The PLM Debate
As part of our ongoing research programme, Cambashi is running a debate on product lifecycle management (PLM) and how it interfaces with the supply chain. Various IT vendors were invited to respond to a discussion paper : "In 2004, will PLM and SCM still be recognisable TLAs?" (a version of which was first published in the FT)

IFS response

Anders Berger, Director Research & Innovation

Is there a need for yet another cut of the business fundamentals?

The value of the original article, and the new pillars it proposes, is not in the names but in the way the pillars are described. These descriptions point to the value of going beyond pure operational and functionally oriented systems and enable a more holistic view, over time and over organisational boundaries. In essence, the article addresses the fundamental issues of "what customers to serve, with what products and when, by using what resources" - issues still not adequately addressed in most business applications, regardless of pillars and TLAs.

For IFS, the response to these business requirements is to provide a lifecycle perspective on customers, products and assets (human and physical) - a significant addition to business applications functionality. An important driver for adding the lifecycle perspective has been the major shift from direct revenues of product sales to indirect revenue streams from services and additional products. Profit margins and customer loyalty are increasingly found in the very early concept/design phases, as well as in the later service and support phases. Even though a lifecycle perspective on products, customers and assets will start to give managers actionable knowledge of lifetime costs and revenues, it will not do away with the need for highly streamlined planning and execution support, typically found in SCM, ERP, PLM and CRM.

The article claims that the outsourcing phenomenon is one driving force behind the need for rewriting or renaming the "map of fundamentals". We agree that the internet, regarded as a powerful infrastructure enabler, is changing the fundamental "make or buy" decisions in favour of increased outsourcing (verticalization due to decreasing transaction costs), as well as horizontal integration through mergers and acquisitions (economies of scale).

However, and to date not adequately recognized, transaction costs and thus outsourcing economics are dependent on the inter-organisational capabilities of business applications. Today, most collaborative applications support the transactional level of business well suited to contract manufacturing scenarios with limited design and development content or after sales/service processes. The transaction costs, including co-ordination costs and possible revenue, competence and relational erosion over the entire product lifecycle, might well counter any efficiency gains fuelled by specialization. This risk is particularly evident when e.g. the early development phases, the process engineering phase or the later service operations are taken into consideration. One primary reason being that neither collaborative applications nor pillars nor TLAs recognize sufficiently the need for communication and knowledge sharing between organisations and over the entire lifecycle. This is in fact a main reason for the emerging in-sourcing trend seen in e.g. the automobile industry. We would argue that there is still some work to be done on standards, integration platforms and collaborative applications before outsourcing can advance to the next level. However, this step does not necessarily require new IT acronyms, it will require added lifecycle capabilities to the functionality already included in SCM, PLM, ERP, CRM and other business applications.

As a final reflection, one could ask if the answer to the present confusion and future development of pillars and TLAs for describing business fundamentals, is to introduce yet another set of pillars or engage in a discourse around which TLA will replace which? In this respect, debating whether PLM will overtake SCM, or be a module in ERP, is rather academic from an IT-buyers perspective. Instead, the debate and the present confusion around PLM, ERP, SCM, CRM etc should partly be explained by vendors' and consultants' need for positioning and for creating market opportunities, bringing limited help to the IT-buyers trying to navigate in the jungle of pillars and TLAs.

To find out more, go to the IFS website at www.ifsworld.com

If you have any feedback to add to this debate, please email plm@cambashi.com with the subject "PLM debate".