked on deck so captains can see a safe distance ahead of the ship, and the CAE system calculated what was permissible.
Such capabilities "are going to make a huge difference," says Paul G.P. Hoogenboom, CIO at RPM International Inc., a Medina (Ohio) chemicals company with subsidiaries in 17 countries. It markets Rust-Oleum paint and other products that also must meet many regulatory requirements. "With PLM, compliance is built into the workflow," he says. "The system won't allow you to create a formulation with a material" that isn't approved.
PLM towers over previous efforts to integrate product development, says AMR's Burkett. When other enterprise-software juggernauts came to market a decade or more ago, he notes, "the type of thought processes that now dominate manufacturing [in this online age] didn't even exist." The Internet changed mind sets -- and PLM is fundamentally revamping the rules of product development to fit manufacturing's new global game. By Otis Port in New York