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Jump-Start Product Innovation with PLM: Industry Lessons Learned from the Automotive Sector

by Frank Spiegel | SAPinsider

April 1, 2006

Increasing product complexity, decreasing time-to-market, and heightening regulations -- these challenges resonate across all industries. In the automotive sector, these pressures are driving the shift to a more integrated, cross-departmental approach to product development, an approach that mySAP PLM can support for businesses in any industry.

After devoting years to optimizing their logistics processes, many businesses are now shifting focus to their product-development processes. Markets are driving companies across industries to bring more and more new products to market faster, all while product complexity increases and margins diminish.

Take the automotive industry, for example. Rapid product development has evolved over the last few years, and automotive companies face major obstacles across the entire life cycle of their products, from inception to retirement. These challenges will likely sound familiar, since nearly all SAP customers are facing similar pressures:

  • Increasing product complexity — Not only do cars contain more parts than they did years ago, but each part carries with it an exploding number of variants

  • Rising cost pressure — Automakers are charged to develop more cars with a limited number of employees

  • Decreasing time-to-market — To get more new models to market faster, automakers must reduce cycle times and develop new products in a shorter time frame

  • Heightening regulations — As manufacturers of globalized products, automakers must comply with more and more government and safety regulations

  • Coordinating teams across departments — Product development has become a cross-departmental issue, with mechanical, electrical, and software development all working together with controlling, change management, sourcing, (virtual) prototyping, production preparation, factory planning, and marketing

These factors are driving automotive companies to shift from maintaining individual product-development processes, where each department works independently, to creating one common, cross-departmental product-development process. To facilitate this organizational shift, automotive customers — and customers across all industries — are relying on product lifecycle management (PLM) solutions.

In addition to consolidated process support, PLM brings with it the benefits of more efficient partnerships with OEMs and suppliers, more accurate cost calculations, and improved consistency in master data management. PLM also enables greater visibility and control, meaning that every authorized person has access to all relevant product information in a single database, thus increasing transparency between departments and allowing a common, more controlled business process.

This article demonstrates PLM in action and describes how SAP's PLM solution, mySAP Product Lifecycle Management (mySAP PLM), can produce these benefits and address industry-specific challenges and requirements in the automotive sector — and in any business.

Why SAP? Because PLM Is Meaningless Without Integration

Think about how your product-development processes and the technology that supports them work today. To create new products and get them out the door, regardless of your industry, you need processes in place for research, development, sourcing and material requirements, logistical value chain management, and supply chain management. And on the IT side, you need a technical infrastructure to manage all of these processes. Many companies may even have different applications or systems in place for each process, all connected through homegrown interfaces.

This results in high operational costs, especially if applications are dependent on individual employees, which is sometimes the case. Any missed communication among these systems has a business impact, from minor data inconsistencies to more severe consequences, such as a production standstill caused by material shortage resulting from a missed call-off.

Beyond providing support for new, innovative products that are compliant with market requirements, mySAP PLM ensures that all of these product-development processes are not working at cross-purposes. Because of its tight integration with ERP, SCM, and CRM systems — integration that no other PLM provider can offer — SAP's PLM solution is an especially attractive choice.

SAP's PLM Solution Portfolio

If you look at the mySAP PLM solution map (see Figure 1), you can see that mySAP PLM addresses the three levels of the product lifecycle process:

  • Product and project portfolio management provides capabilities for systematic idea management and concept/business-case evaluation for fast decision making (doing the right things), and a complete set of project management tools for project structuring, scheduling, resource and cost management, and more (doing things right). This solution supports automotive companies as they plan and execute their product-development projects. For example, automakers can use reporting functionality to assign resources to individual processes and track costs.

  • Lifecycle process support manages the product-development process from the early brainstorming stages to handover to production, sales, service, and maintenance. It covers areas like requirement management, CAD integration, partner collaboration, quality management, and strategic sourcing. With lifecycle process support, auto companies can consolidate the heterogeneous business processes of their individual departments — including design collaboration with suppliers, target costing, central strategic buying, and engineering change management — into one common, orchestrated product-development process supported by a single tool.

