White Paper

Part 1: Defining PLM – Executive overview

A COMPREHENSIVE GUIDE TO MAKING SMART INVESTMENTS IN PRODUCT LIFECYCLE MANAGEMENT

Abstract

Over the past ten years, more and more discrete manufacturers have deployed
Product Lifecycle Management (PLM) solutions to optimize product development
and enhance bottom-line performance. Paradoxically, however, there is still wide-
spread confusion and disagreement concerning the essential capabilities and func-
tionality of PLM. Ultimately, PLM’s potential as a game-changing technology will
never be fully realized until a single, comprehensive definition of PLM is formu-
lated and universally accepted. The fact is, manufacturers will be able to experi-
ence the complete range of PLM’s benefits – and choose the best PLM solution –
only when they fully and implicitly understand what PLM is, and what it can (and
should) do for them.

In this first of a three-part series of related papers, PTC provides a definitive expla-
nation of PLM, based on a decade of experience building and implementing PLM
solutions across the globe. This overview examines the growing importance of PLM
and identifies the “must-have” capabilities of a PLM solution, the ‘extended capa-
bilities’ of a PLM solution, as well as the three critical system architecture charac-
teristics that manufacturing executives can confidently employ as a “buyer’s check
list,” to ensure they make the smartest possible investments in PLM technology. In
part two we explore the “must-have” capabilities of PLM in detail, then part three
examines the “extended capabilities”. In combination, the series provides a com-
prehensive guide to the most informed PLM decision.

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Why has PLM become so important?
In the manufacturing industry today, product development
processes and profitability are inextricably linked. There is a
strong causal relationship, whereby such processes have a
profound, direct impact on manufacturers’ ability to generate
sustained earnings growth. Fundamental in today’s global
business environment – one that’s characterized by geographi-
cally dispersed work groups, increased competition, and
new customer requirements in emerging markets – product
development challenges for discrete manufacturers are more
complex than ever.
Since these challenges – which concern everything from hav-
ing more project stakeholders, to managing disparate systems
with incompatible data, to dealing with increased frequency
of design changes and complying with stricter industry regu-
lations – represent formidable obstacles to business profitabil-
ity and success, it’s critical that organizations determine how
to effectively address such issues. (It’s important to note that
while revenue improvement represents 80% of the profit op-
portunity and cost reduction represents the remaining 20%, in-
dustry leaders successfully adopt best practices in both areas.)
At an ever-increasing rate, manufacturers have come to re-
gard product lifecycle management (PLM) as the solution.
“Organizations implementing PLM can expect
both top-line and bottom-line benefits that
come from gains in time-to-market, operational
efficiency, production costs and regulatory com-
pliance.”1
–Forrester Research
Likewise, IDC Manufacturing Insights’ assessment that PLM is
assuming corporate-wide importance – ”PLM is slowly matur-
ing into an enterprise decision-making discipline”2 – reflects
a growing consensus among analysts that PLM’s significance
will one day rival well-established enterprise solutions like ERP
(Enterprise Resource Planning), CRM (Customer Relationship
Management) and SCM (Supply Chain Management), and
potentially offer even greater value. Gartner expresses this
sentiment even more pointedly, by asserting: “In addition to
PLM’s inherent value, PLM decisions have strong influence on
the business model and benefits that can be realized by ERP,
SCM and CRM applications in downstream business process-
es; in that sense, PLM is the most fundamental business appli-
cation in manufacturing.” 3
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In short, the implications of adding a PLM solution are clear:
• Companies exist to make money for their shareholders by
achieving sustained earnings growth
• Revenue growth and cost reduction are the only two ways
to improve earnings – with revenue growth being the more
sustainable, unbounded option
• Revenue growth is four times more influential than cost
reduction, with regard to profit contribution
• PLM enables product-centric organizations to meet their
bottom-line goals while addressing product development
process challenges related to regulatory pressures,
product complexity, and geographic dynamics
• Similar to the evolution of ERP, PLM is a consolidating
technology that offers significant IT cost-of-ownership
benefits
• Unlike ERP – which focuses on cost-reduction initiatives –
PLM addresses both cost reduction and revenue growth
• PLM has reached a point in its maturity where its ROI
potential is making it a top-of-mind business imperative
for C-level executives
“In addition to PLM’s inherent value, PLM de-
cisions have strong influence on the business
model and benefits that can be realized by ERP,
SCM and CRM applications in downstream busi-
ness processes; in that sense, PLM is the most
fundamental business application in manufac-
turing.”
–Gartner Group, Inc.
The need for a clearer definition
In light of PLM’s growing awareness and adoption, it’s inter-
esting to note that while there is also widespread agreement
on the benefits of PLM, there is some disagreement on its pre-
cise definition.
PTC.com

