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Financial PLM

 

It is not true that PLM is somehow "unquantifiable".  You can calibrate PLM in detailed financial terms, and integrate PLM with the financial performance of your business.

   

 

This process of financial management begins with project justification, creating proposals that can be approved on purely financial grounds.

 

It extendeds via metrics and integrated accounting to show PLM benefits that appear in the published Annual Report.

 

The PLMIG can provide the toolsets and the guidance to enable you to achieve this.

 
   

 

Making PLM Pay

 

There are 5 elements to making PLM pay for itself:-

 
Preparation
 
Belief
 
Facts
 
Maths
 
Financial Understanding
Preparation

 

PLM projects are difficult to define and justify, and any kind of ongoing PLM implementation may be seen as progress.  Expectations are always less than 100%, and there are many reasons why delivery may fall short. Many of these reasons boil down to vague target-setting, and under-funding.

Both of these can be hard to resolve.  The PLM Team has to provide hard financial figures that show a good NPV or IRR, and this means going through a formal GAP and impact analysis.  This will be a mini-project in its own right.  It will need belief, facts, maths and financial understanding.

 

Belief

 

If you were to dive straight in, all you would be doing would be to generate numbers that quantify a sub-optimal environment.  In order to reach the full potential of PLM, you have to aim high.

In financial terms, this means going beyond the usual mundane goal of "producing a cost justification that the Board will sign off".  It means starting from the viewpoint that: "We should implement PLM because it is going to make the company an enormous amount of money. Millions. Everyone in the organisation will be financially better off because of what PLM is doing for the business."

If you do not believe that PLM will be of huge financial benefit to your company, then you will never get the figures to prove it.

 

Facts

 

In order to reach the full potential of PLM, you have to face the truth about the weak points of PLM in your company's actual operating environment, and to make these work for you.

If you ignore the weak points, and raise a proposal for funding that hides them, then they become pitfalls that will derail the project and cause it to fail.  But if you analyse them, and provide written evidence of them, then they become "war stories" that will reinforce the need for improvement.

 

Maths

 

You are now ready to do the maths to show how much you can achieve.  And mathematics is what it is.  It is not guesswork, and it is not an act of faith.  The way to calculate the financial benefits of your future PLM programme is to apply the same mathematical rigour as you would to, say, solving simultaneous equations.

Firstly, as with simultaneous equations, you express everything in terms of one variable - PLM Benefits. Not "PLM Value", or " Features", or "Points of Pain", but Benefits. There is an Analysis Algorithm that shows you how to do this.

These single variables are passed through the PLM Metrics Algorithm, which deconstructs each one into its component elements in a way similar to finding highest common factors in algebra.  Except that in this case, the tools are PLM-related, including the '16 Axes of PLM', the '6 Elements of Metrics', and the '5 Whats' questioning sequence.

 

Financial Understanding

 

A major boost in the whole process is to get your Finance Department colleagues on board and fighting your case - showing how the figures will improve the real company accounts.

Since the dawn of PLM, PLM Managers have wanted their Finance Director to learn about PLM - because as soon as he understands it, the FD will naturally want to endorse all of the important PLM improvements that the company needs.

But how many PLM Managers understand the work of the Finance Director? How does the FD see the world, and how can PLM really impact upon it?  Will a particular improvement appear in the Profit & Loss Account or the Balance Sheet?  Do the company accounts break down in a way that will make the improvement visible, or will the accountants have to do extensive manual calculations to monitor it?

To get the help of the accountants, you have to be able to talk their language.  If you find accountancy a "grey area", the Accountancy Overview for PLM Managers explains clearly and simply how even the most complex corporate accounts are generated, in a way that the layman can easily understand.

 
   

 

Tools and Methods

 

Once the general principles are understood, the rest comes down to determination (because doing the calculations requires effort); and discipline (to keep following the methodology).

The PLMIG provides 3 main tools to guide you through the process:-

 
Project Justification Handbook
A complete methodology to evaluate and quantify the current and future benefits of PLM; to build these into proposals for new PLM projects; and to establish metrics to show that targets have been achieved.
 
PLM Delivery Handbook
Enables you to scope out and quantify the aims and KPIs of PLM projects, and partner with vendors and service providers to prove that they have been delivered.
 
Accountancy Overview
A simple but comprehensive textbook that provides PLM Managers with a basic grounding in Accountancy, enabling them to work credibly and effectively with their Finance Department colleagues.
 
   

 

Project Justification

 

The PLM Project Justification Handbook contains a standard, neutral methodology to quantifiy the costs, benefits and commercial value of implementing PLM.

White Paper  

The Handbook and its supporting toolset contain a neutral methodology to quantify the costs, benefits and commercial value of PLM in purely financial terms.

The complete toolset enables you to prove to the Board that PLM is worth doing for purely financial reasons.  It includes all of the instruction documents and templates that are needed to produce the final submission.

 

This makes it possible to identify real financial metrics that will support your next PLM project or capex submission.  The techniques are logical, thorough, and work in every PLM situation.  The methodology can be can be applied equally well by users and vendors.

Take the "leap of faith" out of proposals for PLM enhancements by quantifying the full benefits and rate of return.

Read the full story >>>

 
 
   

 

PLM Delivery

 

The PLM Delivery Handbook enables users and their suppliers (vendors, systems integrators or consultancies) to work together to define target benefits for PLM adoption.

This takes Justification to a new level, enabling vendors and advisors to collaborate in the process and commit to achieving the results.

Survey  

The Handbook adds a collaborative 'front end' to the Project Justification methodology, and enables the user and vendor to participate not only in the ideation and discovery, but also in the detailed calculation process.

 

The 7-Step PLM Delivery methodology enhances the vendors' own 'discovery' processes, and makes their time spent on site more productive. From the outset it avoids wasted effort by ensuring that all the pre-requisites are in place before detailed discussions start.

 

This enhances vendor involvement and reinforces the drive to achieve targets.

The fact that both user and vendor have calculated the target benefits, and feel confident to endorse them in writing, is a major boost to gaining approval.

Read the full story >>>

 
 
   

 

Financial Understanding

 

If you want to produce a solid financial justification for your PLM projects then you will need to work with the accountants in the Finance Department.  Only they know the figures that you need for the calculations.

Survey  

With a minumum of effort, PLM Managers can learn enough to debate with their Finance Department colleagues on equal terms.

 

 

The Accountancy Overview explains the accountancy principles used even by the largest corporations, with easy-to-follow examples.  It enables the PLM Manager to work constructively and knowledgeably with Finance Department colleagues.

When you can talk to them on this level, and involve them in the process of quantifying the financial effects of the PLM benefits, they take on ownership of the figures and are motivated to support them.  For the first time, your Finance Department colleagues will no longer be "obstacles to be persuaded", but will be on board and supporting you.

Read the full story >>>

 
 
 

Related Pages
 

 

Getting Started

 

It is not surprising that these tools and techniques do not exist anywhere else.  It required an 18-month workshop programme spanning 5 countries to develop them.

Thinking about PLM in purely financial terms requires a completely new mindset.  The initial drivers to implement PLM are obviously related to the product and the lifecycle, but focusing on financial outturns provides new insights and opportunities.

Once you have understood the basics of Making PLM Pay, then applying these toolsets will enable you to reorient your implementation onto a proper financial footing, and take advantage of the performance benefits that this brings.

 

Find Out More

 

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