  • Lifecycle data management is the foundation of all processes within mySAP PLM. All product-related data, like documents, parts, product structures, and process structures, are managed along the entire life cycle. For auto companies trying to unite the data they need — across costing, CAD, engineering, manufacturing, and service databases — lifecycle data management brings all product data into one repository to set up a common reference product structure as the data basis for all processes and tools (see Figure 2). As a result, even though departments retain their own piece of data in the common database, their applications are interconnected and can grow and interact consistently and accurately.
Figure 1

A Glimpse at the mySAP PLM Solution Map

click here for a larger version of this image

Figure 2

PLM Consolidates the Tangled Web of Siloed Databases Into an Integrated Lifecycle Data Management Structure

Processes in Development: How Customers Use mySAP PLM Solutions

To gain a better understanding of how mySAP PLM can support your own industry's specific products and processes, let's walk through the example of an automotive customer using components of mySAP PLM to innovate and bring to market the latest model of a car.

In the automotive industry, typical lifecycle process steps on the way to the start of production (SOP) are:

1. Target Vision and Early Engineering
A high level of uncertainty characterizes the target vision and early engineering phase. Typically a new model only exists as a vague textual description that needs to be merged with the reality of what is technically and economically feasible. The goal is to reach a clearly defined technical specification and a rough concept that can serve as a basis for detailed development.

Customers in this phase typically use the requirement management and concept structuring capabilities within integrated Product and Process Engineering (iPPE), a tool within PLM's lifecycle data management layer. Marketers and R&D teams first compile specifications for the high-level technical, market, and legal requirements, using either the classification or document management capabilities of mySAP PLM. They may even develop two or more competing concepts based on the target vision, including mock-ups, drawings, and descriptions of the new product. These concepts are also kept in an iPPE product structure.

The best concept ideas are brought together into one iPPE product structure. Senior engineers then begin to update the conceptual requirements based on what is technically feasible.

2. Detailed Development
With initial sketches and descriptions in hand, engineers move to the detailed development phase. For the detailed technical drawings, revisions, and calculations required at this stage, integration between the PLM system and CAD tools is essential.

mySAP PLM offers strong out-of-the-box CAD integrations with all major CAD systems — including CATIA, ProEngineer, and Unigraphics, among others — that can be used in parallel with each other and that are all based on the mySAP PLM Document Management (DM) system.1 And because so many changes can happen on the way to a mature product design, a comprehensive change management tool, such as mySAP PLM Engineering Change Management (ECM), is indispensable — as indispensable, in fact, as integration into accompanying processes like target costing.

3. Sourcing
If you look at major vehicle development projects currently running in OEMs, Tier 1 suppliers, and even in some Tier 2 suppliers, you'll find that none of them is being developed 100% internally. Most of these projects involve collaboration with external partners and suppliers. Companies often use the mySAP PLM cFolders (Collaboration Folders) solution to integrate external partners and their data, such as drawings and bills of material (BOMs), in an easy but secure way (see Figure 3).

Figure 3

Viewing Vendor-Neutral CAD Files in mySAP PLM cFolders for Centralized Collaboration with External Partners and Suppliers

Collaboration has another aspect; it provides the technological platform for bidding in the strategic sourcing process. In the automotive industry, supplier selection and price negotiation are processes that heavily determine the revenue of a product over the complete production phase. Supplier relationships are extremely important, since typical sourcing contracts last the seven years a car model is in production, and even longer in some cases. Companies have to be sure their suppliers will provide quality products on time and on budget for the length of the sourcing contract. Customers therefore use the mySAP Supplier Relationship Management (mySAP SRM) solution to control the bidding process, along with a competitive collaboration scenario that enables them to distribute specifications to several vendors, receive their technical and financial offers, and compare them in a selection process.2

4. Prototyping
In parallel with the sourcing phase, development teams and engineers are creating prototypes of the new product. In the prototyping phase, logistics processes go beyond mere data handling; engineers conduct specialized development work and test their designs with manufacturing, starting with the glove box and moving on up to road testing.

Taking into account the high cost of every individual prototype, reliable planning is extremely important to make sure each prototype can be built on time. To ensure a smooth, logistically integrated prototype-building process, customers typically use mySAP PLM Project System (PS). PS enables engineers to plan prototype dates and the resources needed to build them. Through integration into logistics, prototype parts can be ordered, stored, taken from stock, and assembled with the same processes installed in the customer's existing SAP logistics solution (see sidebar below).

