What is PLM

What is PLM image

Operational Benefits

PLM has significant impact on internal, supplier-facing and customer-facing operational efficiency. AMR/Gartner provides some helpful research that highlights specific examples of the operational efficiency payback.

PLM systematically enables better communication and decision making in product development and engineering aspects of the product lifecycle, resulting in improved efficiency in these operating areas by:

  • Internally — Improving use of cost-center resources like core R&D, engineering, prototypes, and samples.

  • Supplier-facing — Enhancing the ability to purchase materials, parts, and customer services.

  • Customer-facing — Increasing knowledge of what style, configuration, or custom design to deliver or how to modify product characteristics in future versions.

Although most companies have existing metrics for these areas, measurable improvement will show within the first six months of live usage of a PLM system. More importantly, these existing operating metrics are also linked to higher-level strategic imperatives, such as speed, innovation, quality, and cost efficiency.

Therefore, improvements in operational efficiency are most critical, giving top management the ability to monitor process against the project milestones (such as loading data, or going live) and against performance goals of accelerating product innovation.

Internal Efficiency

The first set of operating benefits targeted with PLM initiatives is internal effectiveness. Paybacks in this area are among the easiest to prove with existing user best practices using ROI analysis.

Research done by AMR/Gartner displayed below shows specific examples of improvements in internal process efficiency.

Internal Operational Efficiencies:

  • ECO cycle time reduced by 50%; ECO admin expense reduced by 60% (Personal Computers)
  • Cut box assembly from 3 hours to 2 hours 15 minutes; ECO cycle time improved 40% (Storage)
  • TTM improved 40% (Farm Equipment)
  • Company spends 12%-14% of sales on product development. Improvement in NPD cycle time 20%; quality improvement of 40%. Key is increasing overall NPD capacity of the organization (Medical Devices)
  • 110 hours manual, 80 hours in AutoCAD 2d, 50 hours in Catia 1990, 1-2 hours today—90+% improvement (Engineered Systems)
  • Reduced design errors and rework by 25% (Transport Temperature Control)
  • TTM reduced by 5%; design errors and development costs reduced by 5% (Semiconductors)
  • Reduced TTM from 48 months to 18 months between 1997 and 2002; engineering productivity increased 10% per year 1997-2002; 35% reduction in Global Product Development budget (Automotive)
  • 7%-14% improvement in engineering non-value added time, reduction in ECO cycle time by 10% (Defense Programs)
  • 90% faster FDA document generation cycle time (Medical Devices)
  • Design cycle time reduced 25% (Weapons Systems)
  • Overall engineering administrative activity 80% improvement (ECO, search, vault, etc) (Storage)
  • ECO cycle time reduced from 33 days to 5 days (Electronics)

Supplier Facing

The second targeted area for operational improvement is supplier-facing activities in product development and lifecycle management. This area offers the clearest cost reduction and the most promise for immediate ROI because it focuses on design for lower total cost, resulting in reduction in redundant parts and material specifications.

See examples provided by AMR/Gartner below:

Supplier-Facing Efficiencies:

  • Reuse improved from less than 2% to 59%. Total savings: $500M over 3 years on direct materials (Computers)
  • Internal supply chain organization found 2% savings on direct materials purchase; $640M in materials acquisition savings potential across all groups (Industrial Products)
  • 10%-20% reduction in costs for packaging; reduction of 5%-10% on direct materials spend (Consumer Goods)
  • Target savings $3.9M in 2002; $8.5M in 2003 (Seatbelts for Auto)
  • By allowing suppliers access to its CAD files they have reduced the lead time in developing tooling by 80% (Semiconductor Equipment)
  • Material cost reductions approximately 2%-3% (Electronic Manufacturing Services)
  • 2% reduction in direct materials costs (Defense Programs)
  • 50% increase in component reuse, resulting in 5%-15% decrease in prices for standard parts (Aircraft)


The third area of operating improvement is customer-facing performance. Most business cases fail to isolate and concentrate on this area of payback, resulting in an often forgotten cost-reduction opportunity. Benefits that result from taking advantage of this area include higher customer satisfaction, higher win rates for custom designed products and components, and a positive impact on selling and service costs.

See some examples of these benefits below:

Customer-Facing Efficiencies:

  • Order to manufacture cycle time reduced from 4 weeks to one day; errors essentially eliminated (Wireless Transmissions)
  • "Significant" savings on allowances for warranty and returns (Farm Equipment)
  • Order errors reduced by 50% (Elevators)
  • RFQ response time reduction from 2 weeks to 24 hours (Electronic Manufacturing Services)
  • 30% reduction in cycle time for complex custome order taking, pulling in live CAD models, cost models, thermal models all linked (Custom Electrical Switch Gear)
  • Reduced order lead time by 50% (from 8-12 weeks to 4 weeks) using what if scenarios on screen and direct feedback from distributor customers (Custom Aftermarket Wheels)
  • Order volume increase 40%; order errors decrease 75% (Semiconductor)
  • Eliminated almost 100% of customer order errors; cut down purchasing order cycle time by 30 minutes per transaction; 100% elimination of sending out of date product records to customers (Electromechanical Machinery)
  • Reduced order errors by 60%-90% and reduced design spec time by 35%-90% (Furniture)
  • 50%-70% reduction in project (order to quote) cycle time Specialty Chemicals (non-asset) (Project Management)
  • 50% customer RFQ to prototype cycle time reduction (Bearings and Motion Control)
  • Customer RFQ cycle time reduced by 75% (Electronic Manufacturing Services)

Read about Who Uses PLM →