Can a great product realization system and PLM boost the share value of truck maker Scania? This question arises from the ongoing tug of war over the ownership of this OMX NASDAQ listed company.
Currently the German automotive giant Volkswagen Group (VW) and its subsidiary truck manufacturer MAN holds 60-70% of Scania's shares. Now VW have offered to buy the remaining stock at approximately $ 31 per share.
Scania struck an independent committee to evaluate the offer. Today, the Committee announced that,
"The bid does not reflect Scania's long-term value".
One of the crucial factors in the committee's assessment is Scania's production development model, considered by many to be "world class". Scania trucks are of high quality and produced under a lean- and modular production system inspired by Toyota. This system is a leader in the heavy truck industry.
The key driver in Scania's product realization model is how the company has woven together its R & D, product and production development processes into a unique, holistic system. While digging into the background of the deal, Verdi Ogewell compared Scania's product development and PLM approach to how things look at MAN.
Ultimately, we are talking about big customers and big money – Scania, MAN and Volkswagen invest a lot to keep their competitive edge. As a result, it's hardly surprising that this situation involves all of the "big three" PLM vendors, Dassault Systemes, PTC, and Siemens PLM, each of whom is battling to increase their share of the PLM environment at these companies.
The truck market has historically been early adopters and strong users of PLM. There are many reasons for this high level of utilization of systems like CAx, simulation, PDM, proprietary configuration databases and similar program components, but the most important one is perhaps the fierce competition that characterizes this market.
Over the past decade the industry has been consolidating. In the category of trucks over 16 tons; Japanese Isuzu dominated the market with 453,379 manufactured units in 2012. Second on the list is Volvo Group (containing among others, Mack and Renault Trucks) with 224,017, closely followed by Daimler (including Mercedes, Freightliner e t c). Further down the list we find Toyota, Tata Group, and of course, Volkswagen Group (including Scania and MAN).
It's hardly an exaggeration to call it cutthroat competition. It's in response to this environment that Volkswagen aims to consolidate its stake in Scania and delist the company from the NASDAQ OMX stock exchange.
One of the main points in today's product development and realization environments is about systems integration. This aspect is a theme in almost everything, from requirements and CAD models to product configuration, PDM/PLM and DM (Digital Manufacturing). The more advanced a product is, the more complex the IT solution becomes from an integration and process standpoint.
Generally speaking, the framework and the software components that surround the development and manufacturing in companies the size and complexity of Scania's and MAN is something you don't want to change too frequently. However, should you decide to do it, the benefits have to be clear, safe and feasible within a reasonable time frame. And losing momentum in the production is not an option. Thus, this is not a decision made lightly.
That said, a possible merger between the Scania and MAN would impact both product development and IT structures.
Today, Scania and MAN have somewhat different "philosophies" regarding product realization systems:
- Scania has, according to analysts, a more advanced and holistic view of how the product development and manufacturing should be designed and implemented. Scania regards the product realization as one single integrated process.
- MAN, on the other hand, operates with a clearer distinction between the two worlds of product development and manufacturing. MAN's points of integration are not as advanced and sophisticated as Scania's.
Even today these differences cause problems. As the major shareholder, Volkswagen has been pushing for more cooperation and streamlining between these two truck manufacturers. This in turn, tends to create "political" problems; neither of the companies wants to give the other priority when it comes to what the product realization processes and the associated IT software and brand structures should look like.
Ultimately, it's about sharing technology and best practices in an environment where the companies compete against each other in the marketplace. There's also the interactions of personal prestige and future key managerial positions to be considered. These are bound to create a politicized environment if Volkswagen buys the rest of the Scania shares, one that would heat up further if VW decides to merge the two organizations.
At MAN's truck division in Germany the PLM environment is based on Dassault's Catia on the CAD side, but also PTC software such as Creo (Pro/E) and Windchill (PDMLink). According to Verdi's sources, MAN wants to move ahead with a more modern PLM solution with PTC's Windchill suite as its vPDM backbone (virtual Product Development Management).
Notable in this context is also that MAN Diesel & Turbo is leveraging the smaller PLM developer Aras' platform to go beyond traditional PDM to manage complex engine configurations and variants over a 30 year lifecycle.
MAN uses Siemens Tecnomatix for digital manufacturing. Tecnomatix is also where the mBoM (manufacturing Bill of Materials) is produced (the data is picked up and processed for production from PTC's PDMLink).
The PLM environment at Scania
Traditionally Scania has been regarded as a "Dassault" customer. DS Catia V5 is the main solution on the CAx side (a system they are generally satisfied with). Dassault's Enovia V5 serves as a PDM "umbrella" for the distribution of product data "on top" of Scania's proprietary product configurator, SPECTRA. There are also interfaces with digital manufacturing, based on Dassault's Delmia.
There are now indications that DS Enovia will not be Scania's solution in the future. History is one reason - it took a long time to get Enovia V5 in place. Another thing that points this way is that Scania has spent the last year running a pilot based on PTC's Windchill as a potential replacement for Enovia. There is still no official evaluation of how PTC's solution has worked. An additional uncertainty is that at least one more PLM player is lurking in the reeds, so it's far from certain that PTC will get the last word.
As for Dassault, CATIA's role seems to be the only thing the French 3D Experience developer can be fairly sure of. On the other hand, Scania does not want to be in a pure DS V6 environment (mainly due to coupling requirements for Enovia); instead they plan for a mixed V5/V6 solution for the future. This apparently has been approved by Dassault.
As is so often the case in merger discussions, the questions posed above are politically charged. None of the players are typically willing to change solutions or give up autonomy in those choices. Time is a critical factor for these companies, so everyone wants to avoid a drop in production or problems with new product development problems.
Advantage, Scania? Yes. In the short-term. In the long term? Maybe not.
The respected former Scania chief, Leif Östling, is about to leave his lifetime achievement in the hands of Andreas Renschler, a German truck specialist recruited from Daimler/Mercedes. And so far we haven't even discussed the third option - VAG's (Volkswagen Aktiengesellschaft) choice of software has been "all in" on Siemens AG and its subsidiary Siemens PLM Software.
How things turn out in this case remains to be seen. But the stakes are high and as the controlling shareholder, not even the Volkswagen management can afford to see Scania dropping a world class environment.