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Wednesday, May 03, 2017

More on the Cloud: The CPG End User Perspective

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Cloud

CIMdata's Vice President of Research, Stan Przybylinski, recently sat down with an executive from a North America-based CPG company to learn more about the impact of Cloud on the CPG industry.

Let's find out!

Providing some context

Who did we talk to? Our interviewee is a Senior Director, IT Applications, at a North America-based CPG company

What does his organization do? His organization provides shared services across the product lifecycle, forecasting and planning, marketing, manufacturing, sales and distribution, financials, POS, engineering, quality assurance (QA), etc.

What is his role in the organization? Our interviewee is closely connected with his company’s cloud initiatives, and is responsible for managing the PTC cloud services. Cloud is new to the organization in the last few years but they have extensive experience standing up and managing their own data centers around the world. They currently manage a complex ERP environment, including all global systems that process financial, operational, and sales/distribution activities. This includes global reporting systems as well as POS, forecasting, data management, licensing, and legal application platforms.

What are some of the key product development/innovation issues faced by your company?

If we look at where the company is going, our existing footprint supported designing and manufacturing physical products with molded plastics and cardboard display boxes. Products are getting more complicated, requiring more and more complicated development cycles. Many of our products now have integrated devices.

We have challenges with software and the complexity and modularity of complicated products. How do we engineer, market, sell and keep integrated to get better? Previously we had distributed groups, using separate systems. Software was on a different development cycle. Intelligent products create major challenges. It requires that information technology (IT) get involved in in the product development cycle.

Do you have any programs/initiatives in place to address these issues? E.g., digitalization.

Our company is working to meld the different groups, integrating marketing, designing, sourcing, and product development into one process. We think this makes us somewhat unique in our market. We are integrating the whole value chain from marketing through design teams, taking the “how” of a product (specifications, bills of material), to costing, through design to building. Our company already has SAP, and we are working to fill the gap from line planning through sourcing. SAP does help us manage sales and distribution.

We design at our offices in the Northeastern US, the West Coast, and a few other locations.

We do outsource some manufacturing, with some done in China and other countries, and some done in-house. When we subcontract manufacturing, they often have their own tooling groups.

These functions and processes were all supported with stand-alone applications used by siloed groups coordinated through handoffs.

To support our efforts to meld our groups and processes, our plans include using PTCs FlexPLM, PDMLink, and ProjectLink on the PTC Cloud Service to link marketing and line planning with sourcing of CAD-related products. We rolled out portions of the tool last year, making some functions mandatory and others optional to give our users some time to adjust. Marketing, including line planning and design creation, went live last year with FlexPLM and PDMLink. This year we introduced more engineering functionality as well as sourcing and costing for overseas sourcing with vendors on BOMs and other information. ProjectLink will be implemented mid-year.

Using these solutions, we are able to keep on the same schedule with different views on lifecycle. We manage thousands of product designs per year. We use these solutions to help use the appropriate resources on different activities.

What is the role of cloud in your current enterprise software landscape? Do you use other cloud-based solutions (ERP, CRM, SCM)?

Our company has other cloud solutions, such as supply chain planning. We will use cloud-based solutions for what makes sense for the business. SAP and most other solutions are still currently on-premise.

For us, cloud is a time-to-value issue. With on-premise software we have to purchase hardware, test it, and manage our data center. With cloud-based solutions we can start and ramp up more quickly. Going forward those three applications, and others that we eventually choose from PTC, will run on PTC Cloud Services. Based on the cloud references we got from PTC other customers also want to get out of running their implementations in-house.

What challenges do you face in selling cloud-based PLM internally?

The real challenge is selling cloud-based solutions to IT. We did not have to sell it to the team. Security is constantly asked about: where is the data, is it safe, how do we go see it if we want to? It makes them nervous. Security protocols are checked and re-checked. This is a very emotional issue. But if you do it right, security should be at least equal to on-premise, and usually much better.

