Where Does Product Lifecycle Management (PLM) Help with Supply Chain Management?

PLM is a systematic approach to managing the series of changes a product goes through, from its design and development to its ultimate retirement or disposal. SCM, on the other hand, involves the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. 

The PLM software market is valued at US$47.3 billion in 2023, and is projected to reach US$80.3 billion by 2030, growing at a CAGR of 6.9%. It is a significant industry now and in the future (Product Lifecycle Management (PLM) - Global Strategic Business Report (researchandmarkets.com))

Excellence in PLM and SCM is necessary in intricate and highly regulated industries. Aerospace and defence industries account for the largest (23%) total market share of PLM, and is to be expected. North America is the largest region in the PLM market, accounting for 33% of the market in 2020. The APAC region in the global PLM market is projected to grow at the highest. (PLM Industry Statistics • WorldMetrics)

Frameworks

A way to visualise the interplay of PLM and SCM is to use the standard phases of PLM (Introduction, Growth, Maturity, Decline) and overlaying with the Supply Chain Operations Reference (SCOR) model (figure 1)

The SCOR model is a process reference model developed and endorsed by the Supply Chain Council (SCC), providing a standardized method of measuring supply chain performance, and a useful framework to analyse where PLM adds value.

Figure 1: Integration of PLM with SCM SCOR model

Plan

The Planning phase in SCM is about forecasting future requirements and creating a strategic plan to meet those needs. In PLM, this involves ideation, where product requirements are defined based on factors like competitor analysis, market gaps, or customer needs. It also involves forecasting what the growth, maturity, and decline phases will look like. In SCM, planning corresponds to the development of a strategy to balance that demand and supply, align the supply chain network, and plan for logistics both now and in the future.

In the planning phase, organizations define their supply chain strategy, allocate resources, and set performance goals. It is crucial to know what the potential of a product is likely to be (growth and maturity phases of PLM), so that goals are realistic, supply chain design is appropriate for near and future term needs, and resourcing is phased appropriately.

PLM plays a pivotal role in planning by ensuring that product designs align with supply chain capabilities, and informing the organisation what capabilities it either needs to develop or increase. 

Imagine an automotive manufacturer planning to launch a new electric vehicle (EV). PLM ensures that the EV’s design considers sourcing sustainable materials, efficient manufacturing processes, and recyclability. It informs the supply chain on what and where to source, what manufacturing footprint is required, and what the return supply chain needs to accommodate.

Source

Sourcing in SCM involves identifying, evaluating, and procuring the necessary goods and services to operate the business. In PLM, sourcing can be linked to the design and development elements of the introduction phase, where resources are identified and procured for product development. It also is a consideration for the growth and maturity phases of PLM, as the volumes of materials and services from suppliers need to be able to meet future needs, or alternative/additional suppliers need to be brought into the supply chain at defined points.

Sourcing involves acquiring materials, selecting suppliers, and managing supplier relationships. This relationship management in SCM intertwines with PLM closely. As each PLM phase approaches (Introduction, Growth, Maturity, Decline), suppliers need to be part of the process so that they are in lockstep with forecasted volumes so that they don’t get surprised by increases or decreases in the medium term.

An example that brings this to life would be a smartphone manufacturer sourcing components globally. PLM ensures that the bill of materials (BOM) includes reliable suppliers, cost-effective materials, and compliance with environmental regulations. It also ensures that the forecasted volumes for those components are aligned to the various phases of the smartphone’s lifecycle, allowing the component suppliers to allocate the right amount of capacity to the product over time.

Make

The Make process in SCM refers to the manufacturing of products. In PLM, this corresponds to the development of the final design, including pilots and user acceptance testing. The manufacturing phase in PLM focuses on product builds and quality assurance testing for the introduction, and then moving from small-scale pilot plant settings to full-scale manufacturing that may last over many years, and then the eventual decline and removal of the product volumes from the manufacturing footprint.

As the Make phase focuses on manufacturing and production, PLM enhances manufacturing efficiency by setting the appropriate metrics to optimise production for. The value-adds of the product for its customers is an integral part of the Make processes, and PLM sets both the measures and the necessary achievement levels for the supply chain to achieve,

Consider an aerospace company building aircraft engines. It uses PLM to optimize production processes to reduce the time it takes to make the engines, it tracks quality metrics that are either regulatory requirements or differentiators to their competitors, and it ensures adherence to safety standards that are built into the product design.

