Education / ERP vs PLM

Summary: ERP has long been the premier software solution of choice for organizations. But is the ERP Era coming to an end? New contender cloud PLM puts up a serious fight to dominate manufacturing data and usurp ERP as the software engine of complex manufacturing. 

Recently we’ve been talking about ERP and PLM, what they are and where they came from (you can read our deep dives here and here).

But while we talk about PLM and ERP, it’s often not clear what each one is responsible for and what each one actually does.

Today we get to the bottom of that in ERP vs PLM: head to head.

Here we go!

What are ERP systems?

We defined ERP as:

software that unites financial data with manufacturing data to streamline the production stage of the product lifecycle.

Basically, ERP unites financial data is used across the enterprise with the products that are being manufactured.

  • Procurement might use an ERP to order parts for a complex product
  • Accounts and inventory might be tracked and documented in an ERP

As CIMdata put it, ERP:

Controls all aspects of manufacturing including inventory, purchasing, process planning, production scheduling, warehousing and delivery, human resources, finance, configurations, effectivity status, and others.

ERP is about linking product and financial data, and the cascade effects of that linkage (e.g. HR, scheduling, etc…)

What is PLM?

We define PLM as:

A software solution to manage products from cradle to grave by integrating data, workflows, and systems across a value chain to fuel collaboration and drop the cost of new product development by making processes fast, efficient, and simple.

PLM is responsible for owning the:

  • Information relating to a product during the research and development phase of product development
  • Systems and processes that organizations use to design and produce products from ideation through to end-of-life.
  • Changes and revisions that happen throughout the product lifecycle.

So far, everyone’s agreed. PLM does product development stuff, ERP handles the money.

But now we get to the meat of ERP vs PLM: where do PLM and ERP fit in the manufacturing technology stack?

ERP vs PLM: where do they fit?

Hub and Spoke: The traditional view of manufacturing technology

ERP vs PLM - Hub and Spoke

ERP sits at the heart of an organization’s technology and manages translating data from specialized software so it’s comprehensible to the systems and downstream.

For instance, PLM and PDM data are traditionally is used by engineering teams. An ERP might translate that engineering data into an actionable requisition list for procurement, or generate a final cost for sales, or be the connector for the supply chain management software.

Essentially, an ERP is the hub that links all the other software needs together.

PLM is seen as an engineering-specific tool, that only engineers and designers use to iterate quickly and manage the product development process but turning CAD files into a bill of materials and keeping those two critical documents linked.

The problem with the traditional view

There are two fundamental problems with this view. First, it’s an idealized siloed state where no one in engineering ever needs to talk to anyone else, ever, except via the ERP.

And that’s just not a reality. Complex products demand collaboration across all business units and across entire supply chains.

Second, the traditional view assumes that product development only goes one way. And that too isn’t a reality:

  • Business stakeholders need to see and participate in product development, which they’re unable to do if a hulking ERP is standing between them and the engineers
  • IoT data needs to flow back to product designers and developers almost in real time – and an ERP will only get in the way with the hub and spoke model of data translation.

Networks: The modern view of manufacturing technology

ERP vs PLM - Network Approach

The modern approach is much less linear. Rather than siloed data flowing one way into an ERP and then onwards to where it needs to go, the new approach calls for data to flow from every node, or software platform, into every other one. This means that a PLM or a PDM still connect to an ERP – they just also bring together business stakeholders from across the organization too.

Of course, this is heavily dependent on cloud technology to give disparate stakeholders access to the right data in real time, as well as robust permissions to ensure that a salesperson can’t accidentally delete an entire CAD assembly, but those technologies already exist.

And while ERP will remain a critical node in the modern manufacturing network, it’s no longer the hub for each and every process.

Why a network approach is better

  • Stakeholders can access the data they need in the setting its supposed to be accessed in. For instance, CAD data is viewed in 3D rather than a list of parts or a 2D rendering.
  • Real-time collaboration is a feasible reality because there’s no middleware slowing things down.
  • Processes are simplified as steps are removed.
  • Collaboration across the value chain is a reality because you can work with additional suppliers without granting access to an ERP (where financial data lives).

ERP vs PLM: which one do you need?

Honestly? Probably both.

ERP vs PLM doesn’t come down to choosing one over another. It comes down understanding the requirements of each within your organization and choosing the right software for you.

For example, if you’re a company building a complex product, you will need to use PLM software to manage product development workflows, CAD data, and revisions and engineering changes.

But at the same time, you’ll also need a way to translate engineering data into financials and link financial and business data back to product development.

That’s where an ERP comes in.

PLM (now, at least) usually doesn’t integrate into business applications at a financial level because it’s tremendously complicated and because that’s exactly what an ERP does.

Wrap up: PLM and ERP – Better together?

Sorry to disappoint all the gambling fans out there, but in the grand battle of ERP vs PLM, there isn’t a clear winner.

It’s comparing apples to oranges: each software has its place.

For us, it’s more about finding software solutions that:

  • Support organizational objectives.
  • Work together with other best of breed software.
  • Make it easier for end-users to do their jobs while working with tools that they want.

But there are still a few conclusions we can draw.

First, what solution is the “premier software” within an organization will depend on the organization. Sometimes, it’s going to be a PLM at the heart of an organization, owning product data and driving business decisions. Sometimes, it’s going to be an ERP as the central node, with rapid and easy connections flowing every which way.

Second, we’re confident that ERP is no longer going to be the only hub connecting multiple spokes. The challenges of using an ERP to collaborate (because of it’s connection to private financial data) coupled with the rising importance of collaboration at an early, digital stage of the manufacturing process means that it’s just not feasible to have all data flowing through an ERP.

And finally, we think that PLM will emerge to take over some of the ownership that ERP currently has. The rising importance of the early design phase and the increasing importance of the IoT to close the feedback make PLM a natural choice. And with cloud PLM lowering the cost to play, more organizations within the value chain stand to gain from PLM technology.

Got questions about how your ERP integrates with our cloud PLM? Get in touch. We’d love to show you what we can do.

Image credit: Ariel Waldman via Flickr