What challenges/issues do you face? Concerns like security, bandwidth, data lock in, managing hybrid environments; possibly migration

Our biggest concerns are around connectivity. Beyond that there are some IT-generated concerns. We have other applications they want to connect to our cloud-based solutions. When you have multiple cloud-based applications, maintaining integration is more of a dance. The cloud-based provider has to be able to satisfy those needs. They are your infrastructure team. Before, I could find my guy, find my machine, and tell him to do it. With cloud, you have to get them on the phone, and then get them to do something on hardware that is not on our site. We really need that partnership aspect. Your cloud partner needs to work with you to make you successful.

Contract clauses just allow people to sue each other. When you choose this path, you are entering into a relationship. Unfortunately, there is not enough in the contracts to make it work that way. You have to have trust to make you successful. To me, this is just an evolution of what consulting always was.

What benefits/positive aspects of cloud-based PLM do you expect?

Many benefits have already been achieved. This provides us with a very flexible landscape. If I want to go on, bring up two systems, it may take a week of two to spin up. Just put in an order and pay for it. You can go from 1000 to 2000 users in less time than in your own building. We have personally seen this benefit. We went from 3 systems to 8 systems, with double the user base over what we anticipated online in only 11 months. These are huge wins for our company.

At our company, we purchased the licenses and hosted it on PTC hardware on the cloud. We negotiated on the user base for each application. We pay based on usage. When we add functionality, it bumps up the numbers because we have more people logging into the tool. The licenses to do work have not changed. That said, we currently do not have software as a service (SaaS) based offerings. We hope to get there and take advantage of those options. This is a good proving ground to determine if SaaS is a good fit in the future.

For us, as for many companies, it is also a capital expense (CAPEX) vs. operating expense (OPEX) issue. In the past, we might have spent millions on hardware that started depreciating on day one. With this setup there is much less upfront pain.

This approach offers us great flexibility. For example, we wanted to do a proof of concept in one area. We are able to quickly stand up two other systems, did what we wanted and then decommissioned them. This would be very difficult to do with on-premise solutions.

Line planning was done first, supporting users globally. Then we rolled out functionality for designers. Then we got into product creation, naming, and product structures. Now we are moving on to costing and sourcing with project management coming mid-year. We are on a 2-3-year evolution before we permeate the entire PD cycle.

We are starting to use this solution for sourcing and costing. We discussed ideas on how best to do this and got the groups to agree. Then we sketched out the solution and once again sought and got agreement on the approach. Now we can review costs for a specific design, decide on which avenues to pursue, and then move to manufacturing.

What is your general timeline for deployment?

We’ll be able to support the whole lifecycle this year. We are currently rolling out project management, but in our process this is not really part of development. Using these solutions, we should be able to take a product from idea to source in 18-24 months.

Our company is finding more value by reengineering our processes. We do this in steps, with a release one of changes, then release two. We anticipate having releases three and four. This is just the nature of the beast. We need to evolve to best leverage the platform.

As for the future, we see that PTC has other tools that we could benefit from in the future like application lifecycle management (ALM). It is not in the works now, but it is being talked about. We realize we are standing up a backbone, providing a solid foundation for “the house”.

As part of decision-making we have to decide if we roll ALM into this backbone. The same for quality solutions and other enterprise one-off applications.

Our company is a year into a two year roll out. Is it everything it was meant to be? Not yet but we have used this approach with ERP forever, so this will be similar where we continue to add and expand our capabilities. We see PTC Cloud Services as a key element to this approach.

Have your opinion on the Cloud and PLM counted by:
  • Taking our short survey at http://tinyurl.com/CIMdata-cloud-survey.
  • Sharing your views and commenting on this blog.
  • Contacting CIMdata at This email address is being protected from spambots. You need JavaScript enabled to view it. .

We look forward to hearing from you!

Stan

 

 

Email This email address is being protected from spambots. You need JavaScript enabled to view it.
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