just-style management briefing: Integrated ERP-PLM solutions to become key
3 October 2011 | Features & Interviews | Source: Ivan Castano Freeman
It's no secret that Product Lifecycle Managment (PLM) has taken the global apparel industry by storm, becoming a must-have software tool for many clothing companies seeking economies of scale in the increasingly competitive fashion market.
But a much older and less popular cousin that forms the IT backbone of most established clothing manufacturers, Enterprise Resource Planning (ERP), is now back on the radar as clothiers realise that linking it with PLM yields bigger benefits than using either technology alone.
Indeed, the trend to merge the two is gaining so much traction that some observers predict ERP vendors will not survive unless they roll out fledgling systems with built-in PLM capabilities - or merge with PLM vendors to create more powerful solutions.
In the near-term, most companies will look to link PLM suites into their existing ERP systems. However, down the line, observers expect ERP-PLM suites to command higher sales.
Colin Marks, director and chief executive of UK PLM and ERP vendor DeSL, says the firm has been working to develop its integrated ERP-PLM system, dubbed Enterprise Accelerator, for some years but it is in the past 12 to 24 months that sales have really taken off.
"Apparel companies were previously happy using ERP as their main system and they did all the production development on spreadsheets, managed their product development processes using manual documents such as spreadsheets and PDFs etc," he says. "But now they are realising that there are key benefits from implementing a PLM solution and even more from having one single collaborative platform that unifies ERP with PLM to have a true end-to-end solution."
ERP manages all of a business's core processes such as purchase and inventory management, customer management and accounts payable, among other things, but it lacks supply chain management and product development capabilities, which is where PLM comes into play.
PLM handles all of a style's development. It tracks the product's initial concept, ensures all components are costed accurately, manages all the sample approvals and enables suppliers to prepare for future production orders, observers say. PLM solutions can also manage testing processes to ensure that products are free of regulatory-banned materials like lead or heavy metal.
As apparel companies that design their own products look for ways to gain efficiencies and cut costs, adding PLM tools that can be integrated into their existing ERP solutions is becoming more crucial than ever, apparel and software industry observers say.
Explaining one of the benefits behind a PLM-ERP integration, Mark Burstein, president of sales, marketing and R&D at New Generation Computing (NGC), says: "When a style is adopted [by the PLM software], the product data passes into the [integrated] ERP, which manages production, inventory, delivery to customers, and financial transactions."
At the same time, the ERP's production orders flow back into PLM so the company's suppliers know what is on order and allows visibility into work-in-process (WIP) and the shipment status, Burstein adds.
Marks says DeSL's Enterprise Accelerator can provide bigger investment returns than using ERP and PLM independently. However, to avoid integration problems, companies must do enough research to understand how the integrated software can help their business.
"Using separate solutions can bring integration headaches as you are basically implementing two different projects," Marks explains. "However, if you implement an end-to-end solution you have one piece of software and one database. It's all there ready to work."
Planning how the software can enhance the existing business structure and process is key to avoiding integration problems for companies that decide to combine PLM and ERP functions.
DeSL sells its software on a per-user basis (SaaS) or through a one-time installation fee, which is more expensive but provides companies with more flexibility. The per-user system can be hired for 10-500 users, enabling small and large enterprises to use it.
Like other software vendors, Marks is excited about the growth potential for integrated ERP-PLM systems, forecasting the market could grow at least 20% a year.
Burstein, meanwhile, envisages the market will grow 30% annually, but says PLM will grow more strongly than integrated platforms until 2016. This is because large apparel companies are likely to begin swapping ageing ERP and PLM systems for integrated solutions then.
"Many companies are not replacing their ERP systems yet as many were replaced during the Y2K scare. They are just adding capabilities like PLM to them," Burstein explains. However, he says companies that want to replace their ERP are demanding NGC's ERP-PLM product called Global Enterprise Suite (GES). The company also offers individual PLM systems and PLM systems that can be linked to ERP.
SMEs boost demand
Burstein says there are many small-and-medium sized (SMEs) apparel enterprises interested in integrated platforms as planned expansions require a more sophisticated IT platform.
"While small start-up and smaller retailers have been managing their business with Excel and basic ERP tools, they are moving into bigger and better systems as they begin to expand," Burstein says, adding that most of these clients have sales of $30-$40m.
"Any company looking for an ERP system now is demanding an entire suite including PLM,." he adds.
Indeed, observers expect this growing SME segment, which is mushrooming in emerging markets like Asia, South America and Africa, will drive most demand for integrated platforms in the near to medium future.
Meanwhile, ERP vendors ought to quickly introduce PLM capabilities or design their own suites to compete with PLM vendors doing the same. Alternatively, they could merge with PLM rivals, something observers say is already happen and will gain traction in the near future. If they don't do either, they are unlikely to survive much longer, experts claim.