SAP has sponsored this post. Written by Mark Landrosh, SAP.
Manufacturing companies face numerous challenges to be competitive in this marketplace. From increasing competition to evolving customer demands, companies must navigate a complex landscape to remain successful by shifting their priorities.
In this article, we will explore the most critical challenges faced by manufacturing companies, and how PLM solutions natively integrated in leading ERP technology can help them succeed in areas such as product development, engineering, formulation and lifecycle management with the focus on meeting a company’s sustainability goals.
Market Challenges
In product development, you share the responsibilities and challenges of the corporation. With your teams, tools and resources, you need to be able to launch quickly, react to issues and capture the hearts of your customers. In a previous article, we spoke about the traditional market challenges of velocity, quality and profitability being influenced by the emerging critical aspect of sustainability. Let’s explore how this fourth dimension is intertwined with the original three.
Velocity
Since this is engineering.com, let’s “geek out” a little bit. Velocity is a vector. A vector has magnitude and direction. Speed doesn’t have direction. So, you want to focus on “Velocity to Market”. In this case, velocity’s direction points to the market you are targeting with a winning mix of products.
Now that we know where we want to head, let’s focus on how we get there. It is well known that the first to market is usually the market-maker, and getting there is tough. On top of that, “there” is no longer a single destination. You must be able to quickly deliver desirable solutions while considering adjacent markets, taking advantage of new business models, and incorporating the latest technologies.
Quality
On the way to getting “there” or protecting your position once you are “there”, you must be able to deliver a quality product. We need to expand the definition of quality beyond just meeting product standards to include market resiliency. A quality product must be able to adjust to market volatility (in terms of both sourcing and product demand), must be able to withstand price competition, and must be able to incorporate disruptive technologies (or be desirable without them).
Profitability
Even if you meet these first two challenges of velocity and quality, you still need to listen to the voice of the customer to remain profitable. Customer sentiment can make or break your product. You need to be able to deliver solutions that are customer-specific, fuel their desire to be brand loyal, and walk the fine line of being “purpose driven” (i.e. sustainable) to fulfill their intangible needs of contributing to the greater good.
Where do sustainability and the circular economy fit in?
Today’s customers want to do business with companies that deliver sustainable products and services. According to circle-economy.com, only 9% of the world’s economy is circular, yet resource extraction is expected to continue to rise, from 84 billion tons in 2015 to 180 billion tons in 2050.
Companies that are striving to run sustainable business practices are formally or informally setting the following corporate goals:
- Reduce environmental impact: One of the primary goals of running sustainable business practices is to minimize the company's environmental footprint. This can be achieved by adopting energy-efficient technologies, reducing waste generation, conserving resources and implementing recycling and waste management programs. By reducing pollution, carbon emissions and resource consumption, companies can contribute to the preservation of the environment and mitigate the negative effects of climate change.
- Promote social responsibility: Another important goal of sustainable business practices is to prioritize social responsibility. This involves ensuring fair labor practices, respecting human rights and supporting the well-being of employees, customers and communities. Companies can achieve this by providing safe working conditions, fair wages and equal opportunities for all employees. Additionally, they can engage in philanthropic activities, support local communities and contribute to social causes.
- Enhance long-term profitability: Sustainable business practices are not only beneficial for the environment and society but also for the company's long-term profitability. By adopting sustainable practices, companies can reduce costs through energy and resource efficiency, minimize waste generation and disposal expenses and improve supply chain management. Moreover, sustainable practices often enhance brand reputation, attract environmentally conscious customers and create new business opportunities, ultimately leading to increased competitiveness and financial success.
How does this affect product development?
Product development teams have these corporate goals cascaded down to them. They are being driven to address sustainability in their portfolios (market/velocity). They need to ensure that sustainable products are as good or better than non-sustainable products (quality). They need to fulfill purpose driven needs (profitability).
OK, OK, we will obey
Where does this sustainability and compliance data come from and how do we use it? It comes from your business systems, of course. If your PLM and ERP systems are properly integrated, you can use native tools to help curb CO2 emissions, lower plastic content in products, increase recyclability, support maintainability, and reduce water consumption.
But won’t this increase product costs? Well, it sure can.
Traditional thinking has product development only considering financial costs (FX):
- What are the material costs?
- What are the labor costs?
- What are the overhead costs?
But if your company truly wants to support the green line, product development is going to have to adopt these other “circular economy currencies” in their total product cost calculations. In becoming sustainable, the target-driven design goals in product development will change and the factors that determine these goals are more complex:
- Will this alternate material that makes my product more recyclable increase my product cost?
- What is the regulatory impact for delivering my product in a specific market?
- Can I design this component in a way that is more energy efficient to manufacture?
There is a lot to consider, and no easy answer, but the clues lie in your business data. SAP is committed to providing the solutions necessary to drive true sustainable innovation processes in product development. Leveraging a natively integrated PLM+ERP environment, like the one offered by SAP, engineers and formulators can efficiently define, develop, and deliver sustainable and profitable products that meet customer needs.
To learn more about how SAP can support your product development process, we invite you to explore our future articles in this series and visit our website.