PLM v. ERP - What's the Difference and Why You Should Care
Many business owners tend to equate Enterprise Resource Planning (ERP) tools with Product Lifecycle Management (PLM). On the heels of last week's successful Oracle + NetSuite conference (SuiteWorld), it seems appropriate to recap the differences between them.
One of the biggest differences is apparent from their first words – Enterprise vs. Product.
ERP represents a business system that is used across entire enterprises for day-to-day planning and transactions. It involves sales, services, purchases, inventory, facilities, human resources, and many other aspects of the business, with the primary objective of tracking the business's life blood – its money.
PLM, on the other hand, is a business system with the purpose of "keeping the heart beating". Its value crosses the organization independently of ERP. The long-term competitive advantage for most businesses derives not just from their cash flow, but from the continuous flow of ideas, especially as related to their products and services. Much of this intellectual property starts ugly and incomplete, and matures within a PLM system into documents and data that are ready to be passed to an ERP for resourcing and execution.
What happens to all of the decisions that have been made up to that point?
ERP systems are superb at answering questions such as "When?", "Where?", and "How much?". But depending on the nature of businesses, they are typically ill-equipped to answer questions like "What to make?", "How to make it?", "Why is one design alternative better than another?". While ERP focuses on inventory, logistics, and financials, PLM focuses on concepts, work-in-process, and revisions as a design matures from a concept to something your customers will want to buy, and that you can sell.
Such up-stream questions often get to the soul of a business model. For many businesses, PLM ensures "doing the right things", while ERP manages the domain of "doing things right". Now, obviously, such philosophies are highly intertwined. And, for any particular business, the lines between systems may not be obvious. When deciding whether a function should reside in ERP or PLM, it is often enlightening to ask whether the function is critical to your success. Does it define who you are or how you are better than your competition? Or, is it critical to measuring your success.
I met many talented and successful business integrators and consultants last week, and I'm sure that many have their own thoughts on this matter. I'd love to read yours.
– Fred Smith, Sr. Solution Architect