Benefits of Integrating PLM & ERP
The benefits of product lifecycle management (PLM) and enterprise resource management (ERP) are well known. These systems help businesses organize vital information, operate more efficiently and improve their bottom line. They can be made even more useful, however, by integrating them. In fact, many professionals would argue that you need both to take full advantage of either of their capabilities. Let’s look more in depth at how PLM and ERP work together.
What Is PLM?
Product lifecycle management focuses on production and manufacturing processes and encompasses all parts of product development from concept to distribution. Our PLM solution includes product design, sourcing, demand management, supply chain planning, inventory management and multi-channel distribution capabilities. The PLM helps to organize crucial data such as product files, bills of materials and approved manufacturer lists.
Through the use of a PLM, you can track product information changes and easily communicate them to the necessary components of the supply chain. A PLM can update in real time so that you always have access to the most recent product information. This is especially helpful when multiple departments may make changes to production processes. It keeps everything in one central location and keeps everyone on the same page.
What Is ERP?
The main purpose of enterprise resource planning (ERP) is managing financial information. It serves as a place to organize reporting related to accounting, sales forecasting, customer support, shipping logistics and manufacturing planning. Our ERP helps you to manage your order processing, purchasing, financial accounting, inventory and manufacturing processes.
Companies that do their manufacturing in-house can use an ERP to enhance coordination between the manufacturing, finance and sales departments. Other businesses may use it for accounting, inventory and procurement. An ERP system would be especially useful if you build complicated made-to-order items.
An ERP enables you to track orders from receipt to delivery. It provides you with a clear picture of your inventory, delivery timeframes and production efficiency. Armed with this knowledge, you can place more accurate purchases of materials and inventory to avoid over- or under-stocking. You can also communicate this information with any manufacturers you contract with, so they can prepare for the proper production levels.
PLM vs. ERP
The main difference between PLM and ERP systems is that a PLM manages a product through its lifecycle, while an ERP is geared toward different business functions, such as ordering or accounting.
A PLM serves as a system for managing your product over its lifecycle and organizing all your product information. It includes capabilities such as:
- Product design
- Demand management
- Supply chain planning
- Inventory management
- Multi-channel distribution
An ERP focuses on the financial side of things and helps you to organize all finance-related records. It includes capabilities such as:
- Order processing
- Financial accounting
- Inventory management
- Manufacturing management
By using the two simultaneously, your business processes will be more streamlined and efficient.
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Although production lifecycle management and enterprise resource planning deal with different business needs, the processes they support are closely related and, so, it’s helpful to integrate your PLM and your ERP. The two systems can communicate with each other, each making the other more accurate and useful.
The PLM is concerned with the development of the product, and the ERP focuses on the resources needed for production. Because of this, it makes sense to use them in the order the product information would naturally move through them.
You would manage the design of a new product in the PLM. By the time that product is ready for production, the PLM will contain all the information related to that item. The data would then transfer to ERP, so you can use it to manage the resource involved in producing the product. If a change occurs during resource planning process, that information could be communicated to the PLM.
Integrating these two systems ensures that both of them have the same information and the most up-to-date information at all times. This coordination is crucial because a change in one system will impact the other. If you enter incorrect data into an ERP, you could end up ordering too much or too little or an item or the wrong item entirely. If you use an ERP but not a PLM, there will be a gap in your records that can make management of your processes more difficult and costly.
Benefits of Integrating PLM and ERP
Product lifecycle management and enterprise resource planning have benefits on their own, but using the two together in an integrated fashion can help you to take full advantage of each of the systems. Plus, integration brings about some powerful benefits of its own.
Research conducted by Aberdeen Group has found that PLM and ERP integration correlates to business success. The study broke participating companies into three categories based on performance — best in class, industry average and laggard. The best-in-class companies, the researchers found, were 40 percent more likely to have integrated PLM and ERP systems.
What is it about this integration that allows it to contribute so much to success?
One of the most attractive benefits of PLM and ERP integration is the cost savings it can produce. Because these systems automatically transfer data back and forth, there are fewer opportunities for making errors. Instead of inputting data separately into each system, you only need to input it once. That data can transfer directly to the other system and inform its analyses, making for more accurate information and predictions. Combining the two systems also virtually eliminates the chance of discrepancies existing between them.
This enhanced accuracy means that purchase orders can be placed with more confidence, enabling you to avoid wasting money on unnecessary supplies as well prevent shortages, which can force you to delay delivery of orders and lead to hiring supply chain costs.
Having all of your data in one place also allows you to get a clearer picture of your business’ operations, making it easier to identify areas where you could potentially reduce costs.
Not only can PLM/ERP integration reduce costs, but it can also increase efficiency and productivity, which may increase revenue. The near-real-time data transfer between the systems means that you’re always informed of what’s going on so that you can adjust as needed. With more information about your operations at your fingertips, you can also more readily identify possible areas for improvement.
