Let’s talk about ERP and PLM, the differences, the benefits and everything you need to know in order to be successful.
Our most popular blog throughout the years has been a defining article of what the differences are between ERP, MRP, and PLM. If you want a high and fast overview of the terms read our previous blog, “ERP/MRP/PLM” – or keep on reading below for a more in-depth look at ERP vs PLM.
Oftentimes organizations wonder: Do you really need both a PLM and an ERP system? Should you, or can you, use just one enterprise system to manage all of your product information? Which system is best? An ERP (enterprise resource planning) system or a PLM (product lifecycle management) system?
We hear these questions all the time.
This article breaks down the similarities as well as the differences between ERP and PLM so you can make the best and most informed decision for your specific situation.
As an organization, it is in your best interest to use technology as a competitive advantage – therefore it’s important to understand the ins and outs of both systems.
With everyone needing to get products to market faster and more efficiently, it’s good to understand that building and sustaining brand equity is just as important as speed to market.
As your company searches for technology that will give you a competitive edge, it’s crucial that you choose the right technology to serve as the foundation for your digital transformation initiatives.
This means choosing technology that will boost your innovation efforts, fulfill your operational and strategic business goals, and help you get closer to your end customers.
While your company continuously faces tough decisions when it comes to technology investments, you may be wondering if it is better to go all-in on an ERP system or invest in a PLM solution.
After all, both ERP and PLM vendors ‘claim’ they can manage both Bill of Materials (BoMs), costs, changes, and other information related to products.
My goal is to help you learn what system or systems are best for your organization.
What is ERP and how does it work?
First, let’s breakdown what ERP is and its benefits.
ERP stands for Enterprise Resource Planning systems, software, and solutions.
One of the biggest driving factors for an enterprise-class ERP system revolves around finance and accounting. ERP systems are important because they ensure your quality products are manufactured in a timely, cost controlled manner once they have been engineered and approved.
This could be why approximately 97 percent of mid-sized companies already use an ERP application.
It’s important to also take into account that ERP solutions are considered to be one of the first software solutions to be categorized as an essential business tool. This could also be why so many organizations are already familiar with ERP.
Although there are many ERP software solutions on the market today, systems you may be familiar with might include Oracle ERP, SAP, Epicor ERP, Microsoft Dynamics AX, and a variety of others.
The fact is, ERP systems are generally built to satisfy the needs of business operations.
This means they are often used for manufacturing (such as manufacturing resource planning), human resources (HR), finance, accounting, purchasing, inventory management, order management, distribution, labor, customer service, and more.
An ERP system can take a product to market and is known for handling operational concerns such as logistics, warehousing, and inventory management.
These systems also provide vast amounts of transactional data which can be used to gauge your financial position and make informed choices about future business decisions.
What is PLM and how does it work?
PLM stands for Product Lifecycle Management software, systems, and solutions.
While ERP systems take transactional units to market, the data and information these systems use should originate in PLM.
PLM is all about the management of the process behind the product, as well as the history and collaboration that goes along with it.
Some PLM systems you may be familiar with include SAP PLM, PTC Windchill, Area PLM, Teamcenter, Siemens PLM, and more.
By adopting PLM software you can reap many rewards.
PLM solutions allow anyone involved in design, development, and manufacturing to work collaboratively with one set of comprehensive, accurate, up-to-date information.
PLM software works by supporting processes that define your brand, engage your customers, and differentiate your company’s products in the marketplace.
The unique value of PLM provides is that the software delivers a “single source of truth” about your product to anyone and everyone who has anything to do with product development.
The difference between ERP and PLM
A simple way to think about the differences between ERP and PLM is to focus on what each system was intended for, especially because both of these systems originate from very different foundations.
Product lifecycle management systems focus on planning.
Enterprise resource management systems focus on execution.
To take a deeper dive, the focus for each system influences the key and unique features that the system provides.
PLM is a collaborative planning tool for your products.
The typical users of a PLM system tend to be product designers and engineers who need to work together to figure out what a product looks like and what it should be made of.
Since PLM is about planning everything about your product, it provides capabilities around managing designs, related services, collaboration with red-lining, task management and more.
Most PLM systems even have a PDM (product documents management) system inside of them. This how they often control the history of the intellectual documentation needed to design and manufacture a product.
