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e-Business Transformation to a Manufacturing Digital Enterprise

Pat Toole, Jr., IBM General Manager, Product Design Management
Joel Lemke, Chief Executive Officer, ENOVIA Corp.

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Where Are We Today?

The underpinning of the new networked, digital economy is information in digital form. With the growth of the digital economy comes even more growth in the amount of digital information required to support it. The development of increasingly sophisticated computer applications has been both a blessing and a burden. It has been a blessing by enabling corporations to dramatically improve their productivity. However, it has been a burden by generating more information than companies can effectively utilize.

Computer-aided design systems have been generally accepted as an effective means for creating and documenting product designs. As these systems have become easier to use, more people have been able to generate more information – to the extent that we need even more and different systems to manage and make sense of all of the information being generated. Compounding the issue is that each piece of information is related to one or more pieces. Managing the myriad of relationships and dependencies has becomes complex.

Buried within this network is more than just mere information. There is knowledge. The difference is that knowledge is information that is organized, evaluated, valuable and available to the appropriate people to leverage and exploit. For example, knowledge of best design practices, of product performance characteristics, of product maintainability, and knowledge of many other aspects of designing and building the product is crucial for any manufacturing organization. Just as organizations optimally use physical capital such as plants and equipment, they must also use the intellectual capital embedded within their people, systems, and processes. Unfortunately, this knowledge is viewed simply as information – stored away in undocumented processes, in inaccessible systems and databases, and in the minds of employees. Many organizations take for granted the processes and systems used in support of designing and manufacturing a product. These processes and systems have evolved over decades and were established before information was digital. In fact, most of today’s corporations are drowning in information, yet starving for knowledge. A CEO once remarked, "If our company knew what we knew, we’d be three times more profitable."

If design environments were local, companies might be able to get a handle on all of the digital information being generated as part of the product creation process. But corporate boundaries are rapidly blurring as suppliers are given complete design and build responsibilities for entire sub-assemblies. They, in turn, distribute responsibility for sub-components to other suppliers. The result is a design process that is not local to a single company, but distributed throughout an elaborate chain of participating companies, each of which must understand the overall product requirements and specifications, and also must understand their individual responsibility in the context of the whole product.

Within the complexity of this environment, companies are engaging in multiple initiatives to obtain competitive advantage. Most of these initiatives are focused on reducing costs and improving time to market. The proliferation of CAD systems is representative of companies’ focus on reducing costs through automation of tasks. Product data management systems are also being rapidly accepted as an effective means for managing corporate design release processes and shortening engineering change cycles. The millions of dollars being spent on ERP systems illustrates the emphasis companies are placing on efficient operations. Utilization of these systems was once a competitive advantage; however, they have now become a competitive necessity.

Many manufacturers are ignoring the portion of the product development cycle that can have the biggest impact on competitiveness – the conceptual design stage. Instead, they are spending ten times more on operational efficiencies than what they are spending on conceptual design; yet the improvement in bottom line corporate performance – and competitiveness – is limited. Conservative estimates indicate that eighty to ninety percent of a product’s life cycle costs are committed during the conceptual design stage, where only a tiny percentage of those costs have been incurred. Furthermore, taking into account manufacturability and product function during conceptual design can result in up to a 5X cost reduction and 4X manufacturing cycle time reduction.

Unfortunately, traditional Product Data Management (PDM) systems do not effectively support the conceptual design stage. This is largely because PDM systems are designed to enforce structure – both in product data and in business processes. The conceptual design stage, however, is largely unstructured. Enforcing structure impedes creativity by forcing engineers to operate within the context of a rigid data management system, rather than in an environment in which they can be more productive.

Even without traditional PDM systems, many companies are still using product creation processes that were designed to operate on data in paper form, rather than on the digital data being generated by today’s applications. These processes limit engineers’ creativity by assuming that design activities should be conducted as they always have in the past. Many companies use advanced CAD systems to create complex geometry, but then communicate product information using two dimensional drawings, failing to exploit the wealth of product information embedded within the three dimensional product representation. Unfortunately, this communication is often too late to have any significant impact on the product creation process. These processes do not facilitate creative exploration of alternative designs. Moreover, they encourage engineers to push ahead with a marginal design, since the time and effort required to refine the design is outweighed by time to market pressures. The result is costly if change is required, since it’s much more expensive to change a design late in the cycle than it is to change during the conceptual design stage.

Tremendous Opportunities Exist

And where does this leave most manufacturers? It leaves them with tremendous opportunities –opportunities to improve their product development processes and to increase their ability to compete as design and manufacturing enterprises. Digitization is enabling information to be extracted from legacy systems and processes so that, for the first time, manufacturers can really leverage it to improve their corporate bottom line. They are now able to extract and utilize the intellectual capital – knowledge if you will – that is buried within their company and employees. The Internet is shrinking time and space, and allowing large and small manufacturers to conduct business with global customers and suppliers as if they were physically located in the neighborhood. But how can manufacturers take advantage of this opportunity to increase their competitiveness? The answer is by adding value through innovation.

Innovate to Compete

Paul Cook, founder of Raychem, states, "In the final analysis, you can’t continue to reduce costs and grow."* Certainly, low costs are a necessary business objective, but they cannot sustain a company over time. Similarly, being first to market presents business advantages, but only if the products being delivered are desired by customers. The danger facing an organization in focusing solely on operational issues is that the organization might achieve the most efficient and effective production processes, but will not have created competitive advantage. According to the Gartner Group, the new competitive landscape requires that manufacturers deliver new products that allow them to expand their existing markets and even to create new markets. They do this only by designing, building and delivering new products that serve previously unmet needs in the marketplace. Design effectiveness is measured not by the number of engineering changes processed, but by the number of new "killer" products introduced, the contribution of new products to total revenue, and by the number of new customers gained.

Because they focus on repeatability, operational efficiencies do not encourage innovation – in fact, they discourage any type of change whatsoever. Innovation relies on human creativity. Innovation requires an environment in which engineers can quickly and easily experiment with design alternatives. Innovation requires flexibility in the product creation process to introduce new concepts and technologies as they become available. Innovation requires an in-depth understanding of design decisions on product performance, manufacturability, and maintainability. For manufacturers to compete in the next millennium, they must adopt a product development process that facilitates and encourages innovation. When manufacturers can capture and leverage knowledge and more efficiently introduce innovative products into new markets, the product development process itself then becomes a competitive weapon.

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