Your employees will also save time because they will no longer need to input data multiple times. The automatic data updating and transfer possible with combined PLM/ERP systems can take over these repetitive tasks. Employees can then focus on more productive tasks that put their skills to use and help improve the productivity of the company.
Enhanced Coordination Across Departments
Various people across multiple departments often need to input data into business systems, especially in larger organizations. If different employees upload slightly different information, use non-compatible formats or just don’t have access to each other’s data, confusion and miscommunication can occur. This can lead to mistakes, unnecessary costs and lost revenue.
Integrating your business systems helps to keep everyone on the same page by ensuring that all staff members have access to the same data. This is especially important when tracking changes. If someone needs to make an adjustment, especially a last-minute one, it’s crucial that the affected parties get informed of the change as soon as possible. With integrated PLM/ERP tools, they’ll automatically get updated information. You can also look at the history of changes to get a better idea of how your products and processes have changed over time.
By encouraging information-sharing and communication between departments, system integration can inspire collaboration between departments that can lead to unexpected business improvements. When one department gains access to data they didn’t have before, it could help them understand the role in the company better as well as the overall operation of the business. This knowledge can help them to perform better and be more productive.
Improved Customer Satisfaction
The error reduction, increased efficiency and process improvements that PLM/ERP integration can inspire will ultimately lead to happier customers. Although these two tools focus mostly on internal processes, using them, especially together, can help you to fulfill customer orders more accurately and more quickly. It could even potentially allow you to lower prices to gain more customers.
The automation of some processes that using these tools enables also gives employees more time to focus on fulfilling orders, helping customers, improving products and other critical tasks. You can also, in some cases, use these systems to directly manage customer care and product testing to eventually create better goods.
Once you integrate your PLM and ERP, you might also choose to integrate it with a customer relationship management solution, or a CRM. Doing so will improve the accuracy and usefulness of the data in your CRM, helping you to improve your relationships with your customers.
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How to Approach PLM/ERP Integration
There are several different methods you could use to integrate your PLM and ERP. You could enable them to communicate directly with each other, either one way or back and forth between the two applications. You might also choose to use a middleman program that takes the data from each back and transfers it to the other. This solution could also work for integrating other business systems. You might also choose to send data from both tools to a completely separate application for viewing.
The method you choose will depend on your organization’s needs and capabilities. Here are a few things to keep in mind when figuring out how you’re going to approach your PLM/ERP integration.
Make It Your First Integration
Your PLM and ERP aren’t the only two tools you could integrate, but research suggests with them, your first integration could be beneficial. The Aberdeen study mentioned earlier also found that best-in-class performers had started with this integration, while laggard companies had started elsewhere. Best-in-class businesses that had not integrated their PLM and ERP had no other integrations. Laggard companies without PLM/ERP integration were more likely to have other integrations.
In the study, PLM and ERP was by far the most common integration. 59 percent of businesses had integrated these two systems, twice as much as any other two systems.
Those high-performing businesses likely started with PLM and ERP because they’re so fundamental to a business. They focus on the product and the resources needed to make it, which are, of course, central to everything a business does. Starting there demonstrates a more organized approach to integration that seems to make the whole process more successful.
An important consideration in a PLM/ERP integration is in which direction or directions data will flow. If possible, set up a system that allows information to flow both ways, from the PLM to the ERP and the other way around. That way when someone makes a change to the information in either system, the other will receive an update as well.
You should also ensure that users of both systems receive notifications when a change occurs and understand what the adjustment means for their processes. This means that not only should the systems be able to transfer data between each other, they should be able to alert each other of those changes.
Make Integration Comprehensive
You should take steps to make your integration as complete as possible. Rather than focusing on just a few data sets, incorporate as much useful information as you can. Of course, you’ll have to make sure that this information translates into a useable format in either system.
In addition to more basic information, your ERP should also send information on actual costs as well as sourcing and supplier data to your PLM. Your PLM should also provide a target cost to the ERP, an estimate of what costs should be. This is a rather novel approach to determining costs since it takes place much earlier in the process than is typical, but it’s a tactic that many leading businesses are now using.
Sharing this kind of information between the two systems will make both databases more accurate and prove more context for their information, potentially making them more useful to your organization.
Keep Track of Usage
Develop a way to keep track of how data is used that applies to both systems including information that one resource sends to the other. This will help you to get a better idea of what data is useful and why and how it can be used to improve your organization’s operations.
Keeping a record of usage will give all employees access to more ideas for how to use data and prevent different staff members from repeating questions that others have answered before them. Usage tracking will make for efficient use of data and enable it to contribute to more process improvements at your company.
FDM4’s PLM and ERP Solutions
At FDM4, we offer both an enterprise resource management solution and a product lifecycle management solution, as well as other businesses systems. Using our systems for all of your management will make integration easier since our various tools readily work together.