What is the difference between Product Life-cycle Management (PLM) and Enterprise Resource Planning (ERP)?
There are many schools of thought around the broader PLM vs ERP topic, here are a few perspectives to consider:
- ERP and PLM systems have distinct purposes but increasing overlapping capabilities and processes which, when used together appropriately, give an organization complete control over its manufacturing processes. PLM focuses on the ‘up-stream’ virtual product creation, collaboration and innovation, Digital Manufacturing, Virtual Construction, Product and Plant Simulation, Project Engineering realization, product compliance, etc.; while ERP focused on the ‘down-stream’ physical product accounting, sales forecasting, raw material purchasing, inventory, resource management, manufacturing planning, customer care and support, execution compliance, traceability, and shipping logistics.
- Master Data Management (MDM) is a common thread for both PLM and ERP as they both consume core Bills of Materials (BoMs) information. PLM typically creates and manages PDM / CAx, Items / Parts and Documents, technical publications and EBoM, while the MBoM, SBoM and ‘as built’ BoM are controlled by ERP – and Manufacturing Execution Systems (MES). There has been a long debate about who owns the master data for the MBoM as it is typically synced ‘down’ from the EBoM. In addition, some organizations decide to manage their master feature dictionaries outside of PLM (…).
- PLM focused on product history and project change management (relational interactions), while ERP is about product record management, building, execution planning, financial reporting, and sourcing (transactional activities). The PLM data model is more suited to the requirements of a flexible data structure, visual information and dashboards, as well as unstructured metadata with the ability to make changes early, while the products are in a digital state. The ERP data model is more rigid to support large volumes of repeated transactions, hierarchical data mining with execution-focused, controlled, well defined business processes.
- PLM and ERP will overlap and intersect differently from one organization to another, however they are not interchangeable – the focus will differ depending on the history of the organization, its ways of working and processes, its products and associated services, and culture. Typically, organizations that are more inward looking for their Research & Development & Engineering (R&D&E) will consider themselves more Manufacturing-focused, while organizations that are leveraging open innovation and PD / Engineering supply chain collaboration will consider themselves more Engineering-focused. PLM processes require discipline, yet some flexibility to support iterative design activities, manage creativity and enable decision making processes. One simple difference is that ERP optimizes ‘what you have‘ (existing and physical products), while PLM optimizes ‘what you do not have‘ (new products, intellectual property and knowledge).
- Both PLM and ERP improvement initiatives yield business benefits. It is often said that PLM focuses on long term benefits, enabling innovation, reducing waste, following a continuous improvement approach… ERP focuses on ‘cost avoidance‘ and ‘cost reduction‘ of existing budgets, hence perhaps ‘easier’ to justify investing in (…).
- PLM transformation should happen before financial transformation (enabled by ERP). By managing product life-cycle and changes with PLM and then syncing final product data to ERP, manufacturing organizations can avoid wrong part ordering, prevent inefficient spending, product recalls and compliance regulation issues. Manufacturers that begin implementing ERP before considering PLM might face various challenges to effectively manage product records. Establishing effective processes with PLM before integrating with a compatible ERP system will maximize organizational efficiencies, minimize transition costs, as well as optimize business benefits of each solution across the extended organization.
- PLM-ERP bi-directional integrations leverage the strengths of PLM to manage and update all Engineering content and processes as they extend into other functional areas. Such enterprise integrations can be enabled by ‘SOAP-based’ Enterprise Service Bus (ESB) solutions for robustness and re-usability (assuming sufficient ‘openness‘ on both sides to align with a common message model that is fit-for-purpose).
- ERP is usually the core focus of Enterprise-IT (or core-IT) from an implementation perspective; PLM is with Engineering and Product Development (PD) – however, Engineers usually perceive PLM as Engineering “admin” or as an IT toolset, ERP as a non-Engineering transactional IT “admin” and therefore assign PLM ownership to their Operations, which in turn delegate its implementation to a dedicated Engineering-IT team). Often, IT is less interested in PLM as more complex and less straightforward than transactional system deployment; a cliché statement suggests that “PLM implementations are successful thanks to Engineering, or are failing because of IT“.
What are your thoughts?
This post was originally published on LinkedIn on 2 March 2015.