Delivery

Delivery in SCM involves managing orders, warehousing, transportation, and distribution of products. In PLM, this can be associated with the introduction phase, where the product is introduced to the market and given the criticality of any product launch, ensuring it gets to customers on time and in full is a major focus. As a product moves through its lifecycle, the deliver component will become more complex as more customer locations get added in the growth phase, requiring more warehouses, trucks, airplanes, and customer service functionality. With the maturity phase in PLM, the supply chain needs to actively manage the costs of delivery to maintain or improve margins. There may also be the opportunity to add in supply chain services and offerings at the Maturity phase for Deliver, such as express shipments and different inventory management models.

The goal of SCM in this element is the delivering of products to customers efficiently and on time.

PLM contributes to these delivery goals by providing the insights on where to locate the product, how it needs to be stored, packed, and distributed, and what its future distribution network will need to be (and when).

A fashion retailer would use PLM to manage inventory, track shipments, and optimize distribution routes in a fast-moving environment where a product is dependent on sentiment of both customers and retailers. Effective PLM integration into the Deliver element ensures the timely delivery of trendy clothing to stores.

Return

The Return process in SCM deals with the return of defective or unwanted products. In PLM, this could relate to the Growth and Maturity phases, where feedback is received, and necessary improvements are made. During the Decline phase of PLM, it is crucial to actively manage product inventories at this point to minimize any returns due to excess supply against weakening demand.

Handling product returns, repairs, and recycling all fit into this SCM element. Recycling and the environmental benefits associated may also be a product characteristic.

PLM supports returns by setting and expected failure rate of a product in its design, along with what elements in the product may require recycling. It also uses returns to incorporate feedback into future design enhancements.

Electronics manufacturers often use PLM to manage product recalls. When a faulty component is identified, PLM helps trace affected units, manage returns, and update designs to prevent future issues. 

Enable

The Enable process in SCM involves managing support processes and resources to ensure smooth supply chain operations. In PLM, this corresponds to the management and maintenance of business processes used to create, manage, disseminate, share, and use the information that is critical to all four of its phases. We should think of the Enable process in SCM as one that is overlayed over all of its other processes.

Enabling processes in SCM are those such as IT infrastructure, talent development, and organizational alignment.

PLM helps enable processes by providing the information needs of the product, customers, and suppliers. This information can be used to support the design and introduction of the product, and then can be a monitoring element during the growth and maturity phases of PLM. It can also be used as signals to indicate when different phases are coming up, such as Decline.

Enabling processes being intertwined with PLM are very common in highly regulated industries, such as pharmaceuticals. Consider a pharmaceutical company that introduces a new drug. PLM ensures that regulatory compliance, clinical trials, and labelling align seamlessly with supply chain processes.

Real-Life Applications

With the maturity and growth of the PLM market, and well established SCOR model, there are several notable measurable successes where the integration of both has happened:

1. Tesla’s PLM-Driven SCOR Success:
   • Tesla’s electric vehicles exemplify PLM-SCOR synergy. Their designs incorporate sustainable materials, efficient battery production, and recyclability.
   • Measurable Impact: Reduced carbon footprint, faster time-to-market, and improved customer satisfaction.
2. Apple’s Supply Chain Resilience:
   • Apple’s PLM system integrates design, sourcing, and manufacturing. Their SCOR-aligned supply chain ensures timely iPhone launches.
   • Measurable Impact: High customer loyalty, optimized inventory turnover, and robust supplier relationships.
3. Nike’s Sustainable Footprint:
   • Nike’s PLM practices align with SCOR principles. They source eco-friendly materials, optimize production, and manage returns efficiently.
   • Measurable Impact: Reduced waste, enhanced brand reputation, and cost savings.

PLM and SCM are interconnected aspects of business operations. By understanding the relationship between these two, businesses can better manage their products from inception to delivery and end of life.

Each step in PLM and SCM complements the other. By integrating PLM practices into SCOR phases, organizations can achieve operational excellence, sustainability, and customer delight.