How Winning Product Designs Leverage PLM and ERP

[Stefanie_O]

Close collaboration between engineering teams inside and outside the enterprise requires a comprehensive approach to product development.

The ability to identify, define and specify new product ideas is paramount for maintaining competitive advantage in the dynamic world of manufacturing. Engineers play a crucial role in this process, bridging the gap between concept and reality.

However, the creation of successful new products calls for a comprehensive approach that involves multiple departments and links to a wide range of enterprise processes. Selecting and defining new products requires close collaboration between teams and participants beyond the R&D or Engineering organization and even beyond the enterprise itself.

Identifying New Product Opportunities

The first step towards creating a successful product is typically the collection of ideas from the internal community, including product experts, technicians and the marketing and sales teams. In addition, external sources such as customers, partners and technology experts need to be involved to understand the needs of the market.

This idea collection process is collaborative, facilitated through a central idea repository that is ideally available as a cloud service accessible by internal and external communities worldwide.

A central idea management platform helps companies to keep track of promising new product candidates, share and develop product ideas with the community and discover synergies between ideas from various business units within the company.

Valuable input can also be gained through a continuous review of revenues, cost and quality performance of the company’s existing product portfolio. Declining sales numbers or increasing production costs can indicate the need for a product re-design or new product generation. For this reason, product managers need to be able to retrieve a 360-degree product view that includes multiple product aspects such as product revenues, quality and compliance information as well as development and production costs.

Such a 360-degree view requires connecting a Product Lifecycle Management (PLM) system to the company’s enterprise resource planning (ERP) system and its associated accounting, production and supply processes.

Managing so many product details can quickly overwhelm innovation and product management teams, but using Artificial Intelligence (AI) can help support these teams by scanning and identifying similar ideas, connecting experts across the company and identifying synergies between development projects.

This is why idea management is not just a spreadsheet of good product ideas: it’s a managed business process that requires collaboration, integration with ERP and input from across the company and beyond, blended with a bit help from AI.

Screenshot of Product Innovation Campaigns with an application within the SAP PLM solutions portfolio.

Selecting the Best Product Ideas with Portfolio Management

Once a promising product idea has been identified, it’s time to ask for budget and resources to develop and bring the product to the market. In a highly innovative company, there will be hundreds of new product ideas all competing for the same limited resources and budgets. How do you ensure the right projects are picked to avoid burning money and resources with R&D projects that deliver low value or which do not meet the overall corporate strategy?

Companies with large product portfolios—e.g. in consumer products, life sciences or high-tech—have established a portfolio management process for this purpose. This process helps the product managers at those enterprises analyze new product investments as well as compare costs, risks and benefits for each development project. In addition, product managers can also use scoring methods to generate a ranked list of project ideas and evaluate how these investments fit to corporate strategy and goals.

In a highly dynamic environment, a structured portfolio management process is important to reduce the risk of poor investment decisions, resulting in a highly effective R&D team that can steadily increase its output of successful and sustainable product launches.

As a pre-condition for running an efficient portfolio management process, it is crucial for a company to define and communicate clear, strategic objectives and develop a prioritization framework that considers factors such as strategic alignment, potential return on investment, resource availability, market demand and risk.

The portfolio process requires product managers to evaluate the feasibility of each project proposal by assessing its technical, operational, financial and market viability. In addition, costs and benefits associated with each project need to be estimated before the investment decision is made. These estimates will serve later as the baseline for monitoring planned product development costs against actual value provided by the accounting department.

Last but not least, portfolio management aims to check the organization’s resource capacity, including personnel, budget and infrastructure. It ensures that selected projects can be adequately supported without overburdening the organization. Here, project portfolio management requires accurate insights into workforce availability, considering individual information such as sickness, leave and working hours. Ideally, a resource planning tool should be able to retrieve this information from the HR system and match availability against the project demands.

Capacity Planning with SAP’s Enterprise Portfolio and Project Management and SAP Analytics Cloud.

An efficient portfolio decision process requires multi-dimensional input from various teams and processes across the company and beyond. Portfolio management is a true ERP discipline that is fueled with project and product ideas and information from sales, finance, manufacturing and HR.

Executing and Monitoring Product Development Projects

Translating portfolio decisions into executable tactical project plans represents a critical breaking point in the innovation process. How do you ensure that agreed upon timelines, budgets and resource commitments are available to successfully initiate and execute the project on the operational level? It’s been observed that, in many organizations, portfolio management is managed through an isolated  IT solution, decoupled from the tactical project management system and ERP processes.

This increases the risk that projects will start to deviate from their initial plan and goals, failing to deliver the outcomes that have been agreed on and approved by the portfolio stakeholder. Thus, it is crucial that every investment case that is approved within a portfolio management solution is firmly linked to an operational project plan. This enables the stakeholders to track project execution and understand how changes impact the initial business case.

By establishing a systematic link between strategic planning and operational execution, the project management office can reduce the need for manual interactions and automate a large part of the reporting process. This enables the project management office to handle large project portfolios and quickly generate comprehensive and accurate project reports at any time.

A real, live example from a German automotive supplier shows that automating the synchronization between the strategic portfolio and the tactical project level shortened the time for generating stakeholder reports from several weeks to a few hours.

Manage projects company-wide from a centralized repository and keep the portfolio on track – from forecasting and planning to accounting and closure with SAP.

The growing complexity of products, driven not only by new technologies but also by an increasing amount of sustainability, product compliance and commercial requirements leads to more complex development projects.

In the past, a local team would be sufficient to develop and launch a single product. Nowadays, a full armada of experts spread across the globe must be involved. This requires additional efforts in terms of coordination and synchronization between project team members. In such virtual work environments, team members need to be proactively informed about expected deliverables, tasks and timelines. In addition, team members in remote locations need ways to easily report back progress, changes and upcoming issues in the project.

A global cloud-based project platform can help to facilitate the collaboration between project members beyond silos in engineering and stakeholders in and outside of an enterprise by providing direct access to project plans, task lists and status reports from anywhere in the world. In addition, the ability to link project tasks directly to the engineering work—such as CAD drawings, specifications, requirements lists, etc.—helps the project manager keep track of deliverables in each development stage and monitor overall project progress based on real engineering artifacts.

Manage and track project costs with Enterprise Portfolio and Project Management in SAP S/4HANA.

Design Better with PLM and ERP Together

Creating successful new products in the manufacturing industry requires a holistic approach that integrates not only research and engineering but also a wide range of ERP process, including finance/controlling, compliance, sustainability, supply chain and human resource management.

By fostering cross-departmental collaboration through a PLM solution that is deeply integrated into a company’s ERP system and using early supplier networks, enterprises are able to increase their efficiency in designing winning products for highly competitive markets.

By leveraging a natively integrated PLM+ERP environment, engineers and designers can efficiently define their portfolio to develop and deliver sustainable and profitable products that meet customer needs.

Read more in the article Striking the Perfect Balance and on the SAP website.