As a recognized leader in PLM – providing PLM solutions to
worldwide organizations for more than ten years – PTC con-
tends that PLM is now an indispensable technology for help-
ing discrete manufacturers optimize product development
processes, and that it will continue to drive business growth
well into the distant future. As such, it is important for business
leaders evaluating PLM solutions to have a common under-
standing of PLM throughout the industry. In furtherance of this
goal – and to enable manufacturers to appreciate the full po-
tential of PLM – this paper defines the components, capabilities,
and functionality of best-in-class PLM software.
Although introduced in the late 1990s, PLM still lacks a con-
sistent definition. This may stem from the initial, commonly ac-
cepted belief that PLM represented a conglomeration of func-
tional disciplines – analogous to how ERP unified finance, HR,
manufacturing, and warehouse systems. Originally, PLM was
perceived to encompass mechanical computer-aided design
(MCAD), manufacturing (CAM), and engineering (CAE), as
well as simulation and product data management (PDM) solu-
tions. However, that assumption has proven somewhat erro-
neous over the past decade, as PLM has evolved into a more
comprehensive, enterprise-wide global solution.
Its success to date notwithstanding, PLM’s potential as a
game-changing technology will never be fully realized as long
as there is confusion regarding its essential capabilities and
functionality. Manufacturers need to implicitly understand all
that PLM can do for them – and all that it makes possible to
achieve. This knowledge will enable manufacturers to lever-
age the technology in ways that can yield process efficiencies
that were previously unattainable.
All of which underscores the vital importance of having a un-
ambiguous definition for PLM.
Finally: a comprehensive definition of PLM
So, what exactly is PLM? PLM is software designed to enhance
process efficiencies related to a product’s bill-of-materials
(BOM) – the core information that tells manufacturing compa-
nies how to design, manufacture and support products. Spe-
cifically, PLM software enables manufacturers to optimize the
management and evolution of a BOM throughout a product’s
entire lifecycle – from conception to retirement. Any and all
activities that affect, change, influence, or finalize a BOM are
the factors that will drive a manufacturer’s overall operational
effectiveness and, as such, are subsumed within the PLM um-
brella.
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For clarity’s sake, it’s important to note that PLM does not in-
clude the technologies used to author the information compo-
nents that populate a product’s BOM – such as MCAD/ECAD
files and engineering calculations. Consequently, desktop
solutions like CAD/CAM/CAE software and math calculations
software are related to PLM, yet are outside PLM’s purview.
To be assured of successful management and evolution of a
product’s BOM – that is, successful PLM return-on-investment
(ROI) – manufacturers must implement solutions that, at a min-
imum, feature the following:
1. A foundation set of “must-have” capabilities, delivered
through seven distinct PLM components (see Table 1);
and
2. A single, scalable system architecture–characterized
by high performance, effective data replication, and
robust security – that is integral, Internet-based, and
interoperable
In addition, to mitigate risk and reduce total cost of ownership
(TCO), PLM solutions should offer sufficiently rich capabilities–
out of the box – so as to minimize software customization.
Of particular importance to highly innovative, forward-look-
ing manufacturers seeking to leverage the full potential of
PLM – and thereby experience the benefits of its value proposi-
tion in full – are eight additional PLM components that provide
more sophisticated, extended capabilities (see Table 1).
“With PLM, we can get a really good indication of
the maturity of where the product is at any given
moment. The result is that we get a more granu-
lar review and approval process and better vis-
ibility into our product maturity.”
– B rent Barnes, Manager of Documentation Systems,
Cochlear Ltd.
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 White Paper

PLM SOLUTION CAPABILITIES Must-have capability Extended capability

Document Management •
Embedded Visualization •
Workflow •
Distributed Collaboration •
Multi-CAD data management •
Complete BOM management (i.e., combined MCAD, ECAD
software content in a single product structure) •

Change and Configuration Management •

Manufacturing Process Management (MPM) •
Requirements Management •
Program Portfolio Management (PPM) •
Quality Lifecycle Management (QLM) •
Product Analytics •
Component and Supplier Management (CSM) •
Service Information •
Communities of Practice •
Table 1. Each of these 15 component will be discussed in more detail in parts
two and three of this white paper series (see end of paper for details).