5. Ramp-Up
Ramp-up marks the transition from product data and prototypes to the production of the actual car. The ramp-up process brings the finalized and tested product data to the plant level, where routings and work instructions are created, the logistics chain is defined, and the development BOM is consolidated and transformed into a logistically relevant plant BOM.

Here, the mySAP PLM iPPE solution can play to its strengths: It allows customers to form both the development BOM and the plant view of the BOM in one common model. Both BOMs can share the same objects (for example, BOM items), but the BOM structure is different for each viewpoint. iPPE gives customers a better overview of their BOM, and thus ensures a consistent, redundancy-free production BOM as a basis for the logistical process.

With Prototypes, Careful Planning Pays Off

mySAP PLM Project System (PS) offers extensive prototype planning functionality, providing a good overview of your capacity and machine-load capabilities. The planning process not only affects the prototype-building phase, but runs in parallel with phases of the complete development cycle. Here, for example, is how the prototype planning process would work in the automotive industry:

1. Vehicle Development Process
To create a vehicle prototype development plan, first set up the project's structure according to product and organizational aspects, including items like how many people you will need, what machine resources you require, budget restrictions, etc. With PS, you can also lay out a master timing schedule for the major project components.

2. Parts Progression
Parts progression for all parts, their usage, and their movement is connected to this vehicle development plan. Both internal and external procurement can be triggered from the project plan right when the materials are needed.

3. Test and Validation Plan
Test and validation plans, which describe all steps needed to check for a safe level of product maturity, can be included into the vehicle development plan for all development phases. The test and validation plan is carried out on a component and system level. Beyond the time schedule, PS can also store test case descriptions and results with the help of other integrated PLM functionalities.

4. Vehicle Usage and Build Plan
Derived from test and validation plans, vehicle test requests are used to build vehicle usage plans for prototypes. With a common, integrated plan, you can ensure optimal use of a prototype — from its finish date in production through maintenance-related dismantling and assembling tests, and through operational, usability, and safety tests. With PS, you can also create detailed prototype test requests and assign them to available and planned prototypes.

5. Prototype Build
Vehicle usage plans provide delivery requirement dates to the prototype shop, triggering capacity requirements for the shop floor and material requirements for procurement.

6. Vehicle Usage Tests and Results Documentation
After delivery, prototypes are tracked according to the vehicle usage plan. Planned and unplanned rebuilds are stored in the vehicle history, and test results are documented with reference to the product structure.

This process cycles around and around until the tested final product is delivered in the market. With a carefully planned prototype cycle, you can ensure a safe, high-quality product in a shorter time frame and simultaneously reduce costs by optimizing how you use and manage your valuable prototypes.

Prototype Management and Planning in the Vehicle Development Process

Conclusion: Learning from Industry Experience

The product-development and innovation challenges that automakers face resonate for many SAP customers. Though the specifics of each phase of the product-development process obviously can vary by industry, what's key here is that mySAP PLM functionality supports the entire product lifecycle process and is integrated with your backend systems.

In developing the mySAP PLM solution, SAP has worked closely with its partners, including OEMs and suppliers. Collaborating with and learning from customers has made mySAP PLM what it is today: a complete product lifecycle management offering that is scalable — from major, globally acting OEMs to local Tier N suppliers — and that supports our customers across industries as they innovate, develop, and bring new products to market.

For more information about SAP's PLM solutions, please visit To learn more about SAP's industry-specific solutions for the automotive industry, visit

1 For more information on CAD integrations, see Thomas Klee's article "Fully Integrate Product Design Into Your Business Processes for Faster Time-to-Market" in this issue of SAP Insider (

2 To learn more about mySAP SRM and the competitive collaboration scenario, please visit

After finishing his studies in industrial engineering within the field of mechanical engineering, Frank Spiegel joined SAP in 1999 as a consultant for the automotive industry, working with customers like BMW, Brose, Bosch, Daimler Chrysler, and Leoni on both logistics and PLM implementations. In 2005, he joined the mySAP PLM solution management team, where he now is responsible for product structures.

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