These systems control and manage everything from CAD (computer aided drafting) files to program, project and change management processes. A PLM system combines all this functionality and integrates it into an overall product lifecycle management process.
This is why PLM solutions have a higher impact on revenue and brand image.
ERP on the other hand is a system focused on making and executing a product. The primary user of an ERP system tends to be people who deal with manufacturing operations.
Since ERP is about execution and fulfillment, it focuses on capturing information around things such as inventory, purchases and more.
While ERP systems focus only on traditional entities such as item masters, bill of materials and dates, PLM solutions encompass all of the iterative, collaborative, and creative processes that make up the vital elements of your product’s lifecycle.
In short, both solutions are vital for a company to develop and make products as efficiently as possible.
How PLM and ERP work together
Despite sometimes being viewed as competing solutions, ERP and PLM systems work very well together.
In fact, these enterprise systems complement each other, and it is in your benefit to have both! We can help you work through a Return on Investment (ROI) analysis if you’d like. Just contact us.
So how do enterprise resource planning and product lifecycle management systems work together?
PLM software provides the single point of product truth used by ERP to manage product resources and financials.
For example, by using eBoMs (engineering bill of materials) data from your product lifecycle management system, ERP can accurately generate purchasing and inventory management records, creating a unified management of both your resources and production.
Essentially, ERP systems pick up from PLM solutions and take finalized products forward.
This means that design, development, sampling, fitting, approval, assortment planning and all other activities essential to creating great products have already been signed off by the time your products reach the ERP system.
PLM systems help define, design, and plan your product. PLM integrated to ERP allows the systems to feed relevant BoMs and file components, so your manufacturing teams can efficiently order, make, and ship your products.
In fact, combining these two software solutions has only improved end-to end business performance and has already proven to be necessary. This is why so many ERP providers have started to acquire and develop their own PLM platforms!
By using ERP and PLM together, your organization can create a powerful source of data, information, processes and workflows. It can make it easier to create and deliver products from idea generation through design to manufacturing and distribution.
Now that you have a better understanding about how PLM and ERP solutions can positively affect the profitability of your entire company, you are in a better position to understand why it is best to invest and integrate both solutions.
PLM ERP integration benefits
Oftentimes, PLM only gets associated with engineering. In fact, many people don’t even realize that the full product lifecycle management system can integrate with ERP.
Rather than considering whether or not a PLM system could complement an ERP system, you should focus on the benefits your organization will gain by integrating the two.
When used together, your organization will have unified control over your manufacturing process and here’s why.
Today, in order to stay ahead of competition it is essential to deliver the right product, on time, and under budget.
To meet these requirements your organization must shorten design time and product engineering cycles.
By using PLM and ERP systems together, you will increase collaboration throughout your entire organization. ERP and PLM work best together as they collaborate and facilitate movement throughout your organization.
Without PLM, your ERP system is likely to consume and manage inaccurate data from design and engineering. This in turn is likely to deliver minimal (if any) improvements to your business.
Only using an ERP system without a complementary PLM system puts your organization at risk of mismanagement of product changes – which could lead to instances of inaccurate financial planning.
Together, PLM and ERP enhance collaboration between engineers, operations, and suppliers as they provide a single source of product truth. This will help you to seamlessly deliver products from design concept through manufacturing and distribution.
Because these two solutions both focus on products, they help create one single version of your product truth. This helps reduce errors and guarantees that your product documents and product versions are under control.
Seamless PLM to ERP integration will enable your organization to be more agile and reactive in all business activities including traceability, cost, delivery, quality, innovation and more. It helps ease your manufacturing process and creates a more cohesive environment.
By integrating both PLM and ERP, your organization will accelerate innovation, increase productivity, improve quality, and boost your overall performance.
Our Solution: Windchill PLM System
PTC Windchill is our PLM solution that we offer to our customers – so for the 97% of you that already have an ERP system, you should consider complementing it with Windchill. A popular blog called, “What is Windchill?” distinguishes all the ins and outs of this system.
“Windchill and our new ERP system make it very easy to manage customizations and helps us to make sure that we have materials in-stock and on-time to meet those needs. We save about four hours per job with just the front-end BoM load and getting the information into the ERP system – which has been huge for us.” – Myron Pundt, VP of Engineering, ALM Positioners