A note on definition “validation”

The PLM market is currently in a state of transition – one in which the capabilities and characteristics
considered essential in a PLM solution are being reevaluated, yielding some results that are already
apparent. For example, two major PLM vendors – recognizing the importance of database consolida-
tion and a single architecture platform – are evolving their offerings accordingly. Developments like
these seemingly serve as third-party validation of PTC’s PLM definition.

The role of system architecture Three crucial characteristics

In providing a comprehensive definition of PLM, the discussion
thus far has addressed the question: What components com-
prise best-in-class PLM software? This final section rounds out
the definition by addressing an equally important question:
How are those components delivered?
Employing the right architecture is critical to a successful PLM
implementation. For example, if PLM software provides all 15
above-referenced capabilities, but utilizes a delivery method
that requires five different databases or five unique user expe-
riences, the software should be disregarded as a viable PLM
alternative.

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Specifically, to fully deliver on the “promise” of PLM, a solution
must leverage system architecture – characterized by high per-
formance over WANs, effective data replication, and robust
security – that is:
• Integral. A true PLM solution must be more than a
disconnected bundle of features and functions; it must
be designed such that all “ingredients” work together as
one cohesive system to optimize product development
processes. A single, integral architecture is built on a set
of common architectural and technological layers with
no redundant, overlapping, or conflicting modules. PLM
solutions with an integral architecture share a common
database schema and common business object and
process models, as well as a common, web-based user
interface with single log-in and consistent look-and-feel.
In essence, this type of architecture provides a “single
source of truth” for all applications and workgroups –
ensuring that all stakeholders across a distributed
enterprise are always using the most accurate and up-to-
date information in their product development efforts.
• Internet-based. By containing 100% Internet code and
technologies, and an infrastructure built on industry
standards, a pure Internet-based architecture provides
internal and external stakeholders with seamless, high-
performance access to the complete digital product –
thereby enabling collaboration across a distributed value
chain in support of global product development.
• Interoperable. By using standard protocols, an
interoperable architecture for a PLM solution enables
seamless sharing of product content and processes
through integration with legacy and enterprise systems/
technologies – including heterogeneous CAD applications
and enterprise solutions like ERP, CRM, and SCM.
“The entire Group will benefit tremendously from
this new partnership and from the creation of a
harmonized PLM environment, which leads to
cost savings, reduced time-to-market and im-
proved product quality.”
– Jean Botti, EADS, Chief Technical Officer
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Overview
To date, PLM has delivered significant inroads in the discrete
manufacturing industry. Numerous manufacturers have al-
ready experienced some of the ways PLM can enhance prod-
uct development processes – and scores of others are seeking
a better appreciation of the technology to discover how they,
too, can benefit.
However, if manufacturers are to tap the full potential of PLM,
they first need to explicitly understand its value proposition. Af-
ter all, manufacturers can’t know what to expect – and what to
demand – from PLM unless they know what’s possible.
This paper has sought to provide that insight by delineating a
comprehensive definition of PLM, along with a quick explana-
tion of the components that are required within best-in-class
PLM software. Armed with this knowledge, manufacturers will
be better prepared to make purchase decisions that maximize
their returns on PLM investments, increase their process effi-
ciencies, and ultimately enhance their bottom-line results.
For more on the definitions and benefits of the capabilities
that make up a complete PLM solution, we invite you to read:
Part 2: Defining PLM–Critical “must have” capabilities and
Part 3: Defining PLM–Extended capabilities
Visit PTC.com/solutions/product-lifecycle-management to
learn more about the promise of PLM.
1. Forrester Research, Inc., ROI of Product Life Cycle Management, February

2009.
2. IDC Manufacturing Insights, Product Lifecycle Strategies Top 10 Predictions
for 2010, Webcast, 2010.
3. Gartner Group, Inc., Brant, Kenneth F. and Halpern, Marc; Findings: PLM’s
Business Value Is Fundamental, Yet Still Not Well-Understood, April 1, 2010.
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