Jim McKinney wrote an article titled “3 Steps to Measure the Value of PLM” a few months ago. In it, he put forward these 3 steps: Create a Baseline; Imagine the Future; and Use Metrics as a Guide.
He says that knowing the value of PLM to your business can help in many areas: selling the value to upper management, selling the value to various business organizations, planning your next implementation activity, and maintaining a view on how well you are proceeding relative to your planned PLM value.
I think that he is on target and you would be surprised at how few companies take this approach. I would call this a return on investment analysis [ROI].
Create a Baseline
As with any expenditure, the cost of the problem must exceed the cost of the solution or you won’t take it on. Given that, what problems are you trying to solve?
How are you doing business today? How much time do your engineers spend looking for information? How do they know that they are looking at the latest released version? How long does it take to generate a change request? How long does it take to get it approved and released?
Are you confident that you have a ‘single version of the truth’? How much did your company spend fixing errors over the last year? Have you sent the wrong files to manufacturing or a customer? What is the impact on your company’s reputation? How does that translate into dollars?
Imagine the Future
If you could purchase a solution that solved your problems and successfully implemented it, what would the dollar numbers for the activities above look like? Obviously, the dollars saved must exceed the cost of purchasing and implementing your solution.
Use Metrics as a Guide
Many companies will do the cost analysis before purchasing and implementing a solution, but not many will review their ROI after the implementation is complete. This activity will help you justify your project with upper management. It will help you stay on your course of cutting costs and taking on projects that extend your solution.
It is important to define how you measure success before starting the project. The measure needs to be objective and metrics fill the bill. The ability to show success will help you with expanding your implementation to solve other problems.
Contact me if you would like to discuss return on investment analyses…